Inside the Gallagher Journey: Driving Global Growth - Kahl Betham

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Paul Spain:
I'm Paul Spain, Futurist and Chief Executive at Gorilla Technology.

I love helping individuals and their organisations succeed. The New Zealand Business Podcast is all about this – by helping you learn from some of our highest achievers.

On this episode I’m joined by Kahl Betham, Group CEO and Executive Director of Gallagher. Kahl’s story has become a masterclass in modern leadership – as he became the first person from outside the Gallaher family to lead the company. During his 5-years at the helm the company has seen revenue’s rise from under $300m to an expected $750m in the current year, with a track to $1B in their sights.

We’ll explore the company journey starting with Bill Gallagher’s invention of the first widely adopted electric fence through to their current global security and precision agriculture technologies. Along the way we delve into the culture, innovation and long-term thinking behind Gallagher’s success.

The New Zealand Business Podcast is proudly brought to you by One New Zealand alongside Gorilla Technology, making tech enablement and cybersecurity easy for midsize and smaller organisations. And by Outrun Global, remote staffing to help your local teams work smarter, not harder.

Paul Spain:
Well, Kahl Betham, great to have you here on the New Zealand Business Podcast. Thanks for coming in.

Kahl Betham:
Well, it's an absolute pleasure to be here.

Paul Spain:
Look, uh, it'd be great to start at the beginning of, of your story. You know, we really want to delve into your story but also into the broader, uh, Gallagher Group, uh, story. But maybe tell us a little bit about yourself and, uh, you know, where you grew up.

Kahl Betham:
Yeah, well, I grew up in a small town called Martin in the Rangitiki, in between Palmerston North and Whanganui. Spent about 4 years in Australia. My father was Australian, then we moved back. And so most of my childhood was there. A lot of wider family in the farming and haymaking scenarios. So spent the summers throwing hay and running quite a bit from an athletics perspective. Yeah. It's an interesting start really because that's also where I got my first job at a company called PEC, which Gallagher acquired in '99.

Kahl Betham:
So that's the connection there of how I ended up in Gallagher.

Paul Spain:
Ah, okay, okay. And so when you look at those younger years, do you see much connection to the business world that you've ended up in? Were there particular things around your upbringing where you were learning lessons and sort of getting exposure to leadership lessons and the like?

Kahl Betham:
My grandfather took quite a big role in my life because my mum and dad broke up when I was about 8. And so I spent a lot of time with my grandfather. And I probably wouldn't have joined any dots naturally until I got later on in life and I started to realize after remembering some things that He was really quite an innovative guy. He was a farmer and I've never been a farmer myself, but he was one of the first in New Zealand to bring in artificial insemination. And he brought in different varieties of blueberries and grew those. And now that I think back on my life, I think actually there's probably quite a strong streak there.

Paul Spain:
Yeah.

Kahl Betham:
And he was one of those really hardworking and really strong values kind of people. So I think I must have drawn quite a lot from him as a father figure, shall we say.

Paul Spain:
Yeah, yeah, that's great. And when you were studying, you know, what were the things that kind of took your interest during maybe, you know, the high school years?

Kahl Betham:
Yeah, so through high school, some interesting stories there as well, because what I was really interested in, I was pretty much top of the class. And then there was a whole lot of things that I was just good enough in. So there's a bit of an insight there from a neurodiversity perspective we can pick up on a little bit later. But the kind of things that I ended up enjoying were computer science and and design and a bit of mathematics and things like that. So I was probably naturally drawn towards more technology and design and innovation things.

Paul Spain:
Yeah. Following your high school studies, what happened from there? What was the next step on the journey?

Kahl Betham:
Yeah, well, I've got a bit of a passion for cooking, but I also really enjoyed technology. So I took a bit of a gap year as soon as I finished high school to really think about what I wanted to be. And I ended up going down more the business and the technology path. But that was an interesting path as well because I chose not to go to university. And it's a really interesting reason because I couldn't find one degree that covered both the commercial and the technology side of things. Because I really wanted to be business and I wanted to be technology. And there was a new degree at Manawatū Polytechnic at the time called the Bachelor of Applied Information Systems. So I got to learn about software coding.

Kahl Betham:
I got to learn about IT strategy, take business papers, accounting papers, and it was taught by people from the real world who had actually really been there and done that vocationally. So that was a really interesting start for me. And yeah, I suppose I had a sense early on that I wanted to run something tech, so that commercial basis was quite an interesting choice as well as the technology.

Paul Spain:
Right, so you already had a longer-term strategy in mind?

Kahl Betham:
Probably more of a feeling. Yeah, I definitely felt like a I wanted to be able to make money out of the work that we're doing. So I thought, okay, business sounds pretty important to that as well. And there was a bit of a gap in the education industry, I think, without doing a whole double degree. And it was quite integrated and vocationally integrated as well. And in the 4th year, having a nice project, which is where I got my job at PEC, which is the company that later got acquired by Gallagher. So it ended up being a straight path straight to employment.

Paul Spain:
Yeah, great. So walk us through that, taking that role and, you know, how that came about and then into the acquisition.

Kahl Betham:
Yeah, well, there's not very many technology companies in a small town of Martin with 5,000 people. There was one. So it was well known in the area. So it was one of those times where I walked in and asked whether or not Hey, I'm from here, I'm getting into technology, I'm doing business as well, looking for a project, can you help me out? And it was a really nice founder, John Williams, at the time. And he really enjoyed that I came and asked and wanted to be part of it. And it was an iconic company in the town. And pretty similar story to Gala, started in 1938, started with farm machinery, then went into electronic things, ended up diversifying into all kinds of software. capabilities.

Kahl Betham:
So it was kind of an interesting parallel, actually. Yeah.

Paul Spain:
And tell us about the acquisition, because, you know, you were, I guess, on the receiving end, as it were. But there must be some interesting learnings from being in that sort of situation and being able to see it from that side.

Kahl Betham:
Yeah, reflected a lot since, because at the acquisition time, I was 3 years into a junior software engineer role. So I didn't really know too much about the business and things. But what I later learned, because some of the people that were there and that were hiring me at the time were actually still with us, so we talked a lot about lately. And that was an interesting learning in the business because diversified out into 3 different divisions, and all 3 divisions at the same time found themselves too far behind the technology cycle and having to reinvest at the same time and couldn't quite fund it all. So there's been a lifelong lesson there to say, hey, keep ahead of the technology curve, don't stretch yourself too thin, and make sure you reinvest. So that's something that's been front of my mind. While it was a great opportunity that really accelerated that company by becoming part of Gallagher and then getting all the opportunities that Gallagher afforded and all the the wise entrepreneurship that Sir William allowed us to do with a really high level of trust, you wanna make sure you don't do that again.

Paul Spain:
Yeah. Yeah. And so what was the timing that all of that took place?

Kahl Betham:
So 1999, the acquisition. And I moved up to Hamilton with Gallagher in 2000, just after the year 2000.

Paul Spain:
Yeah. Okay. Okay, good. And I mean, When I looked through your LinkedIn journey, a lot of different roles, and obviously now when we look at the picture, you've been leading the business for quite a number of years. So walk us through, and you also did sort of, I guess, 2 tours of duty with Gallagher.

Kahl Betham:
Yeah.

Paul Spain:
Because you were there for a block of years, a small time away, and then back back into the fold, uh, and, and obviously some incredible success, uh, you know, across those years. So, um, you know, keen to hear about that kind of earlier on, um, you know, part of the journey post the acquisition.

Kahl Betham:
Yeah, so the— I came into PSC at the time, or, um, and the access control product was called Cardax at the time that I came into, and the job that was available was software engineer, so that's the one I took and had some good skills in that. But after a couple of years in that role, I found that I was quite drawn, I quite liked going out to customers, I quite liked talking to customers. And soon, early in the 2000s, after we moved up here into the Waikato with Gallagher, I popped the question about whether there'd be an opportunity to create actually our first, or one of our first 2 business analyst roles, where I could go out and talk to customers, find out the requirements and those the new innovative ideas that they'd like to see and specify those into our new generations of product. So I got that job and did that for a few years, um, and, um, found some really interesting seams of value, um, from the customers and was— seemed to have quite a nice way of, um, working with those customers to work out what they needed, um, finding a way to wrap a nice little commercial model around it, find that there was an opportunity. And we found we got some quite significant significant business growth out of it in quite a short period of time. So following that, I was offered the role of product manager for the access control business, or the Cardax business at the time. So, and I definitely put my hand up for that because that was a really interesting role where not only are you in the middle of the R&D teams where all the wonderful technology capabilities and architects, all the things that can be built, so what's possible with technology, and of course with what's possible with the customers, and then what's possible with the business models and the commercial pieces. And that just seemed to really fit with me.

Kahl Betham:
So I really enjoyed that. So pretty soon after that, they gave me the responsibility for product management for all of the security division. And I did that for about 13 years.

Paul Spain:
Wow.

Kahl Betham:
Yeah.

Paul Spain:
Now, for those that aren't familiar with access control and the security offerings. Maybe you can walk through what that consisted of from a capability perspective for your customers.

Kahl Betham:
Yeah, absolutely. So access control. So most people, if they're in New Zealand, if they're walking through an access control reader, chances are it's got a little Gallagher badge on it. So our radio frequency technology to walk through the door. So we have those readers, but we've also got control devices that decide who goes where and when. behind that. And we've got command and control software similar to what you'd see in a, um, in one of those security movies, um, big control rooms, you know, um, with all of the cameras all around the walls with people monitoring a whole world worth of, um, capabilities there. So we're a software platform company now as well as the electronic access control capability as well.

Kahl Betham:
And that, so that all came with Cardax, it all came from PEC.

Paul Spain:
But it would've been simpler back in those earlier days in terms of your capabilities. That will have grown a lot over the past 25-odd years.

Kahl Betham:
It certainly has. Yeah, I think the RFID technology has come a long way as well. We go to smart cards, we've gone to mobile phone credentials, like we're in the Apple Wallet and things like that versus the early generation or even magstripe cards at the beginning really. So that was kind of interesting. And from a software world perspective, I remember a time when we had Unix and Linux Linux-based control systems, and then we had the early Windows products, and now we've got fully cloud-enabled everything that integrates into business and fully globally scalable as well. So we've certainly grown a lot in the software capability world, and we're 20 years into having a really strong recurring revenue business in that space. So that's, I suppose that was the really first entrée for the Gallery into real globalised software. from being a really good device and product company.

Kahl Betham:
Yeah. And the origin of how Gallagher got into security in general is because, of course, back in many, many, many, many years ago, invented the electric fence many decades ago. And then that became really strong from an agricultural perspective. And then in the '80s, built a version of the electric fence systems for prison and military. So, Gallagher already had a security offering before '99. So Sir William saw, oh, okay, so if we're looking after the perimeter security, maybe we could look after the building security as well and maybe merge those 2 things together. So that's how the— that was the origin of security, I suppose, inside the Gallagher Group.

Paul Spain:
Yeah.

Kahl Betham:
Doesn't make— it doesn't, from the outside looking in, make a great deal of sense, but actually from a technology perspective, it's been really quite an interesting journey with a lot of overlap. as well that has spilled over into agriculture and some of the agricultural things have spilled over into security. So it's been quite an interesting set of adjacencies there.

Paul Spain:
Yeah, some quite natural progressions when you look at the technology. Really interested to hear, you know, the background around Gallagher Group. Obviously it goes back a really long way. So, you know, maybe you can share that story and I know some listeners will have heard elements of it, but yeah, keen to hear that.

