CEO Stories: Marrying Personal Passion and Disruptive Technology

Mike Liams
CEO of Alcohol Monitoring Systems

Mike Iiams, CEO of Alcohol Monitoring Systems (popularly known as SCRAM) talks about marrying personal passion and disruptive technology to improve society.

SCRAM–the company whose products include the alcohol-monitoring device made famous by a post-rehab Lindsay Lohan–is in some ways a typical tech startup. For years it was a shoestring operation with fewer than 10 employees, run out of a basement by its hopeful founders. But for CEO Mike Iiams, who joined the company some 20 years ago, it was an opportunity to leverage his knowledge of large software systems with personal motivation. For many years, his maternal grandfather was, in Iiam’s words “a skid row drunk” who eventually became sober. “I had this picture of my grandfather in the back of my mind that kept tugging on me,” he says of his desire bring something new to the marketplace and make a difference in people’s lives.

Disruptive technology–such as SCRAM’s device that can accurately measure alcohol transdermally–isn’t enough to make an impact in the market, Iiams stresses. A willing, early customer who can be a partner that helps keep the company accountable is just as essential as capital and other resources. SCRAM found such a partner in Michigan Department of Corrections Electronic Monitoring Group, for whom it ran a beta program. The department is now one of its top five customers.

SCRAM has projects in virtually every state focused on keeping people out of prison, provided they as long can demonstrate that they’re not drinking for the time that they’re being monitored. This helps the criminal justice system make a distinction, in Iiam’s words, between “people we’re mad at and people we’re afraid of.”

This Is Capitalism, Mike Iiams

RH: This is Capitalism. I’m Ray Hoffman. 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 in 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 that the CEO’s name was Mike Ilams. I thought the CEO’s name was Mike Ilams, “I-l-a-m-s.”
MI: You could join those last 50,000 people that have mispronounced my name–two “I’s,” a-m-s.

RH: I’m sure that’s a long list.
MI: It’s a very long list.

RH: His name is Mike Iiams and he has a long list of credits working for the accounting firm, Pete Marwick Mitchell 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 CEO of Alcohol Monitoring Systems, or if you’d prefer, SCRAM System, whose ankle bracelets are keeping a lot of dangerous, habitual drinkers off the highways.

Mike Iiams describes the career that led him to SCRAM as a wonderful learning experience, a wonderful ride.
MI: Where I learned product development skills, sales and marketing skills, business process reengineering skills. When I left JD Edwards and was looking for a new project, I just found this unique project that a couple guys were working on in their basement to measure alcohol as it evaporates through a person’s skin.

I got intrigued by the whole project for very personal reasons. My mom’s father was a skid-row drunk for a big part of his life. And through a number of events, he ended up sobering up. He lived to be just short of a 100–and sober, was this wonderful person. Drunk, he was a fight looking for a victim.

And when I ran across these guys that were trying to figure out a different way of tracking people for extended periods of time to see if they’re drinking or not, I had this picture of my grandfather sitting in the back of my mind that kept tugging on me. Eventually, I thought, “geez, if I made a bunch of money out of the software project, this would be a good project to invest my time and money in.” And fortunately we survived to the point where we’re a viable entity today.

RH: Well, before we get to the viable entity, I’d like to take you back a little bit, back to Alaska, also I believed you worked in Huston. You were exposed to a lot of risk, people taking risk up in Alaska.
MI: You know, I don’t think I’ve ever looked at it as risk. I think I’d look at it as opportunity. Alaska was a great opportunity to see, to be part of this huge construction project, the TransAlaska Pipeline.

RH: But there is risk in opportunity when you’re putting you neck and your money out on the line, which is part of the nature of risk capitalism.
MI: Now I will say with SCRAM Systems, for the first four years that the company existed, monthly…well first, I paid myself a buck a week and at a buck a week, I qualified for healthcare coverage. So that helped me get healthcare coverage. And if I paid myself more money, I’d have to write a bigger check.

