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This is Capitalism: Up Close, Inspired, Explained

Nov 20, 2018

Ray Hoffman interviews Mike Iiams. The first thing you should know about this particular entrepreneur CEO is that his name isn’t what you think it is. If you’re looking casually at an article about the important social work being done by a Denver-based company known both as SCRAM Systems and Alcohol Monitoring Systems, you’d probably think the CEO’s name was Mike Ilams. Mike Iiams has a long list of credits working for the accounting firm Peat, Marwick, Mitchell & Co. in Alaska, during the building of the TransCanada pipeline; working for an oil and gas company in Colorado; a long senior executive role with the maker of accounting software JD Edwards, which is now part of Oracle; and now is the CEO of SCRAM Systems, whose ankle bracelets are keeping a lot of dangerous, habitual drinkers off the highways. Mike describes the career that led him to SCRAM as a wonderful learning experience — a wonderful ride!


Key Takeaways:

[:22] Ray Hoffman introduces Mike Iiams. Mike says many people mispronounce his name.

[1:38] Mike’s career has taught him product development skills, sales and marketing skills, and business process re-engineering skills. When Mike left JD Edwards, he found a unique project that a couple of guys were working on in their basement to measure alcohol as it evaporates through a person’s skin.

[2:04] Mike was intrigued by the project for personal reasons. His mother’s father was a “Skid Row” drunk for a big part of his life. Through a number of events, he ended up sobering up and he lived to be just short of 100. Sober, he was a wonderful person. Drunk, he was a fight looking for a victim.

[2:34] When Mike found these people who were trying to figure out a way of tracking people for extended periods of time to see whether they were drinking, in the back of his mind, a picture of his grandfather kept tugging on him. Eventually, Mike thought this would be a good project to invest his time and money in, with the money from the software.

[3:09] Fortunately, the company survived to the point where it is a viable entity today.

[3:17] When Mike worked in Alaska, there was risk, but he thought of it as a great opportunity to see and be part of a huge construction project, the Trans-Alaska pipeline.

[3:48] Ray notes that there is risk in putting your money on the line for an opportunity like SCRAM Systems. Mike says for the first four years of SCRAM Systems he paid himself $1 a week, to qualify for healthcare coverage.

[4:23] For the first four years, Mike wrote a check of $100,000 or $200,000, each month, to keep moving the company forward. That felt like risk at that time, but the opportunity to bring something new to the marketplace, to create a new market segment and make a difference in lives always drove his desire to figure out how to make it work.

[4:57] Jeff Hawthorne, the inventor and co-founder who had been working for several years on a monitor to keep track of habitually drunk drivers, filed a patent in 1991 and the company — at first, named Alcohol Monitoring Systems — wasn't founded until 1997.

[5:26] There were two co-founders. Jeff Hawthorne was an electrical engineer and Kirby Phillips was an entrepreneur. Kirby and Jeff had started a company to build small, portable, hand-held alcohol breath testing devices. At an event, one of them walked past someone who had had so much to drink they smelled it just walking past.

[6:04] That spawned the idea to take breath-testing technology, redesign and repackage it, and get it to the point where you could measure the alcohol as it evaporates through a person’s skin. That was in 1991 and they filed a patent for the idea. Then they pursued funding sources but did not find people to back the project until 1997.

[6:48] The two people that started backing Jeff and Kirby ultimately found Mike and looked at him as a “new victim” to join the funding cause. Mike started investing in 1999 and then the investment started scaling up in 2001 when they completed a proof-of-concept project and a clinical research study showing the device could work.

[7:30] It was an interesting journey, from the creative idea to exploration in a basement or garage investing their own time, capital, and resources, to finding people to join the cause.

[7:57] When Mike joined them, he brought the skill set of the background of large software systems that could host all the data and provide a meaningful solution to probation and managing the data of the population of people that are being monitored.

[8:24] The stars aligned. Everybody came together and they found enough capital to get the company through the early stages. It took $20 million to fund the company until they got to the point of positive cash flow on customers’ money, not investors’ money.

[9:07] In the early days, they had a total team of seven employees and a couple of subcontractors. It was clear that they could get the technology to monitor alcohol but they had to find a customer to work with that would start putting the software and hardware products into play and help work to develop a complete solution.

[9:48] They got lucky with the Michigan Department of Corrections Electronic Monitoring Group for people on probation and parole. The group has always been innovative and willing to try new approaches and technology. Alcohol Monitoring Systems (AMS) asked Michigan if they would do a beta test with them.

[10:23] AMS would do the beta test for free if Michigan would help provide the guidance and the response to get the product past proof-of-concept to industrial-ready. They ran the project for about two years before they fine-tuned things to the point they could take the product and make it revenue-ready.