Kahl Betham:
Yeah, sure. So back in 1938, the company was founded by Sir William's father, Bill Senior. He was very much an engineer, very much a tinkerer, as Sir William would call it. He really loved welding things, building farm machinery. And the Gallagher Group, as Sir William and Sir John were children, will remember very fondly welding farm machinery, building farm machinery. And that's really where the Gallagher Group started, um, and having, yeah, an engineering firm, I suppose, but founded in a lot of engineering entrepreneurism, I suppose, right back at the beginning there. Um, and what was really interesting, um, after that phase, um, which went for a while and it was quite a small company, um, I think William tells the story of he, he started hanging out in the company when it was like 11 or 12 people or something like that. So a long way from the 1,850 that we've got now globally.

Kahl Betham:
But you know, there was a real challenge that Bill Senior had. He had this lovely car and he had a lovely horse named Joe and the problem was that the lovely horse named Joe liked rubbing its backside up against this lovely car and it was getting on his wick a little bit. So the tinkerer engineer that he is, he grabbed a magneter and a rubber band and wired it up to the car and lo and behold, the morning after he did that, Joe the horse was well on the other side of the panic and never went back towards the car again. And that was probably the start of the idea of an electric fence. He thought, okay, this really worked. Yeah, that was a portion of a second learning period for the animal.

Paul Spain:
Yeah, yeah, okay. So he lit up the whole car and then moved on. That really set things rolling to do the electric fence.

Kahl Betham:
Yeah, that's right. And Sir William's sort of came in, um, soon, soon after that and started running, uh, running the place. And like, he was chairman and CEO for 52 years, which is incredible. And, and he started the export business. And Sir John was in the business at the time as well. And they tell the story how in the early days they were both going off to trade shows in, in Australia and New Zealand. Australia was the first export market, and they were selling the wares. Um, interesting story about the Galahad Orange as well, as, um, they were going to take some farm machinery across and I think, I think the story is they ran out of a bit of paint and there was undercoat and it was orange.

Kahl Betham:
And so they had one piece of machinery that was orange and one that was a blue colour, I think it was. And they took both, and Sir John and Sir William both individually went to different parts of the show and presented it, and the orange one got a lot more attention. It was almost accidental. So, um, yeah, and it's been Galahad Orange ever since, which is, um, kind of an interesting origin story as well.

Paul Spain:
Yeah, fantastic. And In those early days, you talk about Australia and exporting into Australia, but how quickly did the international opportunities open up and how quickly did the idea of an electric fence actually catch on?

Kahl Betham:
Yeah, so Sir William was a real pioneer in this area because New Zealand didn't have very many technology exports at all at the time. So pretty much him picking up the bag and going around the world was a really unique thing. I think it took a couple of decades to get going and get things moving. But the structure that he chose was interesting, I thought, because Scullagh Group was small, didn't have a great deal of capital. And when you're a smaller company, and anyone who's listening to this who's in the startup world will know that banks don't come to you in the early days begging to give you money without a great deal of risk. So what he did is he went around the world and he found entrepreneurs in each country And gave them a majority shareholding and Sir William kept a minority shareholding so that they would build the market. And because they had skin in the game and they were going to take the responsibility for the marketing, that was a great way to scale without a great deal of capital. And they were called limited risk distributorships.

Kahl Betham:
So they provided a lot of scale quite quickly and in a reduced risk perspective, I think. And I thought that was quite— quite clever and the start of the real belief that enduring partnerships and leverage are the way to grow.

Paul Spain:
Yeah. And did that model, you know, stick around for a long time? How did that, how did that change and, and evolve?

Kahl Betham:
It was only in the early 2000s that we started buying those distributorships back. But it was interesting because in the early 2000s, um, there was a Better by Design programme backed by New Zealand Trade and Enterprise and Ray Labone, I remember it. He was the marketing guy, came in and gave us some advice and helped us out quite a bit going through a lot of these areas. And he talked about brand a lot. You know, we were good at— we were a good product company, we were selling good products around the world, and we had really great retail chains and things like that. But he taught us about the value of brand marketing. And we had 27 product brands and it was diluting everything. We didn't have a great deal of marketing dollar back then as well.

Kahl Betham:
So we found that actually being a step removed from the customers and also not really having full control of the brand, 'cause they were all individual companies with individual entrepreneurs who had the rights to sell Gallagher, but we weren't getting a global ubiquitous brand experience. So early 2000s, we started buying back some of those regions. And actually it was only year before last that we bought back almost the last 2. And one of them was buying back Europe after a 35-year joint venture.

Paul Spain:
Wow. Yeah. Okay.

Kahl Betham:
So now we have those back and we have control of the world with that respect. So now we can take on all the new technologies and new business models to the world.

Paul Spain:
Yeah. And walk us through the journey in terms of the different products, because it didn't sort of stay that you were just doing the electric fence, right? That things moved reasonably quickly.

Kahl Betham:
Yeah, so the electric fence energiser was interesting. And as you say, it takes some time to get that market going. So in order to be able to sustain financially, then started building out all the other accessories that go around the electric fence. So we got really good at building insulators and posts and gathering other things that we needed to sell as traded goods, such as wire and stuff like that. So ended up with electric fence systems. That was interesting. But then a number of decades later, we started getting into weighing animals because If you're going to be optimising pasture, which is essentially what electric fence did, allowed you to break-feed and allocate grass appropriately for the animal for the season to look after the pasture, but also maximise the growth of the animal. So we're actually talking about starting to optimise how to grow beef and lamb faster and produce more milk out of the limited resources they had.

Kahl Betham:
So that was pretty important. So then you get pretty interested if you wanted to know how fast they're growing, you want to start weighing them. 'Cause that's a sense of health and it's a sense of growth and it's a sense of how much money the farmers are gonna make when. So we got into weighing, which is electronic weigh scales and with load bars and getting into those kind of capabilities now. So now we're starting to weigh the animals. That was interesting. When we—

Paul Spain:
How do you weigh cattle, by the way? I'm curious.

Kahl Betham:
Yeah, so load bars, really big just set of weigh scales really. that they stand on in a crush. You get them into a really narrow metal crush and hold them there and they weigh themselves. If it's sheep, they sort of run through and pause and carry on. But that's changing over time as well. You know, there is— we've got a front foot weigher, which is a unit you put in the middle of a paddock and give them a salt lick and they put their front feet on and it estimates it quite well. So you don't have to get them back in other areas.

Paul Spain:
Yeah.

Kahl Betham:
There'll be vision weighing with cameras in the not too distant future, which will be quite— I think that'll become quite ubiquitous as well. So those technologies keep going on. But also because we bought the access control business, which had RFID technology, then all of a sudden that same technology's in the AirTags.

Paul Spain:
Okay.

Kahl Betham:
So then we could produce readers for those. So that was one of the early crossovers of the technology between the security business and the animal management business. And the first one where the technology started flowing back towards the Galahad group in traditional areas.

Paul Spain:
Right. So if it's wearing a tag and it's getting weighed, you can identify who it is very quickly. Yeah. So

Kahl Betham:
that's really important. And that became really important with food traceability because you need to be able to track the life of the animal. And that goes up to Nate for pasture-to-plate traceability for any any disease reasons and things that you might need and food providence.

Paul Spain:
Yeah, yeah. And so the security side of the business.

Kahl Betham:
Yeah.

Paul Spain:
Yeah, really interested in how that really came about.

Kahl Betham:
Sure.

Paul Spain:
And in those earlier, earlier years.

Kahl Betham:
Agricultural electric fence then went to prison and military electric fence systems. So that was the start of the security business in the, in the '80s for the Gallagher Group. acquired the access control in '99 from PEC, which is where we got the access control readers, it's where we got the software platforms from and merged that in. And then that progressed, we continued to build out a new generation of product for the first 10 years or so after the acquisition because perhaps the new generation of product wasn't quite as finished as it might have been sold at the time. So we spent time really filling out that software platform and growing that capability and building out the market. And that, that took a little while to get going. But then there's a couple of interesting pivot points along the way. In GFC, like 2008, 2009, security was only about $20 million in size, so quite a small business still.

Kahl Betham:
And it's like well over $300 million today, to give you an idea.

Paul Spain:
And how big was the overall business at that time?

Kahl Betham:
In '99, the whole business was under $60 million at the time of acquisition, and this year we'll be close to $750 million. to give you an idea. Wow. And yeah, and $500 million of that growth in the last 6 years or so, which is kind of interesting. So, but going back to security and the GFC, it was a really interesting moment because a lot of our competitors started going, taking their manufacture of the electronic components to China or to Asia in general or to lower cost economies, shall we say, because things got tough and they went chasing that 25 to 35% margin gain. And we were thinking at the time, because Sir William's always been really, and the family have been really grateful for the country and for the region that built the business. So they're really focused on making sure we kept manufacturing jobs in New Zealand. And I thought that was really cool at the time.

Kahl Betham:
And I was head of products for security at the time. We said, what are we going to do here? And we asked ourselves 2 questions. What are we going to do? Are we going to follow? And if not, what do we do? So we thought, you know what, if we go there chasing price, not value, then we— I actually remember the chat. We said to ourselves, well, okay, we go there on price, what happens next? Well, sooner or later the middle class in China is going to rise. And we actually said this at the time. Then what are you going to do when there's no longer a cost advantage? If everyone goes to China, who's different? And then what are you going to do? You're going to go to Vietnam, Laos, Cambodia and just keep chasing the next low-price economy? But instead what we decided to do, we go, you know what, In the next one of these downturns, what kind of revenue would we like to have? Well, government spends in downturns. We'd like a lot of government work. Then we thought, well, what's the biggest goal for government? Well, what if we targeted to be at the very highest level of security and be the product of choice in the Five Eyes countries at intelligence and military level? Sounded like crazy talk at the time.

Kahl Betham:
We didn't have any right to be doing that with $20 million of revenue. We've got competitors, billions of dollars of size operating in those areas. But we set that goal and we doubled and then we tripled our R&D. We built those platforms and that was the start of our very high security business. So today we are the only company in the world who's certified in 4 out of 5 of the Five Eyes and we are the product of choice and we've really, really, really achieved that. So that was really cool. And we didn't expect at the time that the advantage would be so great. We thought we were doing it to keep jobs in New Zealand.

Kahl Betham:
We thought we were doing it to show that you can actually, if you chase, innovation and value you can actually build in New Zealand profitably and be world's best. So that was what we wanted to achieve. But what we didn't realise at the time, because we weren't in the high-security market at the time, that actually because all the competitors did go to China, we were the only ones who— you can't buy Chinese gear, can you, if you're in intelligence?

Paul Spain:
Yeah.

Kahl Betham:
So we found ourselves in this really, really unique position, also because New Zealand's in the Five Eyes and highly trusted with our military.

Paul Spain:
Yeah.

Kahl Betham:
So we found ourselves in this really unique unique competitive position.

Paul Spain:
Looking at that choice not to follow the others to Chinese manufacturing, not to do that, how hard a call was that actually to make? Because it all sounds great now, but at the time you're dealing with the global financial crisis. revenues, the numbers, you know, you've got all the same pressures that everybody else was dealing with.

Kahl Betham:
Yeah.

Paul Spain:
You know, from what you recall, like, you know, how difficult a decision was that? And was there a, you know, was there a feeling that maybe this was a really crazy move?