So in the first four years, I’d write checks of 100,000 a month or 200,000 a month to keep moving the company forward and that certainly felt like risk at that time. But the opportunity to bring something new to the marketplace and create a new market segment and make a difference in people’s lives was always driving that desire to figure out how to make it work.

RH: Let me take you back to that basement–which you weren’t working in–but I know the name Jeff Hawthorne, he was the inventor and co-founder.
MI: Right.

RH: And he’d been working on this monitor to keep track of habitually drunk drivers for several years before there was actually a company. I see the first patent application was 1991, and the company wasn’t founded until Alcohol Monitoring Systems as the company in those days, was founded in 1997.
MI: That’s correct. There were two co-founders, Jeff Hawthorne, who was an electrical engineer, and Kirby Phillips, who is more of an entrepreneur. And Kirby and Jeff had both started a company that builds small, hand-held portable breath-testing, alcohol breath testing devices.

And something happened and one of them was at an event where they walked past somebody that had had so much to drink you could just smell that when you walked past him. And it kind of spawned the idea of, “geez, how would you take breath-testing technology and redesign it, repackage, it and get it to the point where you could measure that alcohol as it evaporates through the person’s skin?”

So when they first got the idea, which is back in 1991, they filed a patent and then they pursued funding sources and really did not find people to back this project until 1997. And the two people that started backing Jeff and Kirby ultimately found me, looked at me as a new victim to join the funding costs, I think.

And I started investing in 1999, and then things started scaling up from an investment standpoint in 2001 when we had completed a proof-of-concept project and a clinical research study that said the device could accurately measure alcohol transdermally.

So it was an interesting journey. But I think, like many things, the creativity of people… that they get an idea, they start investing their own time and capital and resources, they do it in their basement or in their garage and they keep looking for people to join the cause. Fortunately when I came along, the skill set that I brought was that large software systems background that could host all this data and provide a meaningful solution to probation and sheriffs for managing the data–managing the population of people that are being monitored.

So it’s one of those things where the stars align, everybody came together. We found sources for enough capital to get the company through the early stages. But I have to say that those early stages, it took 20 million to fund the company until we got to the point where we were positive cash flow on customers’ money, not investors’ money. So that was quite a journey that we had to go through to get to the point where we could pass that first hurdle and that first test–which is become profitable.

RH: Now can you take me a little deeper into those early days?
MI: We had a team of probably seven people in total that worked at the company. We had a couple subcontractors that we contracted with and it was clear that we could get the technology to monitor alcohol. But we have to find a customer that we could work with that would start putting the hardware and software products into play and help us work through to develop a complete solution.

And we got lucky. We knocked on the doors of the Michigan Department of Corrections Electronic Monitoring Group. And Michigan has a fairly extensive electronic monitoring group for people on probation or parole, and they had always been extremely innovative and willing to try new approaches or new technology. So we approached Michigan, talked to them for a while, said, “geez, would you run a beta project with us? We’ll do the beta project for free, we need you helping provide the guidance and the response to help us get this product industrial-ready, not proof-of-concept ready.”

And so we ran that project for about two years before we had fine-tuned things and gotten to the point where we could take that product and make it revenue-ready. And today– Michigan I believe is one of our top five customers today. We’ve got a wonderful relationship with them. They’re a valued partner in helping us build the right kinds of products and solutions that effectively work for them and other agencies like them.

So it’s not just the capital, it’s not just the resources. When you’ve got disruptive technology, you have to find that early customer that dreams about what your product could do and hold you accountable to get there.

RH: But this all reaches back to that first patent application from 1991–it still does?
MI: It does. Yes, it does.

RH: So this would be a good time to do a kind of executive summary of what the SCRAM technology is.
MI: Well, the SCRAM technology measures a person’s blood alcohol content as that alcohol evaporates through your skin. And we’ve all experienced and I’m sure you have been around people at some time in your life where you can stand next to them and they’ve had enough to drink that you can smell it.

RH: They smell like a distillery, yes.
MI: Yes, and it turns out that one percent of all the alcohol you consume leaves your body through that constant perspiration process. About five percent of the alcohol that you consume leaves you body as you exhale through your breath. And in the breath sample, which people are all familiar with, the lining of the lungs are a thinner tissue membrane, and it’s easier for the alcohol to come out of solution and get expelled through your breath.