[10:52] Today, Michigan is one of AMS’s top five customers. They are a valued partner in helping AMS build the right kinds of products and solutions that effectively work for them and other agencies like them.

[11:16] It’s not just the capital or the resources. When you’ve got disruptive technology, you’ve got to find that early customer that dreams about what your product could do and holds you accountable to get there.

[11:32] This all came from a patent application in 1991.

[11:38] Mike provides an executive summary of what the SCRAM Systems technology does. It measures a person’s blood alcohol content as that alcohol evaporates through the skin. You may have been close to a person who smells like alcohol as it comes through their skin.

[12:08] 1% of all the alcohol you consume leaves your body through that constant perspiration process. About 5% of the alcohol that you consume leaves your body as you exhale. Your lung lining is a thinner tissue, so it’s easier for the alcohol to pass through it as you breathe. It takes more effort for the alcohol to evaporate transdermally.

[12:48] As 1% of the alcohol you consume exits through the skin, Alcohol Monitoring Systems developed a sensor mechanism in a device that’s securely attached to a person’s ankle. It continuously monitors a person’s BAC and it wirelessly moves that data to a website that AMS hosts.

[13:12] The website is intended for audiences where a court, for example, would take a repeat drunk driver and order them to abstain and do this kind of monitoring in lieu of incarceration. Once you send somebody to jail, they lose their job, they can’t pay rent for the family — everything starts to cycle down very quickly.

[13:43] The intent of AMS is to work with agencies to build alternative programs. If a person isn’t drinking, they’re not drinking and driving. If they’re not drinking and driving, we’re meeting that public safety need to make sure these people aren’t posing a risk to society.

[14:02] If they’re not drinking, then the money the courts spend on treatment and other services has a better chance of helping this person learn to manage this part of their life.

[14:15] Mike says AMS got lucky because a lawyer called them up, and said they had a celebrity who just got out of rehab, and the lawyer wanted their client to be monitored for a host of reasons. That celebrity was Lindsay Lohan. Lindsay Lohan proudly wore the bracelet for weeks, with paparazzi following her all over.

[15:02] In a short period of time, SCRAM Systems had hundreds of television-based news segments all over the world talking about them, their technology and Lindsay. That just propelled them to a level of prospective customers calling them for information about the systems. Lindsay Lohan helped SCRAM Systems more than she knows.

[15:34] Lindsay Lohan, with a surfboard and a bikini, made their bracelet look good.

[15:40] There was a treatment provider in Orange County, California, that looked at the technology, found SCRAM Systems on the web, called out of the blue and said, “You need to help us.”

[16:02] Judges all over started having repeat high-risk drunk drivers in front of them and calling AMS for help. Mike tells of one offender arrested in Texas, from Tennessee, who was sent by court order to Denver to get a SCRAM Systems bracelet.

[16:43] AMS got a number of one-off cases like that from individual judges who would call and say something like, “This person worries me. I need to do something. I can’t keep them in jail. Let’s give this a try.” And it worked.

[16:56] SCRAM stands for Secure Continuous Remote Alcohol Monitor. The company’s legal name is Alcohol Monitoring Systems, but the marketplace never called them by that. People say, “You’re the SCRAM guys!” SCRAM resonated with people, so the whole product line today is SCRAM ”something.”

[17:52] The products include GPS monitoring, home arrest monitoring, unsupervised breath testing, and the continuous alcohol monitoring with the ankle bracelet. This year, AMS is launching a completely new software experience for the probation officer called Nexis that is focused on what AMS has learned over the last 15 years.

[18:32] Probation officers have very complicated jobs and very complicated caseloads. The requirements for supervising people vary from person to person. There are no software tools that do a good job of helping that probation officer make decisions day by day on how to react to the behavior that they see from their caseload.

[18:59] AMS has worked with leading researchers and behaviorists for the last five years. Nexis, to be launched this year, is an evidence-based practice tool to help probation departments and officers make better decisions on how to incentivize and sanction people who are under their charge.

[19:28] Mike talks about the future. AMS has garnered international interest. They have pilot projects in eight different locations around the world. This is a chance to expand their role in probation and in location monitoring. They have a chance to expand their role internationally and become a global player in this marketplace.

[20:02] AMS is at “a fun stage” right now. They have a lot of risk, executing across all these fronts, but they’ve built a wonderful team that’s very excited about stepping up and managing these risks.

[20:19] AMS has about 300 full-time employees making them a medium-sized entity today. When Mike became CEO 15 years ago, there were 10 employees. That is considerable growth.

[20:42] AMS makes extensive use of blogging. One blog is Sobering Up, Covering drunk driving, alcohol addiction, and criminal justice. When AMS started, they looked for thought leaders to create a discussion around the issues of alcohol and crime. They tried a couple of approaches toward creating awareness and a forum for debate.