Kahl Betham:
No, it was a very short discussion actually, because Sir William believed so much that we should be building. and innovating in New Zealand. So, um, and I thought that was my first real experience testing the value of private entrepreneurial ownership, because genuinely, genuinely took a multi-intergenerational view of things and a long-term view. And we were in a good financial position because we were already, um, in a, in a premium position in each of our categories. We were already known as, uh, particularly in the agricultural side of things, we were the world's best at electric fencing. at the time and emerging in security. And we felt that there was a strong opportunity going forward. So I don't recall, it may have been a harder conversation behind the scenes 'cause I was head of products, I wasn't on the group ELT, I was on the security ELT at the time.

Kahl Betham:
It may have been a harder call behind the scenes, but I don't remember it being that way. And there was no really strong documented strategy or business case to it either. It was a, This feels like the right thing to do, start building it.

Paul Spain:
Yeah, yeah.

Kahl Betham:
It was a real entrepreneurial call and a real, yeah, by Sue Williams.

Paul Spain:
Now, $20 million security business.

Kahl Betham:
At that time, yeah.

Paul Spain:
How did that grow from that time and from that decision? Did you see immediate results? How was the progression?

Kahl Betham:
Sure, so the high security actually took quite some time to fully mature. The path between $20 to $50 million came from a different path, I suppose, going back to that business analyst days. One of the things that I found when I started talking to our channel, it was Chubb at the time, Chubb Security in New Zealand. A guy called Barry Elwin was the head of technology, and it was a really interesting time because they got purchased by UTC. And actually, one of our big competitors at the time that they were selling a lot of were purchased by GE, and they were competing with each other at the airline level, and they didn't want to buy each other's products anymore. So, as a junior business analyst coming in, I said, you know, what would it take for us to help you out here? And he helped specify what would need to change in our product, and the platform, the positioning to actually hit the sweet spot of what they wanted to achieve. And so, we built that. And that was the start of a really strong relationship.

Kahl Betham:
And that went from a $60,000 a year revenue to about $600,000 per annum, which was quite notable at the time. we even launched the product. And then we got Australia's interest and all of a sudden we started having some scaled channel coming in. And that was the start of us realising actually getting national force multiplier channel and targeting that was a really important thing to do. So that got us from $20 to $50 million quite quickly. And that gave us a lot of runway to then continue on because something that we've achieved, apart from some bank debt along the way, we've had no external capital. still 100% owned by, um, the fam— the 2 families. And we've done that through, um, really strong organic profitable growth along the way.

Kahl Betham:
So, um, these force multiplier relationships have underpinned that, those enduring partnerships.

Paul Spain:
And, and what, what were those external relationships with at the time to be able to get that feedback, to be able to ask, uh, for that opportunity to, uh, you know, to, to grow your business? Yeah. At that time? Did you have amazing relationships already or was that something that kind of just, you know, happened on the spot as you saw changes taking place?

Kahl Betham:
There were definitely existing relationships because I didn't have to go bang down the door and say, who are we? Because they were already buying some of our things. So we had— our sales teams were good and they were— they brought us in and said, hey, if you want to understand what could be, come. And they took me around to the lead technical people in different parts of our channel, the ones who would be able to see the future a little bit more. We call them lead customers, the ones that you can sit down with and imagine the future and get some really cool ideas because they know things. And there's sort of a question that we popped really early that I really enjoy, which is, you know, what do you wish someone would just do that you've given up asking for? And that question came out with a lot of these answers. So Yeah.

Paul Spain:
That's a great question. That's fantastic.

Kahl Betham:
And people just start talking. And if you listen, and then if you build what they believe they wish they would have, and you just keep a little bit quiet about it, and then you surprise the market, it's quite a nice feeling. And that experience got me that product management job to then go and commercialize it, which was fun.

Paul Spain:
Let's talk a little bit about the culture. What was the culture that you came into with Gallagher Group and how did that evolve over the time that you were there through to obviously stepping into leading the company yourself?

Kahl Betham:
So much has stayed exactly the same and so much has changed all at the same time, but the foundational things are values-based. From the very first time that I met anybody at Gallagher, I felt very warm and I felt like I was going to be looked after. And this was at a time when our company was being taken over and we weren't sure what was going to be happening. And we were being brought in one at a time and we didn't know what it was for. And for me it was a, do you want to come? But it wasn't, do you want to come for everybody? So it was one of those sort of moments. Okay. And, you know, I thought that was handled kind of well. But I was a young guy.

Kahl Betham:
I wasn't supporting a mortgage or a family. I was— just started my career. But I felt that warmth and I felt like I was gonna be looked after. And that was just something that I sensed right from the beginning. That was, yeah, Margaret Comer, actually. She's, yeah, she's not with the group anymore, but that was the first person I met and I got that. But then every person you met after that, you felt kind of the same way as well. So the values and integrity have always been there from Sir William.

Kahl Betham:
The entrepreneurship, the gut feel intuitive business, the— you put the relationship and the lifetime customer first, but the lifetime relationship first before profit, before anything else. And what do you know, the rest turns up. So I think that all that stuff is really, really there. Taking a long-term view, not a short-term view, having— an innovation appetite to have a go without having all the details laid out in front of you. Because if all the details laid out in front of you, it's not innovative, is it? You're just replicating something. So I thought that was something that came through really strongly, really early, and something that I really picked up and learnt, and it resonated with me from Sir William and the rest of the team.

Paul Spain:
How did that look in practice? You know, how do you scale an innovation kind of forward-looking, creative, tinkering, uh, you know, type of, uh, type of mindset and have that not, you know, not just in, in, in your, uh, you know, your lead, your top leadership and, and your founders' family, but, you know, actually spreading out right across the organization.

Kahl Betham:
Yeah, so the, the expect— the expectation of continual adaption and not standing still And we call it now creative problem solving. It used to be relentless innovation, but we found that when we talked to our people, the words they used were, you know, we're creative problem solvers. And that was the language they used, so that's what we use now. So building it deeply into the DNA as an expectation. An entrepreneur sees the world differently to perhaps some other more risk-averse personality types. An entrepreneur is more afraid not to try and to miss an opportunity. then someone might be afraid to try and fail. So that built in everywhere.

Kahl Betham:
So you only really get in trouble if you don't try. And I thought that that came through quite nicely. So built into the values, we communicate it, we hire for it. And when you are an entrepreneurial organisation, entrepreneurs and entrepreneurial people are attracted to you. And it's— you just seem to attract more and more people that feel the same way. Now, of course, you need, in different roles, you need people who are highly structured with a lower risk appetite, and you want them looking after all the important things. behind the scenes as well, like some software roles you want just to get right, and the finance roles and the legal roles you want to get very detailed and just right, and you want them to have their appetite. But in the sales roles and in the innovation roles and in all the roles where you have customer interactions, having highly empathetic people who care and feel what the customer's needs is really important.

Kahl Betham:
And then that flows through. It's not easy all the time, but always making sure that any conversation we have is not What do you think? What do you want? What's good for the customers and why is it good for them? I think is important.

Paul Spain:
And has there been a particular approach for helping put yourselves in the customer's shoes so you can see things from their perspective?

Kahl Betham:
Yeah, when we went through the Design 360 programme, which was teaching us about design thinking, and design thinking teaches you how to observe the world. as it is, but also think about how the world could be, not the way it is. And you get taught how to ask open-ended questions that get to the root cause of the problems they're trying to solve and the needs they really have. Not the— because everyone, if you're a technology company and you go to talk to them and say, hey, what should we build? They've all got an idea and they say, I want one of these. But if you can really get under the hood of the real problem they're trying to solve, then you've got a chance of then throwing the problem to the innovation team for them to work out a really innovative way to solve it. Or they'll think of something totally different as a result of that insight that you hadn't thought about. And a lot of our ideas weren't the first idea that come back. In fact, I don't think any of the good ones are.

Kahl Betham:
It always comes from another thought, another thought, another thought, which goes down a little bit of a rabbit hole. And then someone wakes up in the middle of the night and goes, I've got it, and it works. So it's, yeah, that's the creative problem-solving part.

Paul Spain:
How much of that do you think is able to be, you know, learned and engendered, and how much of that comes from, you know, the, the way that those that you're hiring are, you know, are wired for it maybe naturally?

Kahl Betham:
I've come to learn a lot about brain wiring, neuropsychology in the last little while, because when I was 42, about 8 years ago, you know, the, the story where I started to understand about neurodiversity— this is important, so I think there's actually a huge link here, so I'm going to go here. So my eldest son, he was struggling at school a little bit, got held back a year. But then the next year, the teacher goes, this guy is pretty special. He's a talented artist, like ridiculously talented with drawing and creativity and things like that. And he just thinks a little bit differently. Just go get him tested over here. And came back ADHD as heck. It's amazing.

Kahl Betham:
And then we started to learn about that, which is interesting. We started to got all the materials learning about ADHD. And then my wife and I were reading all the materials because she's a doctor. So she went down the neuroscience part of it pretty well. And I really like to understand everything deeply. So I went down that neuroscience rabbit hole. But what we worked out is we thought, this isn't a story about Jack. This is a story about us and our lives.

Kahl Betham:
And we found that we were highly neurodiverse as well. And then when you start to learn about that, we realized that in addition to some of the challenges that people might think of, deficits and disorders, I started to read and learn that actually there's a really high level of the innovation-seeking gene and the novelty-seeking gene in this population. And all of a sudden, I just flashed back my entire life and, ah, I've always been looking for something different. I've always been looking for the novelty, for the challenge, for the thing that doesn't exist in the world. And all of a sudden, I go, wow, that's because of the way my brain is wired. So I think in a lot of ways, people are wired for novelty seeking, or they're wired for safety or nurturing or different things. So I think making sure that we understand that about ourselves and understand that about what kind of people we need in what roles, and we start designing teams. You don't have a highly innovative role with someone who needs a high level of safety and certainty.

Kahl Betham:
It doesn't work that way. But you don't put a highly innovative ADHD person in a mission-critical system. Such as writing software to make sure the plane lands, because it won't. So I think that's really important. And I've spent quite a bit of time thinking about this. And I think a lot of the success of the scale change that's happened in the last 5 or 6 years come down to us intentionally designing teams and understanding leadership development and building leaders 4 layers deep of the right kind of leaders in the right kind of roles. I'd say that if I did nothing else again in any future role that I have, I did that, it'd work every time. So I think that's really interesting, organisational design around neurowiring.

Paul Spain:
So walk us through a little bit more about how you've done that.

Kahl Betham:
Yeah. So everyone knows about profiling of things like Myers-Briggs and things like that. And we use Myers-Briggs, which is interesting. If you're going to have high-performing teams, you need to have high cohesion in teams. And in order to have a high cohesion in teams, you actually have to have quite a high level of self-awareness of yourself. The leaders need to have a high level of awareness of different personality types and what they need in order to be able to motivate them and excite them and also solve challenges for them, in order to be able to design the teams that's the right balance and shape. Because if you design an entire team the same as you or the same as one type, which is quite an attractive thing to do because they think like you and you get validated, but it's not the right thing to do at all. Having leaders that understand that and how to balance a team is important.