Transdermally, as it evaporates through your skin, it takes the alcohol a little bit more effort to evaporate through your skin. But again one percent of all the alcohol we consume leaves your body that way. So we developed a sensor mechanism and a device that’s securely attached to a person’s ankle–it continuously monitors a person’s BAC–and then it wirelessly moves that data to website that we host.

And it’s intended for audiences where a court, for example, would take a repeat drunk driver and order then to abstain and order them to this kind of monitoring in lieu of incarceration. And that’s our intent. Once you send somebody to jail and they lose their job, can’t pay rent for the family, everything starts to cycle down very quickly.

Our intent is to work with agencies to build our alternate programs. And if a person isn’t drinking, they’re not drinking and driving. And if they’re not drinking and driving, we’re meeting that public-safety need to make sure that these people aren’t posing a risk to society. And if they’re not drinking, then the money that the courts spend on treatment and other services have a better chance of helping this person learn to manage this part of their life.

RH: But I take it it was hard slogging in the early 2000’s getting judges and criminal lawyers and law enforcement agencies to accept this idea.
MI: You know, we got lucky in the early days. We got lucky because a lawyer called us up, said he had a celebrity that just got out of rehab. He wanted to have the celebrity be monitored because–for a whole host of other related issues–so it wasn’t court ordered. And that celebrity ended up being Lindsay Lohan.

And Lindsay Lohan proudly wore our bracelet for weeks and the paparazzi followed her all over the place. And in a very short period of time, we had hundreds and hundreds of television-based news segments all over the world talking about us, our technology, Lindsay. And that just propelled us into a level of people calling us and saying, “geez, what do you guys do? Come visit me, let’s see if you can help me.” So Lindsay helped us more than she knows. Lindsay with the surfboard in her bikini made our bracelet look good.

RH: And your first real breakthrough as I understand it, came in Orange County, California.
MI: It did. You know, again, there was a treatment provider in Orange County that looked at our technology, found us on the web, called us out of the blue and said, “you need to help us.” And what really happened is judges all over the place started having repeat, high-risk drunk drivers in front of them and we’d get calls from California.

We got a call from a judge in Texas that said, “I have a repeat drunk driver from Tennessee. We’re putting him on a plane, he lands in Denver at this time–I expect you to put him on a bracelet and monitor him. And if he drinks, you call me, we’ll issue a
warrant for his arrest and transfer him from Tennessee back to Texas.” And so the stuff that happened out of Lindsay Lohan was just one-off stuff like that where judges say, “this person worries me. I need to do something, I can’t keep him in jail. Let’s give this a try.” And it worked.

RH: Now, where did you come up with the name SCRAM, which is so perfect?
MI: Secure Continuous Remote Alcohol Monitor.

RH: Simple as that!
MI: Yes, and in reality, the name of the company is called Alcohol Monitoring Systems. But the market place never recognized our name. They always said, “you’re the SCRAM guys.” And so SCRAM seemed to resonate with people and our whole product line is SCRAM-something today.

RH: So SCRAM Systems is not the legal name of the company?
MI: No, the legal name of the company is Alcohol Monitoring Systems.

RH: Still is?
MI: It’s privately held. We know who we are. We don’t feel compelled to change the name of the name of the company and reissue stock. And the SCRAM branding resonates.

RH: Now in the last few years you’ve come out with a portfolio of products like SCRAM X, an ankle bracelet for house arrests, and SCRAM Remote Breath.
MI: We do GPS monitoring, home arrest monitoring, unsupervised breath testing, the continuous alcohol monitoring with the ankle bracelet. And this year, we’re launching a completely new software experience for the probation officer that’s called Nexus that is focused on what we’ve learned over the course of the last 15 years.

Probation officers have very complicated jobs, very complicated caseloads. The requirements for supervising people vary from person to person to person. And 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.

So we worked with leading researchers, a behaviorist for the last five years. And we’re launching a new software application this year called Nexus that is an evidence-based practice tool to help probation departments and officers make better decisions on how to incentivize and sanction people that are under their charge.

