If you're looking for the ideal type of company to take up residence in Lexington, you need go no further than New Circle Road. That's the home of ELAN Home Systems, a $55 million company that has been quietly clocking growth at 20 percent to 30 percent per year.
ELAN Home Systems designs and manufactures audio, video, data, communications and security systems for homes around the world. They sell to 58 countries worldwide, ranging from Saudi Arabia to South Africa. While their current catalog offers over 600 products, they continue to release 20 to 25 new products a year. They have also garnered 42 industry awards in the past five years.
ELAN's products include whole-house controls, indoor and outdoor speakers, multi-room audio and video systems, intercom and surveillance systems and other entertainment products. The company's systems are often featured in showcase homes around the country.
"I think high-tech companies like ELAN are good for the city of Lexington," said President and Chief Technology Officer (CTO) Bob Farinelli. "They don't sprawl, cause traffic jams, and it's a good thing to invest in."
"The nature of the staff is mostly professional, college-educated, so we generate a pretty good tax base for the city in a pretty small spot within town," he said. "I'm a big proponent of technology. That's the flag I wave."
ELAN's technology development has focused on whole-house entertainment and communications for almost 20 years. The company was originally part of Square D. That company determined that it was headed in a different direction and decided to divest ELAN in 1994. Farinelli, along with a group of investors, secured funding and bid to buy the company from Square D in September 1995.
"We were a bit of a Skunkworks," says ELAN Executive Vice President of Sales and Marketing Paul Starkey about the creative nature of the early company. Starkey was one of the original partners of the company, along with Farinelli. "Initially, we focused on one product: a six-channel audio device that would allow you to play different music in six different rooms. We built it from a drawing on a napkin and were ready to release it to the market in six months. It was a fantastic success."
The company set up its own manufacturing and assembly facility on Palumbo Drive, Starkey said. By 1998, revenues had doubled and the company had set a strategy to develop a complete catalog of products.
"We have grown pretty substantially since we started," Farinelli said. "We have continued to apply the basic principles that we started with - to provide entertainment distribution, control and lifestyle enhancements for residential and consumer applications."
The company's success was noted by others and in 2003 it was acquired by Nortek, Inc., a $2 billion company based in Rhode Island. Nortek is a leading U.S. manufacturer and distributor of building products for residential and commercial markets. The acquisition gave ELAN access to additional capital and overseas manufacturing resources, Farinelli said. Manufacturing was moved to China and the money saved was reinvested into infrastructure and hiring more professionals.
It also allowed the company to further develop what Farinelli terms its "three-legged strategy:" acquisition, product development and sales.
ELAN's acquisition strategy began in 2005 with the addition of Sunfire, a company that makes high-end home theater electronic products. In 2007, the company purchased HOMELOGIC, a maker of control systems such as touch screens that can control lighting, thermostats and other devices within a house. Farinelli terms this union of the three companies "The Power of Three."
"We saw this as a way to get to where we want to go quicker," said Farinelli. "The Power of Three is the fact that we have the ability to leverage technology to really make a more powerful solution for the home. It's kind of a cross-pollination of technology between the brands."
The second leg, product development, largely takes place in Lexington. The engineering and product management staff develop ideas, often based on input from customers. Development is also based upon what the competition is doing or how the technology is changing, Farinelli said.
"We have more good ideas than we have time to work on them," he said. "It used to be that we would just sling it out there, but these days there is so much software involved in products and feature sets are so complicated that you really have to get a team of people to work together from all sides."
ELAN currently holds 23 patents, with four more pending. Farinelli's name is listed on 17 of those.
Products are sold through dealers, not directly to the consumer. The company has 13 sales representatives in the United States and others internationally who meet with dealers and train them on both product sales, programming, and how the various products interact. ELAN has over 600 dealers in the United States.
ELAN Home Systems dealers sell to the high-end homeowner, according to Starkey. Systems are usually installed in 4,000- to 5,000-square-foot homes, ranging from $500,000 to $2 million and up in value.
In 2007, the company launched a new brand named ATON, designed for the "cash and carry" customer. While the products in this line represent a high-end solution, Starkey said, there is no programming needed and non-professionals can install them. A line of 50 to 60 products has been developed for this market, Starkey said, some costing a couple hundred dollars. "The market has changed a lot," he said. "The appetite from the consumer who wants music and video content has risen exponentially."
Retailers such as Best Buy, Home Depot and Radio Shack, according to Farinelli, could eventually sell the ATON line.
The company sees major growth internationally. "Russia loves us," Farinelli said. "South Africa, Australia, UK, Belgium, Germany and France are among our customers. The world is a big place." While the company doesn't have high sales in Asia currently, Farinelli sees that changing in the next few years as the company establishes additional resources there.
The continuing success of the company also stems from its emphasis on training and technical services, according to Rick Gratz, marketing and communications manager. Gratz has been with the organization for 14 years, starting as part of the original team that came from Square D. Training on all three brands is conducted in Lexington as well as at a West Coast training center in Carlsbad, Calif. The company also offers an online program called ELAN University Home Systems Training.
"We offer one-stop training in Lexington year-round," Gratz said. "We give dealers and installers training on all ELAN products and introduce them to new applications."
Classes include international partners and bring a steady flow of people to Lexington for training. ELAN also hosts an international training event in May each year at Lexington's Marriott Griffin Gate Resort, bringing in over 300 technicians and dealers to hone skills and share knowledge.
Training programs as well as development have meant that ELAN has made an effort to recruit some of the top-notch engineers in the country to their staff, Gratz said.
While the company is "very Lexington-centric," according to Paul Starkey, "Most of our engineering people are imports." Once they have moved to Lexington, Starkey said they usually like it. "It's a great place to live," the Illinois native added. The company currently has 120 employees.
Bob Farinelli noted that ELAN has had luck in hiring new graduates directly out of UK, and the company always tries to look locally first when hiring.
The percentage of business the company does in Lexington barely registers "on the radar," according to Farinelli. "We are international Ö and we have a small percentage of business that is done here in town," he said.
Technology continues to advance, giving homeowners access to information. And what does Farinelli see as the trend that will have the biggest impact in the next five years? "Ö Web 2.0, which will have access to so much content, so much information Ö it's going to revolutionize the world again as it (the Web) has already done," Farinelli said.
"We have a whole bunch of 'Mr. Wizards' behind the curtains, pulling the strings and pushing the buttons," Farinelli said of ELAN. "There are lots of people responsible for various areas that are the wizards behind these things to make them grow. I think we have a balanced and diversified mix of products, and we have the people that will allow us to weather economic storms or competitive threats pretty well."
With its technology, quality emphasis and business expertise, ELAN Home Systems appears to be most at home with success.