Kahl Betham:
But we invest a lot of time in profiling, but also then with those external coaches, which we've now built as an internal capability, by the way, so that we get everybody profiled that comes in so they can help them understand themselves. And then when they've understood themselves, we've all got those profiles and we can say, now, what does the team structure look like? What does this look like? What does conflict look like? What does motivation look like? So we've had a lot of external experts come in and help us understand that. And we've got a little way to go in a lot of areas, but I think that's one of the key reasons why we've got extremely high engagement. We have a score of 83 for engagement, which is absolutely world-class across all industries. And I think that's one of the key reasons we do that.

Paul Spain:
That's great. And so what are the mechanisms that you're using to measure these types of things? Internally?

Kahl Betham:
Yeah, sure. So we do engagement surveys. That's really, really important. And the most important part of engagement surveys is not getting a score, it's actually getting the insights about what's great that you want to double and triple down on and where are the work-ons and actually getting busy and doing those. So that's a really practical thing. And you don't want to go past that because everyone knows it, but does everyone do it very well regarding actually improving the culture? every time because we say that we just need to be 1% better than yesterday every day and always adapt and always be better. So it doesn't matter if you've already got a score well above 80 that's world-class and in the highest echelon. We want to be 81, 82, 83, 84 and just be a little bit better every day because nothing stands still.

Kahl Betham:
But what we've also done is we send leaders to ISL in Queenstown, Institute of Strategic Leadership, and that's one of those Rare opportunities in life where you get to go away and you unplug from your entire life. They make you turn off the phone for the entire week and they really help you understand you and who you are and what you need and who you want to be as a leader. It's got nothing to do with skills or anything else. So we put everybody through that and we've actually gone a couple of layers deep with that. So that's an interesting thing. As it happens, my coach from that ended up coming in and starting our own internal practice. of building out our internal leadership programme, 'cause deeply, deeply, deeply believe that, yeah, building out those leaders 4 layers deep in these areas and the quality of leadership was the way that we were gonna unlock billions of revenue. And it's certainly been the truth for that scale factor.

Kahl Betham:
So that was, I'd say that's my top 3 things that we've done over the last 6 or 7 years deliberately. Yeah.

Paul Spain:
Yeah,

Kahl Betham:
as an organisation.

Paul Spain:
That's great. I'm curious about you leaving Gallagher.

Kahl Betham:
Yeah.

Paul Spain:
What happened there and what did your time away look like?

Kahl Betham:
Yeah. So after running the products team for security for around 13 years, you know, I had this real interest and desire to maybe have a crack at leading an organization. So I suppose I popped out. We call it the secondment now or the holiday because I was only gone for 5 months. And it was kind of interesting. And, you know, things are kind of flatlined a bit in security. Things are like plateaued off and we weren't really growing. We got to about that $48 million mark and we were stuck there for a little while and we didn't really feel like we were going too far.

Kahl Betham:
And I started to think, you know what, maybe it's time for me to spread my wings and take a leadership role. And SmartTrade gave me the opportunity to, to lead that, to lead that business, which was interesting. So that was my first crack at that. But stayed really close to Gallaher during that time and you know, they, they asked me, hey, would you— do you want to run security globally? And I thought, yeah, that's kind of cool. That's kind of the job I always wanted, to be honest. Um, so I took that, and, um, and it was really interesting because things weren't going that well. We were unprofitable, um, that one year, um, that I— or part of the year that I popped out. That year we were unprofitable.

Kahl Betham:
And it was— but I think one of the good things about that is I think sometimes things have to be broken enough to have mandate to change. Because if things were okay, you probably would have done increments, But popping out, having a holiday, getting fresh, because I needed to freshen up a little bit, and it was quite nice to step away and get some perspective. And when I came back in, I had the gift of mandate to do what we needed to do. And I'd been thinking about what security needed to do. I'd written what we called a product strategy back in 2011, and this was 2015. I left in 2016. I came back in. And so I had something sitting on the shelf there ready to go to implement.

Kahl Betham:
And coming back, they gave me the chance just to implement that. So, and we did a massive transformation. We, we took a really, really close look at the business and took a look at the, the shape of our, our customer base and, you know, and what the shape of our channel was. And we found that, you know, 90-something percent of our income was coming from 14% of our channel partners and we looked at those channel partners and they all looked and felt the same way. So we found that, ah, there's a— there's something in the secret sauce there. So we, we understood that, we profiled it, and then we trimmed some of the channel that perhaps didn't fit quite so much and weren't profitable. And we profiled what our champion channel partners needed to look like, and we started recruiting and hiring more of those and building that out. We had a look at what kind of leadership capability we needed to grow the business to hundreds of millions.

Kahl Betham:
And so the first thing is we had to say, well, we don't want to be 50 and then growing at 5 or 7% compounding, whatever it was. We actually, we wanted to be hundreds. So then what does it take to be hundreds? And that was a reframing question that was really, really important. So then we, um, yeah, designed out the teams we needed. So, you know, a little bit sad because, um, some people that you'd worked with for decades and they were really good at At the beginning, perhaps they either didn't have the energy or they're at the end of their careers or for one reason or another, they perhaps weren't 100 or 200 kind of people. So that was difficult. But we designed out the leadership teams again and got really focused and got busy and we got profitable in the first year. And before you know it, within a few years, we went from the least profitable to the most profitable division in the group.

Kahl Betham:
quite quickly. And now today it was $48 million, now security is going to be well north of $300 million this year. And $200 million of that growth has happened in the last 6 years, actually since I handed over to Mark Junning and the leadership team. We took it to another level again, which is a proud moment for a leader when you step out and it goes from $100 million to $300 million pretty quickly. You know, you've got something quite right in the strategy and the team and the sustainability of that. So it's quite a cool story.

Paul Spain:
That's really exciting. And how global is that business today? Because you talked about the focus on the Five Eyes countries. Have you doubled down on those countries or, you know, is there a much, you know, broader perspective?

Kahl Betham:
Yeah, so Security sells into just over 130 countries. And actually, most of the business comes from the enterprise space. So we're talking about critical national infrastructure such as the health or the schooling systems or the local body councils, or any high-rises, or it's just almost any industry. We've got a really strong spread across industries with buildings and doors and perimeter needs, so it's quite widespread. So we chose to target the very high security because that's the pinnacle, the hardest thing, and if you can do that, then you get the right to everything else. So that was one of our, like, the big hairy audacious goals, you know. If you can win the top, top end of town, then of course banks are going to be good. If it's good for intelligence, it's good for banks.

Kahl Betham:
And that was like the right to win. So, um, we've got lucrative business in high security, but the 80% rule is actually in the, the broad commercial space. Um, and while we say Five Eyes, there's another 126, 127 countries that we sell into in addition to those countries. So yeah, it's quite well spread.

Paul Spain:
Yeah. In terms of, you know, bringing that reset to the security business and going through that, you know, what can you break down for us in terms of, you know, how you were able to achieve that?

Kahl Betham:
Yeah. Well, the first thing we had to do was we just had to break it down. It was really, really simple. The first one was a stabilize phase. And to get a new plan in place. And then there was, well, actually it's really just 2 phrases, 'cause the first one was to stop the bleed. The second one was to form a new plan and then to scale it in those ways. So it was like taking the problem into bite-sized chunks and just breaking that down.

Kahl Betham:
And it wasn't too difficult because we actually had it, in fact, the product platforms we had then are actually very, almost identical to the product platforms we had at $300 million. So we already had a world-class product to take to market, and that's a privilege. We just had to build out the commercial organisation to do it and to have a go. We touched everything in the business, and I think, yeah, all we did was change everything. And I thought that was interesting. But the mindset was the most important thing, I would've said, along with designing out the— because we had to have a look at the culture. Because when things go bad, you know, it's not a very long walk between everything's fine to things getting quite toxic, quite quickly as a culture. So things weren't very nice inside the security division.

Kahl Betham:
And of course, if things aren't nice inside one division and that starts holding back other parts of the division as well, you know, you get a bit of pressure on and people start feeling not that great. But then conversely, when you start winning and growing quickly, it sort of— that culture turns on a dime. And I found it turned on a dime because they knew me as well. I didn't have to learn— they didn't have to learn who I was. So it was like, I'll call you back, let's go, which is kind of nice. So I learned a lot about the speed of change, the importance of leaders. A leader can turn things around in weeks. Yeah, and it can come back quickly if you know where you'd like to go.

Paul Spain:
And how did you set your goals? How did you decide, are we gonna grow by 10%, 20%, 50%, 1,000%? Like, you know, you've gotta come up with something that has at least an ounce of, reality to it, but you also want to really stretch, right? So, you know, how did you land on those goals? What did you end up sort of setting for, you know, for the team? And, you know, how close were you to your goals along the way?

Kahl Betham:
The first thing is when you're setting growth goals is to understand how much growth is there in the market. So every commercial building in the world is quite a large target addressable market. So we weren't going to— we could set any goal and that would sound believable. And it was quite a mature market at the time and with many competitors who were many hundreds of millions. And we had a better product than a number of them who were hundreds of millions. So if we said, cool, so if our product's better and the difference has to be the commercial organisation. So it was more about the world deserves and we deserve, our product deserves to be getting got in the hands of more people to enjoy because the— The competitors leading the market at the time had aged technology, it wasn't that great, but they had a bit better distribution model. So it was quite easy to pitch that the market's big enough, that we're good enough, and then just to have a go and to start one piece at a time.

Kahl Betham:
But the first goal was, is to say, hey, $100 million is a good first tranche. 'Cause at the time when things aren't going well and we hadn't been growing, that could feel like a long way away for some people. If we'd said we're gonna target $1 billion at that time, people would laugh you out of the room kind of stuff. So you actually also have to set goals that feel like they're reachable but super stretchy still. It's got to be stretchy enough that you can't do it with status quo. You have to change everything. You can't stay still. Like if we said we wanted to be $55 million, then $60 million, then $65 million, then $70 million, then we probably could have done a modification of what we had and sort of done that.

Kahl Betham:
But because we said we, okay, we want to double in a very short period of time, And also said $100 million's the goal, but just be aware, hundreds is in the mind. So just, you had to have enough change, I suppose. And that was really, really important. And the same thing flowed later on when I got into the group, the group CEO, deputy CEO role, then the group CEO role as well. We were a couple hundred million and we thought, do you know what, the animal management market is huge, the security market is huge. It could be a billion turnover. Wouldn't that be cool? So that was another one of those reframing moments. And to some extent, yeah, sometimes you just have to reframe a moonshot without having all the answers because it just makes you think a different way.

Kahl Betham:
And the only thing that I wish is that we'd actually reframed some of those questions earlier, 'cause I believe the goal that you set is the only— is the ceiling on what you're going to achieve. So if you set conservative goals, you'll get there, but could you have doubled it? You'll never know. But so their confidence grows, ambition grows, risk appetite grows. There's some interesting learnings inside there as well.

Paul Spain:
And how far and wide did you share those ambitions? How did you roll that out through leadership and beyond?

Kahl Betham:
Yeah, wide. Everyone we talked to. Um, particularly in the security turnaround. And, um, and then when I, when I jumped into the CEO role for the group as well, we started doing what we now call a big conversation. We do 3 times a year, which is grab everyone together and have a chat about what's going on and where we're going. Um, and then during the pandemic, when communications had to go through the roof, I was cutting videos sometimes twice a day and then going to weekly. And I think, um, got something like 20,000 impressions of videos from our people over time. We learned a lot about communication acceleration at that point as well.

Kahl Betham:
So far and wide communication, because you're not going to go anywhere unless everybody starts living and breathing the ambition and the goal, because the entire organisational design and fabric has to change to go from $200 to $1 billion or from $50 to hundreds of millions.