RH: So you can take this technology in a number of different directions.
MI: We can. And we lucked out. We’ve garnered international interest, we’ve got pilot projects in eight different locations around the world. So we’ve got a chance to expand our role in probation. We have our chance to expand our role in location monitoring like GPS. We have a chance to expand our role internationally and become a global player in this marketplace.

So we’re at a fun stage right now. And we’ve got a lot of risk, as you would say, executing across all these fronts. But we’ve built a wonderful team that’s very excited about stepping up and managing these risks.

RH: And how large is the team now?
MI: We’ve got about 300 full-time employees. We’ve earned the right to survive and we’re a medium-sized entity today.

RH: And how many employees were there when you became CEO what–fifteen years ago?
MI: Ten.

RH: Okay, that’s growth.
MI: [Laughs.] That is growth.

RH: That’s considerable growth. You know, the company makes extensive use of blogging. I see there’s a blog called “Sobering Up” covering, the subtitle reads, “drunk driving, alcohol addiction and criminal justice.” And it seems those articles get a lot of hits.
MI: Early on, we could not find the right thought leader to create a discussion around the issues of alcohol and crime. And so we’ve tried a couple different approaches towards creating awareness and creating a forum where people could come together and debate what are the right next things to do. And that blog has now resonated for a number of years now and helps us to stay in touch and get people to share the ownership of moving this journey forward.

RH: And I see you publish a lot of case studies from areas where the SCRAM CAM–and CAM does not mean a camera but Continuous Alcohol Monitoring, right…
MI: Correct.

RH:…You publish these case studies from areas where the SCRAM CAM has been heavily adopted including one I read from earlier this year, from Louisiana, which has the highest incarceration rate in the U.S.–Cadeau Parish in and around Shreveport?
MI: Yes. We’re at a stage in the country where the criminal justice system is reevaluating the policies that define whether somebody goes to prison or jail or they don’t. And it really began with the “War On Drugs” back in the 60’s and 70’s when Nixon launched a war on drugs and Ronald Reagan implemented “three strikes, you’re out” in California. And the unintended consequences of that policy movement was just an explosion in the number of prisons and the number of people incarcerated.

And the criminal justice system today is trying to move more to models that say, “let’s separate the people we’re mad at from the people we’re afraid of.” So if you’ve got a violent criminal that you need to be afraid of, that the public needs to be afraid of, let’s keep that person in prison.

If you’ve got somebody I’m mad at–so let’s take a repeat drunk driver, not somebody that’s killed somebody but a repeat drunk driver–if they’re not drinking, you’re mad at them but if they’re not drinking, you probably, the data would say, you shouldn’t be afraid of them.

And so how do we distinguish “I’m mad at a person, I’m afraid of the person” and build alternative-program models that are more effective long term at managing recidivism rights, and less costly in the short run and the long run? And so we have projects in virtually every state focused on keeping people out of jail, keeping people out of prison, as long as they can demonstrate the fact that they successfully do not drink for the time that they’re being monitored.

RH: So after 21 years, is there an impact that you can quantify in terms of what this company has been able to do?
MI: You know, I think the best way to describe what we’ve done, the National Institute on Alcoholism and Alcohol Abuse–NIAAA, which is part of the Department of Health and Human Services for the U.S.–looked at our project six or seven years ago and looked at data on a thousand people that had been monitored for more than a year.

And when they looked at this, said, “of the thousand people, almost all of that population, almost all of the thousand people had successfully drank every single day of their lives for on average for ten years before they were put on SCRAM.”

And when you looked at the data for these people for this entire year that they were on SCRAM, every single day, 99.3 percent of this population did not drink. And they did not drink for that whole one-year period of time. And even if somebody did drink, and they had one or two or three drinking events during the course of that year, this is a person who was drinking every single day of their life, and we’ve now reduced it to they drank once or twice or three times.

