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Bookmark and ShareThursday September 20, 2012

Barbarians at the gates: A perspective on barriers to entry

By Bob Johnson, NAID CEO

One of the challenges to the secure destruction business is the low barrier to entry. Of course, those getting into the business on a shoe string don’t complain, at least not at first. It is not until the new company has a customer base to protect that they wish it were a little harder for the guy down the street to put a down payment on a mobile shredding truck or for the scrap dealer on the south side of town to buy a shredder. Actually, it’s not even necessary to buy equipment. In every major market of the country there are still organizations providing secure destruction services that are simply intermediaries, moving the material on to a third party processor often without their customers’ expressed knowledge or permission. (From a regulatory perspective, doing this without customers’ knowledge or permission is not good.)

The point remains, meaningful, recognized barriers to entry are good for the health of legitimate, honest, established service providers and, in the long run, the health of the whole industry.

Over the weekend, I tweeted “Few barriers to entry are more effective than a solid client relationship. It's the top sales priority ... more so than growth,” and I truly believe that. (@BobatNAID) Having to defend an account after the fact, defensively and apologetically, is like digging yourself out of a hole. Customer loyalty needs to be an overt, strategic activity with multiple moving parts. It is a critical and primary barrier to entry. So, while the best things in life are free, it might be easier if you could through money at it. It is my experience that discipline and strategy are rare commodities compared to money in the secure destruction industry. (I hope you’re an exception.)

That being said, there are other meaningful barriers to entry. NAID AAA Certification is increasingly a barrier. While there is no way to verify it empirically, almost 1,000 NAID certified locations are responsible for approximately 75% of all the outsourced destruction services in the U.S. Although, NAID Certification has a long way to go, there is a real chance it could set a higher level of security and auditing that every service provider would need to meet.

There are other meaningful barriers to entry as well. Downstream Data Coverage, Certified Secure Destruction Specialist (CSDS) accreditation, the Customer Employee Training Program, and CTK, have proven to strengthen customer loyalty and offer a competitive advantage. Once in a while, a NAID member will suggest the association is making it more expensive to be in the industry. Ironically, those complaints are nowhere near as common as the complaints about the amount of unqualified, price-oriented competitors that continue to plague the marketplace.

Meaningful barriers to entry that serve the customer’s best interest should be embraced by legitimate secure destruction service providers. These barriers are the friend of any company serious about creating a healthy market for secure destruction services and a strong, profitable industry.

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