Paul Spain:
And any tips on how you were able to make those communications really stick and make your team interested because it's all very well having some content available, but if the team aren't watching it, listening to it, and engaging at all, or they don't turn up when you're doing an online meeting, then you get stymied very quickly.

Kahl Betham:
Yeah, one really good point is you have to co-design the plan. The ambition in setting the goal of how might we do that moonshot is really important. But then designing out the plan must be a co-design. Everyone must have their fingerprints on it. And if that happens, then you don't have change management because you're not, I've come up with a plan, I now need to teach you the plan and why we've done the plan. You've co-designed the plan and it's theirs and actually it's our plan. And let's go is much better. Let's go on the thing we created.

Kahl Betham:
If we heard it right, if we got it right. Yeah. is much stronger than, yeah, here's my plan I've given you. That's the only way of getting into the hearts and minds of people deeply, I think.

Paul Spain:
Excellent. And I mean, how deeply into the organisation do you do that?

Kahl Betham:
Well, also in the first year of being in the role, here's an example. We'd had really strong values and really strong focus points for some time in the group, but we thought maybe it's time after after 80 years, just to, to re— have a relook at those and hired a company, um, called Empathy, actually, who I'd met as part of the Better by Design program and things like that, to come in and help us, um, discover the real, the real articulation of the values and uncover what was already true and help us work out what our purpose should be going forward. So to answer your question on how far and wide, um, we had workshops with everybody, even from the factory floor. And we killed tens of thousands of Post-it notes and asked them a number of questions. I said, you know, what do you love about Gallagher and that you hope we never lose? In 5 years' time or in 10 years' time, what do you hope we become? And what do you hope our grandkids would say about what we did and the impact that had on the world? We asked questions like, can you think of times where we've fostered innovation or we've stifled innovation? Really cool, interesting questions there as well. And there was a couple more like that, but those kind of interesting questions came out and that's where we got refreshed emotive articulations of our values, which were largely what we already were, but it was in their words and they connected to your heart. Like relentless innovation is a bit practical and a bit engineering, but creative problem solving's a lot deeper, isn't it? Yeah. We've got relentless lifetime relationships.

Kahl Betham:
That's interesting. But when you've got, no, we harness the power of diverse perspectives in everything we do, we do as a team, it's just, it's stronger, isn't it? So when you go from having a practical connection to an emotive, purposeful connection, then things get a lot deeper. So I think that was really important.

Paul Spain:
Yeah. You came back in, was it, you know, 2015 into that, you know, leading the security business globally. And then 2019, you became the Deputy Chief Executive.

Kahl Betham:
Of the group, yeah.

Paul Spain:
Of the group. And this was, I guess, the start of something of a transition because this had very much been you know, a family-owned and a family-led business for, you know, the entirety of its history. Yeah. So let's hear a little bit about, you know, about that time as, you know, Deputy Chief Executive and the transition ultimately.

Kahl Betham:
Yeah, so what I'll also tell just before that is the journey the family went through on that transition. You know, because Sir William was late '80s— sorry, late '70s at the time, and Sir John were as well. And they tell the story about how, as the 2 families, they just got together and said, what do we want to do here? You know, the number of ways that we could go. And now is the right time to think about all the alternatives. Are we going to sell? Are we going to do a Fisher and Paykel and split into 2 companies and then create 2 big companies that way? Are we going to list? Are we going to carry on the way we are and transition to family next generation, or are we going to do something different? And where they settled is they, they didn't want to sell, they didn't want to list. All the wonderful things, the wonderful freedoms, I suppose, that we have as a private organisation to, to take an intergenerational view, to have an innovation piece that will shift an industry in maybe 5 or 10 or 15 years and take a long-term play. If times get tough, we can still pay our people without having to answer to other shareholders because you paid people when you weren't making enough money. And all those really hard decisions that you want to be able to make that are the right thing to do, it just would never happen if you were listed anymore or if you had equity partners or venture capital or anything of the sort.

Kahl Betham:
So what they said, you know, and the next generation in the family said, you know, I don't really have a desire to run this thing. So what they decided to do, they decided to go from family-owned and family-run or led, as you call it, um, to family-owned and professionally independently run. So already had a number of independent directors. So, um, so at the time, um, so they appointed me as the deputy CEO, and that was like just training wheels for a year to be the CEO. And kind of got the keys pretty early on, um, to, to start running it like the CEO. So that was kind of nice. Um, and that was a, a huge success factor in the transition, that there was a high level of trust that Soil MC just Here you go, away you go. It was kind of, that was, I think it was a critical part of the transition.

Kahl Betham:
People often wondered, you know, how that went, but I'd say huge kudos to Sir William of just giving that trust openly and freely so quickly was a critical part of that transition. But anyway, so Steve Tucker, who was Deputy CEO for many, many years, he moved up to Chair of the Board and became an independent director, and he started his life with the directorship portfolio that he's got now. And I moved into CEO role and also Executive Director as well. And we already had some independents. And then over time, Keith Gallagher, Sir John's son, and Ian Gallagher, Sir William's son, they became interns on the board at the same time as their fathers. And then just this year, Sir William and Sir John retired, and Keith and Ian are full-time family representatives on the boards. And the constitution says there will always be one family member from each of the board, there will be 4 independents and an independent chair. And now we independently run.

Kahl Betham:
So that's where we're at today. And the main goal was they wanted to keep running with all the values and the approach and the, I suppose, the mindset of being privately owned, but to run faster at scale and to improve the systems and to have a greater impact at scale. So they fell in love with the billion-dollar idea as well.

Paul Spain:
And, you know, how— How hard was it to come to agreement on all of the bits and pieces of actually making that transition? Were you using outside advice in terms of what doesn't work, what does work? Is that something you had to go and research deeply and the family did as well?

Kahl Betham:
On the family structure, they have their advisors and they definitely would've involved their advisors about what they do and don't want. So I think they would've had some facilitated help, but I wasn't in those. not being a family member. But, you know, in the early days of, of, of the different things that we then started to do at different times, we've, we've gotten different external advice in different specific areas, whether it's in cyber area or architecture or marketing or organizational design. It's all— I think it's important to get some external help in to grow that new muscle that you need. Yeah. But we always ask them to come and teach us to fish, not to do it for us.

Paul Spain:
Yeah. Yeah. Yeah. So I'm keen to hear about the transition from, I guess, what you would call on the agricultural side, agri-mechanical into precision agri-tech. Walk us through how the business was and then how that's evolved and what's changed because you're much deeper in terms of digital technologies now, right?

Kahl Betham:
Yeah, absolutely. So going from the electric fencing systems, and then we just talked about expanding into things to measure the health of the animal, the growth rates of the animal, we started to understand that actually producing a whole farming production system that measured all the elements that you needed to measure in order to grow grass well, to grow animals well, to produce and optimise beef, lamb, and dairy in the world. We had also had quite a bit of experience building out software platforms on top of our security business as well. And we saw the benefit there of when you can become— go from a device company to a platform company, you can actually add greater value and you can actually start to bring a whole lot of different sensors together in order to identify how operations could be optimised and therefore make the world better. So, you know, we've decided to be a precision farming platform in addition to being the traditional farming systems. And as part of that as well, there's some technology changes that have just popped up now that everyone will be aware of now, which is kind of cool, which is virtual fencing as well. We're talking about a wearable on a cow that has the ability to automatically geofence the grazing systems and also break feed and order of how much feed you give the animal at any given time. We've got lifetime tracking of where the animal's been.

Kahl Betham:
And when we start adding that to all the other parts of our of our traditional systems, such as the ability to weigh the animal with multiple different techniques. We've got even water management systems to make sure the water's getting to the animals, and we monitor that to make sure they're getting what they need to grow. If you then start imagining pasture sensors, if you start then imagining all the other elements of the farm that you might want to know to be able to measure in order to be able to give insights about why some animals in some paddocks do better. Or how you might want to, in an animal pandemic, know which animals have been near each other in order to be able to not have to cull them all by proving they hadn't interacted with each other. But we see a huge amount of value in a software platform that brings together a really disparate industry of lots of individual sensors into this nice consolidated platform that allows those insights to be served up to the farmers and make their life easy about how to improve their productivity. So that seriously increased the target addressable market because if we talk about electric fencing systems, that'll be measured in hundreds of millions. But if we talk about all of the beef, lamb, and dairy production in the world, we're talking multiple tens of billions of dollars of production that we can help optimise. So all of a sudden, our target addressable market is not just 10x, it's factors x bigger as a result of that because of the value that we can add to the customer.

Kahl Betham:
So Yeah, we're a precision farming company now.

Paul Spain:
Wow. Now, the way that farms have evolved over recent years, I find it quite fascinating. And I remember visiting a farmer in— yeah, visiting a farmer in Wanaka. And I wanted to see how he was operating his farm because he didn't actually live anywhere near his farm anymore. And, you know, they had cameras set up and, you know, all sorts of automations. And he told me, Paul, our cattle can decide when they come in to be milked. Yeah. We're not actually, you know, operating in the traditional manner where, you know, we bring them in at fixed milking times and so on.

Paul Spain:
And it was a very different way of farming from what I recall seeing, you know, in my younger years visiting family friends and their farms that just looked like a whole different world. How much has that really evolved? And what do you see kind of playing out? That seems to be quite a long transition. It's not something where every farmer's moved into that sort of world. No. But there is the technology there where a cow can wander in and get automatically hooked up to a milking machine and so on with no human involved. How's that world progressing?

Kahl Betham:
Yes, that's really interesting. So milking systems, that's not really our gig, but it's an interesting analogy. But for pastoral grazing systems, so if you just imagine what a day in the life of, or even just the way farming had worked in pastoral grazing, For really big hill country, really big farms and things like that, you'd have boundary fences and really large paddocks, and they'd probably set the animals off into that paddock for a while. And then the animals would probably eat the best grass in the best areas and probably ignore all the rest. And if they did, if the farmers did want to control that, then they were going to be taking out some electric fence standards and moving them every single time with their bike with a whole lot of the standards and pigtails on the back and just moving that fence. And that was someone's job to manually move the fence in order to get the break feeding. And in some parts of the year, that's really, really important to make sure they don't get too much or too little feed, because that really is critical to the entire production of a farm. But what's happening nowadays is that we can set up all kinds of automated profiles with virtual fencing that says, hey, this much feed is going to be allocated to this mob, and we can do that by centimetre.

Kahl Betham:
And we've even got the points now where we can actually just have that automatically moving and grazing. And what happens now is that we can make sure that every part of every paddock is grazed. And what starts— a really interesting thing starts to happen. When you, when you graze somewhere versus not grazing somewhere, you start getting a lot more grass coming through, get a lot more grass coverage. Your land starts holding a lot more. And the amount of milk or beef or lamb you can produce is down to how much grass you can produce and how consistently. So by also making sure that it's grazed in every part, you're also break-fertilizing because the animals are going there. And what starts happening after a couple of seasons is the organic matter in the soil starts increasing.

Kahl Betham:
And so all of a sudden, your land is worth more because it can produce more and you can hold more animals on it. And you can start customizing how much feed each animal gets. Like one's growing slower than another. it can automatically allocate them a bit more, which is kind of interesting. And all this can happen without being there. And now the system is starting to automatically make those changes for people, as opposed to the first generation of virtual fencing, which was, I'm just going to move— I'm just going to change it to profile B in that part of the paddock. It's kind of interesting how that's evolving. And I'm going to be really excited to see what happens over time because I was talking to a soil scientist that we got over here to help us who's been working on regeneration of actually reversing desertification through pastoral grazing, which is really interesting, like on the edge of Mexico and stuff like that.