[21:25] That blog has resonated for a number of years and it helps AMS stay in touch and get people to share the ownership of moving this journey forward.

[21:42] AMS publishes case studies from areas where the SCRAM CAM (Continuous Alcohol Monitoring) has been heavily adopted, including one from Louisiana, which has the highest incarceration rate in the U.S.

[22:09] We’re at a stage in the country where the criminal justice system is re-evaluating the policies that define whether somebody goes to prison or jail, or they don’t. It began with the War on Drugs. The unintended consequences of this movement was an explosion of the number of prisons and the number of people incarcerated.

[23:00] The criminal justice system today is moving more to models that say, let’s separate the people we’re mad at from the people we’re afraid of. Violent criminals that harm society need to be in prison. Repeat drunk drivers (that haven’t killed anyone), if they are not drinking, do not need to be feared and do not need to be in prison.

[24:00] AMS has projects in virtually every state focused on keeping people out of jail or prison, as long as they can demonstrate that they successfully do not drink, at the time that they’re being monitored.

[24:19] The National Institute on Alcohol Abuse and Alcoholism (NIAAA) looked at the project six or seven years ago and looked at data on 1,000 people that had been monitored for more than a year. Almost all 1,000 had drunk every single day on average for 10 years before they were put on SCRAM.

[25:16] The data on this population for the year they were monitored showed that every single day 99.3% of them did not drink. Even if they had a drinking event one, two, or three times during that year, it was a person who had been drinking every day, before being monitored. The monitoring allowed the treatment service to discuss it with them.

[26:25] The hope is that as AMS helps people not drink for extended periods of time, the treatment services that are attached to these people can help them wrestle with ‘their demons’ and figure out better ways to manage their life stresses. Stress is never going to go away; they just need to find alternative outlets to manage that stress.

[26:55] Keeping in mind that success, Mike estimates AMS is still in the early stages of marketplace adoption. Mike cites Scotland as an example, where the alcohol problem is so bad that the life expectancy of a male in Scotland is 58 years. You have alcohol issues throughout Europe and Asia.

[27:43] The lessons AMS has learned in the States, and the research that has been wrapped around projects using SCRAM technology, clearly show that they need to be knocking on doors around the world and helping other markets come to grips with the drinker that turns into violence, whether with a car or in brawling.

[28:26] There is a lot of correlation between people walking out of bars late at night and knife fights on the streets with guys that have just had too much to drink. The market opportunity for AMS is pretty big, if you think globally.

[28:44] AMS has about 25 patents on these devices, some of which don’t expire until after 2030. Is there corporate complacency from all this patent protection? Mike doesn’t look at it that way. Their single biggest competition is the environment that says, “I don’t need to change.” The do-nothing decision is their single biggest competitive factor.

[29:19] Patents don’t help with the do-nothing mindset.

[29:24] The only thing that helps with that do-nothing decision is great people at the field level who knock on doors and wrestle with the marketplace over the magnitude of the problem and the options to deal with it. Mike and AMS keep focused on how to compete with that do-nothing decision.

[29:46] AMS has a wonderful, diverse group of people that come from government and research organizations, that are continually carrying their message at the research level, the Federal policy level, state and local policy level, and then, of course, at the judicial level, and in sheriff's offices and probation offices.

[30:20] There’s no shortcut to covering all the bases.

[30:27] Mike says AMS has been extremely lucky in their workforce. Mike feels he has been lucky to be able to meet and convince people to come join the cause.

[30:40] A lot of people at AMS have stories like Mike’s, with a close family member or friend that struggled with drug or alcohol addiction. They’ve seen the destructive impact on families. They look at what AMS is doing and say, “Yes! I’d like to join your team! Let’s figure out how to make a difference.”

[31:06] Mike says, behind every good drunk is his grandfather waiting to be rediscovered.

[31:16] As Mike looks back over his career, would he have imagined the course he took? He recalls his college days at the University of Colorado during the time of race riots and the unsuccessful experience in Vietnam. There was lots of social unrest. Mike’s generation wanted to find a way to make a difference.

[32:23] With AMS, Mike lucked out. He found a project that is personal to him, that gives him a chance to make a difference. It challenges him to figure out how to make money and make a difference at the same time, and that’s a challenge worthy of his time.

[32:50] Call it SCRAM Systems, or Alcohol Monitoring Systems, either way, what Mike Iiams is building is an important part of modern criminal justice technology.


Mentioned in This Episode:

Mike Iiams

SCRAM Systems

Alcohol Monitoring Systems

Peat, Marwick, Mitchell & Co. (Now KPMG)

TransCanada Pipeline

JD Edwards (Now part of Oracle)

Trans-Alaska Pipeline

The late Jeff Hawthorne

Michigan Department of Corrections Electronic Monitoring Group



University of Colorado

This Is Capitalism