On the Road: Testing Technology Beyond the Product

 

Technology investing often begins with the product.

What does the company sell? How large is the market? How fast can it grow? These questions matter, but they are only part of the work. To build conviction, we also need to understand the people making decisions, the culture they are shaping, and whether the organization has the discipline to execute over time.

At Pembroke, our research balances the quantitative with the qualitative.

During a recent trip to Florida, we met with two of our technology company holdings: Red Violet and BK Technologies. Red Violet is a data and analytics company. BK Technologies makes communications equipment for public safety customers.

The common thread was not the technology itself. It was the opportunity to assess execution up close.

RED VIOLET: ASSESSING CULTURE AND ADAPTABILITY

Red Violet helps customers verify identities, detect fraud, locate individuals and manage risk using large sets of data. In plain language, it helps organizations answer questions such as: is this person who they claim to be, where can they be found, and what risks should be considered before doing business with them?

Much of Red Violet’s value sits inside data assets, software tools and customer workflows. That makes corporate culture and management’s judgment especially important.

One observation stood out. In the sales area, the company displays large bonus cheques awarded to top-performing salespeople. The names are anonymized, but the message is clear. Performance is visible. Success is celebrated. For newer employees, it shows what strong execution can produce.

That may sound like a small detail, but in a sales-driven organization it matters. Red Violet’s growth depends on expanding usage across customers and use cases. The product must be strong, but it must also be sold effectively. Seeing the environment helped us better understand how management reinforces that behaviour internally.

The more important discussion focused on artificial intelligence (AI). For many data companies, AI raises a legitimate question: will it increase demand, or reduce the value of existing tools?

Management’s view was that AI should increase the speed at which customers work, which could increase interactions with Red Violet’s systems. That does not eliminate risk. Data access, regulation, competition and changing customer behaviour all require monitoring. But the discussion clarified how management thinks about both the threat and the opportunity.

BK TECHNOLOGIES: SEEING EXECUTION ON THE FLOOR

BK Technologies makes rugged two-way radios and related communications equipment for firefighters, emergency responders, government agencies and other public safety users.

This is not fashionable technology. It is practical technology. Its value is measured when communication cannot fail.

BK has shifted some manufacturing to Costa Rica, while keeping selected work, quality control and product oversight in Florida. Seeing the facility helped clarify what remains inside the company.

The production floor showed that BK remains closely involved in higher-end and lower-volume products. Management also described how equipment produced offshore is reviewed before shipment. Early in the outsourcing process, quality issues were more common. Over time, the process improved materially, with most incoming units now arriving ready to ship after inspection.

That matters because BK’s customers have little tolerance for failure. Public safety radios may be used in wildfires, cold weather and other difficult conditions. The company showed testing equipment designed to simulate harsh environments. This reinforced a simple point: for BK’s customers, reliability is not a marketing claim. It is the product.

The visit also provided insight into people and culture. The company has recruited engineers from much larger competitors, including Motorola Solutions. In a smaller organization, those engineers appear to have more influence over product design. Stock ownership also extends beyond senior management, giving employees a direct connection to the company’s progress.

BK carries risks. It competes against a dominant incumbent. Public-sector purchasing can be uneven. Hardware businesses must manage component costs, inventory and quality. However, the visit confirmed that the company is managed with a focus on costs and operations.

WHAT THE TRIP REINFORCED

Red Violet and BK Technologies are not similar businesses. One is built around data and analytics. The other is built around radios, engineering and reliability. Yet the trip reinforced the same lesson in both cases.

In technology investing, quality is not found only in the product. It is also found in the corporate culture of the company selling the product, the discipline that supports it, and the people responsible for improving it over time.

These are difficult things to judge from filings alone. They are easier to assess when sitting across from management, walking the floor, meeting employees and asking difficult questions.

We are trying to understand whether the people behind the business have the discipline, alignment and focus required to create lasting value.

Being on the road does not provide certainty. It sharpens judgment.

 

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