Kahl Betham:
And he came to New Zealand and he was sitting with us at field days and I was having dinner with him and he tried some of our beef. He goes, I can taste that your soil is very good. So if you start to imagine now that the quality of soil increases the taste and the experience, so all of a sudden we're going to get to the point where I think we can say that animals, animals grown under these production systems, the soil's better, the carbon sequestration is better because we've got more grass to suck up the carbon, and the soil is better and it's healthier, and therefore the food tastes better. And that should get a premium. So I think that's really interesting.

Paul Spain:
That's great. That's a great, great, great, great story. Great realization to have. Yeah.

Kahl Betham:
And it's only really— how deep that goes is only really going to be understood in the coming years. Because the virtual fencing has only been going for a few years. So yeah, a few more seasons, we'll see what really happens.

Paul Spain:
How many years have you been involved in the virtual fencing now?

Kahl Betham:
Yeah, so we first got involved with an Australian company called AgriSense, which is where our eShepherd platform comes from. And we fully purchased that 5 or 6 years ago, but we'd been involved for about 4 years prior to that. So they had some original IP from Australian CSIRO. around the virtual fencing in certain categories. So we purchased that patent as well. And yeah, that's how long we've been involved in it.

Paul Spain:
Yeah,

Kahl Betham:
but yeah, it's really started to take off in the last few years.

Paul Spain:
We've seen a move in, in a lot of areas from selling, you know, selling a product once to recurring revenue. And in a lot of cases, you know, that delivers benefit, you know, significant benefits, you know, both to the company that's, you know, invented the initial product and to the customers.

Kahl Betham:
Yeah.

Paul Spain:
How's that played out for, you know, Gallagher Group and for your customers? How does that look, you know, today versus, you know, back in the day? you know, sell an electric fence, you know, deal's done, that's it. You know, you maybe would never talk to them again unless they need more electric fences. But, you know, now you've got a much more, you know, continuous ongoing relationship with, with your customers.

Kahl Betham:
It's been a really important part of our deliberate design to move from a device and a product company to a platform company. And, you know, we've been almost 20 years into that software. In fact, no, we actually had software sales and security before the acquisition So it goes all the way back there, and it is a really important part of our profit and loss accounts. It's a significant amount, but it's for a number of reasons, because it gives you some enough certainty to be able to reinvest a lot into R&D. And as a group, we reinvest about 15% of our total turnover back into R&D, all in good times and bad.

Paul Spain:
And actually, this is a, this is a, this is a really big, big number, right?

Kahl Betham:
It is, it is a big number. And when you talk about the toughest times, when particularly with a lot of our our competitors that may have been listed actually during the GFC and other tough times. And, you know, the, you know, those downturns that used to turn up once every 9 years but now have turned up once every year, um, they shrink their R&D at that time. And so we countercyclically go the other way. And this is a part of how that helps, um, because we reinvest it. And we told this, and we started to tell the story because back in the day when we were the first ones to really start charging for software maintenance, maintenance agreements in the industry and security. And we're talking to electricians here and things like that who are installing our products. They go, how's that going to work? And we said, you know, what we'll promise is that we'll, we'll use it and we'll create more innovation, we'll make the products better, and also we'll help you create a recurring revenue business as we create a revenue, and we'll share, and that's going to go well.

Kahl Betham:
So that was really important to build that out. And, you know, as we move from a farming system, an electric fencing system of where we sell boxes on shelves in retail and now become a precision farming platform to optimise. And we earn because we help farmers optimise their operation and to increase their productivity. Then you start to have the ability to have the conversation about perhaps we can share in that with software as well and provide that level of continuity and provide that level of innovation back as well. So Probably earlier days for the agricultural segment as a whole, just from a maturity of the entire segment, but it's moving fast now. And we've seen the last few years that moving much, much faster, that generational change has started to take over. Yeah.

Paul Spain:
That's great. So looking at the security business, and you know, we hear about, you know, Five Eyes countries and, and, you know, really important security, but maybe break that down for us a little bit in terms of understanding, you know, exactly what your security, you know, products enable and deliver? What's the scenario where, you know, where they're really helpful? And, you know, what's that current sort of state of the play look like? Yeah,

Kahl Betham:
that's a great question. So traditional access control pretty much ensures that the good people get in, the bad people stay out, of who gets through what doors when. That's pretty much how traditional security works, and everyone can do that. There's hundreds of competitors. It's quite commoditized. Um, in the— probably about 15 years ago, um, we had, um, an experience where I think I was still a, um, a business analyst, and I was, I was going to a mine site to do some requirements gathering there. And, um, we were standing in a really long queue. Um, you know, there's 20,000 people that get onto one of these sites in Western Australia, and it takes them 2— it took them 2 and a half hours to get them onto site.

Kahl Betham:
And all they were— and what they were doing is they were onboarding people from a health and safety perspective. And so we had this real insight that, you know what, I wonder if we could automate some of this process. And I wonder, because if we could automate this process, could we get these 20,000 people on site faster? Could we increase their production hours? That's kind of curious. So, um, at the same time, um, health and safety legislation in Australia was starting to come in, and it was going— it was about to be legislated. That's when the corporate culpability comes in for manslaughter and things like that. So the mines were starting getting interested in health and safety more. So what we found is because if we know who can go in what doors, we added another concept inside our logic of our access control, which is why they can get in. And we added a concept of competencies of, okay, in order to be able to get onto the site into this location to do this job, you're going to need hot metal certificates, You're going to need to be not fatigued, i.e., inside your shift patterns.

Kahl Betham:
You're going to have to be able to be randomly selected for drug and alcohol because it was a bit of a thing over there. So we were doing random selections of drug and alcohol, standing people down for a period of time while they got tested and then re-enabled later. So long and the short of it is we became the first access control system in the world that became a protective mitigative control for health and safety. paper-based systems, but now automated auditably. So, yeah, so we totally changed the proposition. So instead of selling into a security department inside facilities, now we were— we had the interest of the Chief Operating Officer, the CEO, the— in every part of the organization because we became a critical business system. And some other stories happened as well as that started happening where we found that The production was limited in the mines of how many blasts they could do a day. Therefore, they were limited by how fast they could clear the blast zones.

Kahl Betham:
So we found with access control, we were able to track with our electronic identification of our people where people were and go from a manual tag board system, which is literally putting a key up there manually. And if they walked away with the key and went home, they didn't know where they were, so they couldn't blast. So we did that electronically and we were able to get them an extra blast a day. For one mine, that was $4 million of production a day. So really cool.

Paul Spain:
$4 million of production a day.

Kahl Betham:
I know, we didn't charge enough.

Paul Spain:
We did not charge enough. That's astronomical if you stretch that out over a decade or even a short period of time. So, you know, how much difference did those things make to the ramping up of the business?

Kahl Betham:
So we've now got nearly 500 mines and I believe we won over 400 in a row without any contestation at all because it didn't— it wasn't in the security space anymore. It was in the operational space. And they all needed security technologies, but no one else was selling this. So we found ourselves for quite a while as the only person able to solve those problems for a period of time. So that was really, really interesting. So then we started extending that out to energy management and integrating with student management systems in universities. And all of a sudden we thought, okay, how do we actually become a critical business system in any industry, which is kind of an interesting thing there. So thinking well outside of traditional security.

Paul Spain:
And how big are those opportunities for you? I think probably a lot of buildings don't yet have a sort of system that's tied back to actually who could or should have access. So is that one of the kind of key areas of opportunity and growth in the market for you?

Kahl Betham:
Yeah, you're dead right, because you can have all the wonderful security technology, but if you haven't provisioned the right access for the right reasons and the right exclusions for the right reasons, you don't have a system at all. Very similar to your IT networks. If your password gets into every part of the network, then you don't have security at all. So you have to segment that out. So similar to the mining example, we integrate with the people management systems. So the best The customers who do this the best at the moment, they identify in their people systems what roles people have, where they should be able to get, and why, for what reasons. We automatically integrate that information from whatever system that is into our system and then allocate access based on that role base. That's the best case of how that should work.

Kahl Betham:
Then you should only get where you need to get to. And you should be able to change those profiles in a moment as well under pandemics or any lockdown scenarios and change those based on those needs. So that's what we do, that's bread and butter, but unfortunately it does come down to how diligent those administrating the system are at any given time.

Paul Spain:
Yeah. When you look at New Zealand from a security posture perspective, how do you think we're doing compared to globally? Because I think most organizations, most people will have seen scenarios where swipe cards aren't well managed, well controlled, and the varying access control systems seem— it all seems to be quite relaxed in a lot of cases. What are you seeing? Is that a genuine problem, or is it no problem anymore because everything's digitised and there's nothing confidential left lying around in business premises anymore?

Kahl Betham:
I do think it's a challenge, but it comes down to security is in New Zealand is not as much of a concern as it is in other countries. You know, we're quite complacent as New Zealanders overall because not a great deal of bad stuff happens here, unfortunately.

Paul Spain:
Unfortunately?

Kahl Betham:
Yeah, from a security perspective, you know, exactly right. I shouldn't say unfortunately at all. But, you know, if you're in America, people are really, really worried about things. Like, if you go to a school, we're selling lockdown systems for to stop active shooters. We don't sell a single one of those in New Zealand. So the security posture of New Zealand comes down to how safe the environment is. So yeah, it is delightful, not disappointing, that we live in a really safe place. But it does— it's not very good for setting us up for when bad stuff does turn up.

Kahl Betham:
And we see that across our IT posture and our cyber posture and those kind of things as well. But, you know, a couple of DHBs have been hacked and things like that. So perhaps the awareness is getting up. So yeah.

Paul Spain:
Yeah, thinking about what you do from a security perspective, you know, what's maybe, you know, an example, you know, of how, you know, you've seen a circumstance, you know, change because of what you're able to provide to your customers?

Kahl Betham:
2 examples, 2 short stories. One of them in the mining environment, you know, and the security environment is really unique where the security team is also the emergency response teams. So they're responsible for making sure everyone goes home safe, not only from— because they're operating heavy machinery and things like that. So with us making sure that everyone is not under the influence of drugs or alcohol, they've got the right certifications, they're not fatigued, they're safe, they're safe at work. So genuinely making sure that people go home safe every day to their families is really, really important. Another interesting example, and we, you know, coming from New Zealand, we don't see this as much, but this really resonates with me in America. I've told— I apologize if you've heard this before, I've told it before, but it's a powerful story where we found that with our access control system, we are able to lock down buildings and facilities and spaces in seconds. And unfortunately, there's a market for that in America.

Kahl Betham:
And we have an example where a small school in the state of Missouri had an active shooter approaching the school. And we know that on average, 8 children die in active shootings whenever that happens. And however, a teacher was able to see that, was able to activate a lockdown within seconds. And the first responders were there within a very small number of minutes. And nothing happened. And that's just wonderful. So the ability to, and we've been quietly rolling that out at schools in different places in America as well. And it's horrible that those things are needed, but it's really nice to know that we can have those kind of impacts and stop those things happening.

Paul Spain:
Yeah, that's great. Moments of crisis and the most difficult parts on a business journey, often bring out the best in people. They bring out, or they create opportunities where you have to innovate out of a difficult place. Can you drill into one of those key places from during the COVID window that you think was actually really key in terms of— Yeah. you know, the decisions made and, and how things progressed.

Kahl Betham:
For me, I think so. Just after the pandemic wave, what came next from a global perspective was a supply chain crisis for electronic components, because most electronic components are consumed by the automotive industry. When the pandemic came, they said they didn't want them, therefore all the production got shut down. When they found that everybody was still buying and the money was cheap, they said we want them back and then created a crisis for everybody else. So that's what happened. So what happened for us is we had continuity of all our electronic components coming in, it was going to arrive in a few weeks, it was committed, and then we got a message saying, you know how that was coming in a few weeks? How does 7 months sound? So we could have found ourselves in a position where we were out of stock for quite a few months and up to 6 months, which would have been catastrophic for the group because we didn't have that much stock on hand. which basically means for that period of time we'd have gone to zero income, which is really, really tough and tight. So that's a moment.

Kahl Betham:
But then, you know, um, what do we do? Um, we did a couple of things. First thing is that we, we called up New Zealand Trade Enterprises as well and say, hey, can you help us out here because we're going to need to get access? We knew that we were critical, um, to the high-security portion of the world. Um, we knew that we were critical to the pandemic response, um, for, um, for hospitals, for ICU, and for police and for everybody like that. And we knew we were critical from a food production perspective. People are just going to need to keep eating, and we're going to need to keep getting the systems around the world. So New Zealand Trade and Enterprise were really helpful. They helped us get a letter from Damien O'Connor at the time saying how critical we were. We took that to our suppliers, and that helped us gain some access to supply and get out the product.

Kahl Betham:
priority chain, which was really nice. But what we also did, and this is more of a cultural thing, and I think, you know, we see, you know, that, you know, the depth of your culture balance sheet when times hit tough. And I'm so proud to say that as soon as the pandemic turned up, not only did the shareholders come forward and say, well, the first thing we're going to do is we're going to keep paying people. That's the first thing. You've got to, you're safe and we're going to find a way to do that. But we might need to ask a few favours of our people. on the electronics supply, we're going to need to redesign 52 products in 3 months when we normally launch 4 a year.

Paul Spain:
Wow.

Kahl Betham:
So we did that and everyone just— we asked, they said let's go, and they did it. And that was amazing. And we did that to get dual supply just in case we didn't get the components we needed to make sure that we were able to, to keep providing what we needed to for our customers. We also went to the secondary— it's called a grey market where you buy good components, but secondhand, and we paid a lot for those. And we did that to protect the supply for our customers. Now, we thought we were burning profit on purpose, and we were talking about how long we could live with that, but making sure that we're never going to be out for our customers when they need us. That was really important. But what happens ironically at the end of all of that, through the relationship with the NZCE, through our people just pulling out everything we needed to do and redesigning things and getting everything right, procurement, marketing, everybody did the right thing.

Kahl Betham:
Sales, everyone. We ended up being the only one in both of our divisions who had full continuity of supply globally.

Paul Spain:
Wow. Wow. This reminds me of the story with Tesla versus the other automakers where, you know, Tesla reworked some things and just kept going.

Kahl Betham:
Yes.

Paul Spain:
And other automakers were, you know, basically stymied for months and months on end. They just couldn't, you know, get supply. a range of vehicles and products. It

Kahl Betham:
was just like that. So we had 5 years of growth in one and then that market share stuck, which is really interesting. People remember when you look after the times when they need you the most. And I thought that was really amazing. So we thought we were burning profit, but instead we ended up getting wicked competitive advantage as a result of that. And that's something to be really proud of. But what also happened with that one is because we have all of the manufacturing in New Zealand, So we do plastics manufacturing, electronics final assembly. All we had to do was get the components.

Kahl Betham:
With a number of our competitors that had outsourced manufacturing to different countries, not only did they have to get the components to the right place, they had to get the shipping lanes, which were closed to those places. Then they had to get production prioritised against everybody else. And then they had to get more shipping lanes out to their customers. We just had to get the components and we could make everything. So once again, that back to the GFC of not going off to China, that came back as a wicked competitive advantage during the supply chain crisis. You never know that at the time, but it's amazing when doing the right thing just comes back.

Paul Spain:
Fantastic. Fantastic. Now the world's changed when it comes to the type of technologies that we have access to today. AI and automation, everybody's thinking about it, whether they're looking at the opportunity ahead to, you know, really achieve more efficiently, or whether it's concerns around, well, what does the future of jobs and work look like? What's been your perspective on AI and automation?

Kahl Betham:
Sure. So, over the last 100 years or so, there's been new technologies that always come in which become a tool to make things go faster. faster. When I first started writing code, I remember talking to those who used to write code in zeros and ones, who are purists, who say, you're not writing code, Karl, you're using a third-generation compiler. You're not doing it. You're just writing some words and you don't even know how it works underneath the hood of the— So there's always been that. AI is another one of these, but on steroids. But the approach that I'm taking is that because we're an innovative entrepreneurial organisation selling products, we're in the competitive race space.

Kahl Betham:
So, um, I think there's going to be a really wide spread, um, that starts to really, really form between everybody and those who really excel. Those who, um, hire many, many more people with a lot more AI and exploit the opportunity to progress everything faster will win. People who in the innovative space who replace existing people with AI and keep doing the same productivity but cheaper will fail. They'll get more profitable in the short term, but they'll die because they'll get swamped by those who take the advantage. Because that's what human nature is like. Someone will always take the advantage of the tool. So I believe more people, more AI all the time. Another thing for us to be really, really cognizant of, particularly in the tech space, is it's really attractive also from a financial perspective if you look at it on a short-term basis.

Kahl Betham:
to not hire any junior software engineers because that's what the AI can do. But what the real problem is, is that even before AI, you'd never hire a junior software developer to lead a team of developers. Now when you're using AI, you need to think of them like they're a team of developers. You need to have someone with good experience to brief it well and to check it well and to make sure the output is good. So I think the average quality of the seniors, the volume of seniors you need in the organization needs to go up. But you also need to, out of taking a long-term view of things, you need to intentionally bring graduates in and train them how to be a senior without them probably even writing a line of code. So how do you go about doing that? So maybe that goes back to the design thinking where we teach them how to observe the world, to actually identify problems, to brief the problems, of which then get prompted in. So I think deliberately bringing new generations through and not having a gap in 8 years or 6 years because graduates didn't get jobs.

Kahl Betham:
I think that's the responsibility we all have. And companies who take a short-term view will probably line their pockets and not have graduates, but they won't be taking the view like they have to be there for the consequence of that decision in 8 to 10 years like a private organisation would.

Paul Spain:
In terms of how much benefit are you seeing from AI at this time? Like, is it making a small difference, a mid-sized difference, or a really outsized difference in terms of, you know, how it impacts the overall business?

Kahl Betham:
We're seeing an incredibly wide range. We're seeing in our finance teams the ability to produce financial models quickly is just transforming it, and it's absolutely incredible what we're able to achieve from an analysis perspective. From a software perspective, we've got a lot of software products on older technology platforms, so we're actually having to, to get ourselves up to new generations as fast as we can as well. So that's a factor as well. You have to be able to have modern technology stacks, but the speed of developing those modern technology stacks are factors and factors and factors faster than they used to be. So we are still hiring hundreds of developers. and using AI to do like the new generation of everything that we've got. So we're choosing to, to make that go faster at the same time.

Kahl Betham:
And just the sheer test coverage you can get with AI at the moment and those kind of things is pretty impressive as well. So we, we see that it's, it's having a material impact at the moment, but it'll have an even more material impact in the future. And as organizations get through that technology uptick, they'll be able to exploit it more. So yeah.

Paul Spain:
And when you look a bit further out, what is your prediction on scale of the business of kind of people versus revenue? How do you see that sort of playing out? Because you're working and laying all the foundations to continued growth sort of revenue-wise. How do you think that actually plays out in terms of the sort of growth that you'll need people-wise, whether positive or negative?

Kahl Betham:
Yeah, sure. We're fortunate because we have the ambition to go from what will be $750 million to multiple billions of revenue, so we're choosing to do that. We believe that the volume— we're going to be hiring a lot more people to achieve that and using a lot more AI at the same time, but we believe the volume of people is not linear to what it had been in the past. So it will be able to achieve more of that growth by getting more products to market faster and having better service levels and lower costs to serve, we believe, over time. So we're expecting our average cost, the ratios of people to revenue and gross margin, to improve from a profitability perspective, but the net of those to be bigger.

Paul Spain:
Yeah. Your offerings are very much world-class. However, we're used to kind of looking to the likes of Silicon Valley and certain parts of the world where, hey, this is where the top innovation comes from. Yeah. The largest chunk of your team is in Hamilton, is in Waikato. Yeah. How do you attract that talent? But how do you also augment that with a with a global team because you've got what, probably, you know, not half of your team in Waikato, is it? But—

Kahl Betham:
Yeah, about half. Okay. Just under 1,000 out of 1,850 in Hamilton. That's largely the production team and the R&D teams.

Paul Spain:
Yeah.

Kahl Betham:
And some marketing as well. And offshore, it's largely sales teams, support teams, infrastructure, distribution, those kind of things. Yeah. So, yeah. Sorry, I just lost the train of thought there.

Paul Spain:
No, so yeah, in terms of, yeah, how have you attracted the best talent to Hamilton, to Waikato, you know, which makes up, you know, a bit over half of your team globally?

Kahl Betham:
Yep, so it's been very deliberate because one thing that we've come to realise is that while the tech industry is strong in New Zealand, we're growing faster. And, and it's— you've got to be really careful not to drain the talent pool, I think. So some things that we've been deliberately doing, uh, we've been, um, we've learned how to become more than a product marketing organization, but to become a strategic world-class brand marketing organization to tell the stories. And we know we're getting this right because when I, I talk to a lot of the people that come and join us, particularly in like 3 layers deep kind of roles, and I say, why did you come? How's the experience? What do you think was going to happen and how does And their answers always come down to one of two categories, which is, I want to come here to be world best at something, because you guys are that. And you're global and you've got all these countries and it's really rare in New Zealand, let alone globally, it's rare about how many countries we hit and what kind of technologies and complicated business things that we do. So a lot of it's in that sort of space. So it's a hunger to come and be part of that success. And the other part of it, people are running away from and/or coming towards our culture.

Kahl Betham:
or running away from a different culture they've been. And that's down to this taking the long-term view of things, looking after people when things are right, not actually taking a short-term view of things, and just being good people and driven to look after those lifetime customers, to change industries, to— yeah, we're not— we watch our quarterly results because we have to, because it's the only place we get money because we're private and we don't raise. But It's not the point. The customers long-term are the point, and that comes from our shareholders.

Paul Spain:
Yeah. And in terms of your approach to leadership, I think I've heard it said you're building leaders that are able to create more leaders.

Kahl Betham:
Yeah.

Paul Spain:
How have you embedded that and made that really work?

Kahl Betham:
Yeah, I really like that from Simon Sinek, not leader until you create a leader who can create a leader who can create a leader. And that's where that 4 layers came from actually, Totally stole that. I think it was awesome. It's so very important, particularly when you want to do things at scale. And one of the learnings that you get on day one of going to that ISL course is go, that technical skill that got you promoted, if you don't leave it behind, it'll hold you back because you have to be able to elevate and get out of the way of the people who've taken your job and for them to be better than you were at that job. And that's one of the biggest insights, I think, how you elevate yourself and get out of the way and hire even better people that will do a much, much, much better job than what you did when you were there. And actually sit back in reflective glory and go, they did better than me and that was cool. That was because we created the culture, we created the structure, we created the environment for them to do that.

Kahl Betham:
And that is the most important thing. But you also, people often ask me, oh, you're scaling so quickly. How do you keep hold of your culture? Isn't it going to dilute? But I've got a really interesting answer to that one, which is if you deeply understand what kind of a culture you want for the future and how you want to keep the important things, but then change and grow things to be better in the future, if you don't take the mindset that if we scale, the culture will get backwards, but you say, well, how do I design a better one when we're bigger? Because you've got the opportunity when you add, when you double your team, you can actually shift the average and you can get tipping point to a new flavour, whether it's a different ambition or whether it's a different capability level of people who have been in a multi-billion-dollar organisation or anything. You can design that culture if you do it intentionally. So that's how we focus on things. And when you start hiring for that fit, and we're talking about things such as leadership by influence is critical. We've had some very, very high-performing people who are a bit lone wolf-like, and it just doesn't work as well in a matrix organisation where you've got to have shared services and multiple businesses and things like that. So it's just examples like that where if you— we hire for that first as well as intelligence, not for past performance and numbers on their own, because we find that to be the most important thing.

Paul Spain:
Big hairy audacious goals. Tell me about how you've approached that within Gallagher.

Kahl Betham:
So the first one, I think we talked about it before, was that security audacious goal in the GFC to say, hey, let's target the highest level of national security in the world. And we went and did that, and it was amazing. I believe it's so important. Something changes in your mind when you reframe a goal that's so far out of your current reality, but it's exciting and it feels achievable, but you don't know how. There's something that just happens in your brain at that time. And I think that just changes everyone's outlook. Moonshots are really exciting. People love what SpaceX are doing.

Kahl Betham:
And people come to us and we're attracting talent because of these kind of approaches to the world as well. And we saw the same thing as well when we were $200 and something million and we said, hey, a billion turnover is achievable. Let's just change everything about our organisation to make that true because our more customers around the world just deserve to have all the benefits of the things that we're doing. We're going to move up the value chain, we're going to become platforms, we're going to expand into new countries, we're going to bring new products, we're going to do all of those things. And people get excited. People don't want to stand still. That's what I find anyway, or the kind of people that we attract.

Paul Spain:
And how audacious Were those goals from your team members' perspectives? How much were they really willing to kind of buy into those things? And how important do you think it is to set goals that are genuinely extreme stretch goals that are not the normal everyday sort of goals? Yeah.

Kahl Betham:
I think there's a science to it as well. It's not an exact one at all. So first of all, we had the whole range of experiences because we've got the whole range of personality types. We've got some people who were scared and who didn't know how to do it, didn't think we should do it, think we were just dreaming. So we had from that range to people who goes, I don't know how we're going to do it, but let's go. And everything in between. But the most important thing is that we You take things down to bite-sized chunks and you start to say, well, how will we go about achieving that? So they have to be big enough and audacious enough, but they still have to be achievable and within stretch. And the billion-dollar one was a nice round number.

Kahl Betham:
It's got a nice ring to it, the Path to $1 Billion. You can give the campaign a name and people get behind it and people are still referring to the Path to $1 Billion. But at that time, they wouldn't have accepted $3 billion? But now we're planning for multiple billions. So it's not a— we haven't even made the billion-dollar revenue mark. We will in the next year and a half or 2 years maximum. But now we are saying, how do we become a multi-billion organisation? And it's just, okay, how might we? And that is a much shorter conversation than the first one. Yeah. And you know, that billion dollars was outside of the appetite of a lot of our people.

Kahl Betham:
at the time. Yes, it's not an easy thing, and I'm not going to sit here and say that it was all perfect. We said it, we just did it, and everything was easy. No, it was very hard along the way because every system, every process, every capability in your organization— the idea of an audacious goal is that it's bigger than you can achieve unless you change everything. So yeah, we've been through at least 2 transformations of every team in the business now as a result of that, because you have to keep doing it at every step change.

Paul Spain:
So, Kahl, you know, incredible story with Callaghan Group. But there's another piece to this picture in terms of for yourself because you're handing over the reins.

Kahl Betham:
So

Paul Spain:
tell us more.

Kahl Betham:
Yeah, sure. So I'm halfway through my 9-month notice period and I'm finishing up at the end of March after— and in fact this week I've just crossed over 29 years with Gallagher or Cardax at the time. So, um, had a real moment this year where— a real reflective moment. So, um, I supported my dad through, um, through a cancer journey for 6 years, and the last year, um, he, um, he lost that battle, um, in June. And, you know, I had a lot of time sitting with him because I had a real, real gift. My wife's medical, so we're able to do all the palliative care at home. So I got a lot of time to have a lot of reflective conversations. And I got to say, Gallagher Group were incredible with the time that we gave me during that time.

Kahl Betham:
But, you know, the kind of conversations we had, because we had a bit of a gap in our relationship for about 17 years. We didn't see each other between when I was 8 years old to a bit older. And, you know, the only thing that we really regretted in life was that we didn't spend as much time together during my teenage years before you become an adult. And, you know, we got this realization that you spend 90% of the time with your children before they leave home. So I've got 4 children. I've got 16, 15, 12, and 8. And I thought, you know, I'm spending 30 to 40% of my life offshore. I'm spending 50 to 60, 70% of my life jet-lagged.

Kahl Betham:
What kind of a dad am I? And, you know, I just crossed over 50 and what do I want to do with the rest of my children's childhood? And I thought, you know what, maybe it's time for me to be home more. And that was the key insight for myself. And I thought, you know what, maybe that's the last gift that Dad can give me to say, hey, don't miss that time with your children. And at the same time, you know, um, you also got to do something that's fun and interesting as well. So I'm going to, um, I've, with 2 other co-founders, um, start an energy management platform company and start back, go back to scratch of my product days and, um, and build a company from scratch and hit a mega trend of, of global energy management and see what we can do. But also see if I can help just a small number of companies as well in New Zealand, um, perhaps jump whatever curve they want to jump to to get those scales, just even if it's just donate some time, have some coffees and help people and just help other companies do what they need to do formally or informally. So I wanna help the tech sector grow 'cause, you know, the tech sector is so important in New Zealand. And that's been a big purpose of— I haven't mentioned it today, but one of the driving forces behind growing us to be a billion-dollar industry revenue for New Zealand, 85% of that export, is that, you know, New Zealand needs a lot more than food, fibre, and tourism.

Kahl Betham:
And we learnt that during the pandemic, didn't we? That when some of those things go away, the economy is quite weak. And what we've seen in the last period of time, you talk to Greg at TIN, you know, the TIN 200 companies are now $20 billion combined of export revenue for technology. Yes. And this is software, this is high-value manufacturing, it's stuff like we do. And, you know, that's second only to dairy and it's the fastest growing by some factor. So the productivity of New Zealand is going to be increased by the size of the New Zealand technology export sector. So I want to help more in that space.

Paul Spain:
That's fantastic. Yeah. That's great to hear. It's so cool that you're taking advantage of that learning from the time with your father. That's, yeah.

Kahl Betham:
It's gold.

Paul Spain:
Any other areas you're thinking of that we can touch in on?

Kahl Betham:
I wouldn't mind talking about the family's commitment to community. They give a lot back.

Paul Spain:
Yeah, in fact, I was talking to our CTO on CISO and he was at an event in Rotorua over the weekend, the opera singing world or something. And he was like, oh yeah, that was all sponsored by you guys. So I was like, ah, okay, there we go. So there's obviously lots of things that that Gallagher are involved in, in terms of giving back. How does that, you know, how does that all sort of fit together?

Kahl Betham:
Giving back to the community and supporting the community. And as the family was saying, giving people a leg up, not a handout, is a really important thing. So there's underlying in that intention is an intention to support a productivity uptick or a growth uptick or filling a social gap of some kind. And that's been really strong right back from Sir William's dad. And it's really, really come through very strongly from both families. So to give you an idea, both families have charitable trusts outside of the group where they give a large portion of their dividends away outside of the group. So I don't see a lot of those requests. The family just give it away.

Kahl Betham:
And that's important. Now they— and here's the reason that if you build— the family believes that if you build strong communities, then that builds strong families. And if then those families are attracted to an area, and if those families are strong, then they can form strong businesses. Then if those strong businesses stay in New Zealand and create jobs in New Zealand, then you create the economy. So that link is really, really strong. And, you know, when we talk about, like, went to visit the hospice who came around and supported my dad, I was really proud to say that, yeah, Sir William was one of, And the company invested quite a bit of money to get that going. We talk about rescue helicopters. Originally, we had some in there.

Kahl Betham:
You look at Coast Guards. There was a small deanery fund at the Melville School that was there for a while. And they just had money to— if someone didn't turn up at school for shoes or whatever they needed, they just bought them for them. And never ever was known. In fact, this might've been the first time it's been mentioned. But lots of little things like that where They just do the right thing and help the community. Adds a lot and it's not the reason for it, but it creates a great deal of pride and it is a great way to attract talent as well. People feel a great deal of connection because when one of our people who— so they could be working on the production line making a product, but they go to a hospice or to the Hamilton Gardens or they go to the theatre or they go as you say, to name Melvina Major Chair through the university, or they go to a named building at the university and they go, I did that.

Kahl Betham:
And that's them. And having that big impact is really, really important. So I think it's a huge part of the fabric of the Gallagher family and what it means to be private and what it means to think about things far outside of yourself.

Paul Spain:
So, Kahl, before we wrap up, keen to hear if there's some closing tips or advice from your journey that you think would be useful for listeners?

Kahl Betham:
Yeah, I think from a business perspective, focusing from a purpose perspective on really globally important problems to solve that are really valuable, that really matter to people, I think is really inspiring for myself along the way. And I think as we do business with global domination goals and big, hairy, audacious goals and all those kind of things, always staying grounded and looking after people and doing the right things and giving back to communities and thinking far outside of ourselves to shift industries and shift countries and all those kind of things. So I think, yeah, keep thinking wide and keep heart as you operate in business, I think is important.

Paul Spain:
Yeah, that's great. And is there something that's really inspired you? Is there something that, you know, when you think of sort of shifts in your own mindset and growth have taken place, are there any things that stand out in your mind that sort of became, you know, really helped you, you know, shift personally?

Kahl Betham:
I've always been really inspired by space programs and rockets and things like that, and also Formula 1. I suppose inside there, there's things that require massive technology leaps, massive ambition, risk-taking, and a whole lot of people getting behind it, I think. So yeah, every time the Starship goes up, I'm there watching it. I'll get up in the middle of the night and watch it. I just love those technology leaps. I find those things very inspiring because I have no idea how to do that. And it's cool.

Paul Spain:
Yeah. Yeah. Karl Beetham, a real privilege to have you on the New Zealand Business Podcast. Thanks so much for, for your time today and for all of the insights that, that you've shared.

Kahl Betham:
Oh, it's an absolute privilege, and yeah, thank you for, for sharing this information out there.

Paul Spain:
Excellent, thank you.

Kahl Betham:
Cheers.

Paul Spain:
I hope you enjoyed this conversation with Kahl Betham. There’s certainly a deep lesson in the Gallagher story about the enduring impact a strong culture can have on an organisation.

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