And when you take somebody that drinks all the time and you get them to “occasionally they drink,” now you’ve given that treatment arm an opportunity to say, “oh, Mike, I see you had a drinking event yesterday, let’s talk about that. What triggered it? Why did you choose? You know you were going to get caught, why did you choose to go back and drink again? What were the events that led you to that?”

And so our hope is that as we help 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. Because stress is never going to go away. They just need to find alternative outlets to manage that stress.

RH: Well, with that success profile in mind, how big should your company become over time?
MI: I think we are still at the early stages of marketplace adoption. On a global basis, if you take the U.K., for example, or let’s take Scotland as an example, where Scotland, the alcohol problem is so bad that the life expectancy of a male in Scotland is 58 years. And the U.K. is a little bit better, but you have alcohol issues throughout Europe, you have alcohol issues throughout Asia. The lessons that we’ve learned in the States, and the research that’s been wrapped around projects that use our technology, clearly show that we need to be knocking on doors around the world and helping other markets come to grips with not just…

…It’s not the social drinker that we’re worried about, it’s that drinker that turns then to violence, whether the violence is with a car or the violence is brawling at a soccer game or brawling on the streets or knife fights. You know, and 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. So our market opportunity is pretty big, especially if you think globally.

RH: And I see the company has about 25 patents on these devices, several of which don’t expire until after 2030. And so I’m wondering how do you avoid any corporate complacency in a case where your business seems to have somewhat of a patent-protected moat?
MI: Yeah, I don’t think we look at it that way. I think our single biggest competition in the market place is the environment that says, “I don’t need to change.” The “do nothing” decision is our biggest single competitive factor. And so patents don’t help you with the “do nothing” decision. The only thing that helps you with that “do nothing” decision is great people at the field level that knock on doors, wrestle with the marketplace over the magnitude of the problem and the options to go deal with it. And so I think we keep focused on how do we compete with that “do nothing” decision and patents don’t help you with that.

We’ve got just a wonderful diverse group of people that come from government, that come from research organizations, that come from…that just are continually carrying our message at the research level, at the federal policy level, at the state and local policy level, and then, of course, at the judicial level, and sheriff’s office by sheriff’s office, and probation office by probation office. There’s no shortcut to covering all of the bases that you need to cover.

RH: Well, how do you find such a dedicated workforce?
MI: We’ve been extremely lucky. I feel like I’ve been extremely lucky at being able to meet and convince people to come join our cause. There are a lot of people here at the company that have stories like mine where they had a close family member or close friend that struggled with drug or alcohol addiction. They’ve seen the destructive impact that that has on the family unit and they look at what we’re doing and they say, “yes, I’d like to join your team and let’s go figure out how to make a difference.”

And remember behind every good drunk is my grandfather waiting to be rediscovered.

RH: That’s a nice way to think of it. And one last question: Your bio says you’re regarded as a noted expert on the epidemic issues related to alcohol. You’ve made many presentations to law enforcement related organizations. So I’m wondering, as you look back over your experience, going back to business school at the University of Colorado, could you even have imagined a career course like this?
MI: [Chuckles.] No, no, I…No, not at all. When I graduated from school, and at the University of Colorado…And the country at that time was certainly troubled–we had race riots, we had social unrest over the Vietnam War, we had an unsuccessful experience in Vietnam. There was just lots and lots of social unrest. And I was kind of a byproduct of a whole generation that I think, at least the friends that I had at that time, really secretly wanted to find a way to make a difference.

And I think with SCRAM Systems or Alcohol Monitoring Systems, I lucked out. I found a project that is personal to me. It gives us a chance to make a difference. It challenges me to figure out how to make money and make a difference at the same time. And so I think I lucked out. That’s a worthy challenge, it’s worthy of my time.

RH: Call it SCRAM Systems or by the actual corporate name, Alcohol Monitoring Systems–either way, what Mike Iiams has building is an important part of modern criminal justice technology.

This is Capitalism, I’m Ray Hoffman.

About the Series: Featured stories from the intersection of the free market and entrepreneurial success. Here we speak with leading CEOs, academics, philanthropists and up and comers on their contributions and perspectives on the American economy.

About Ray Hoffman: Ray Hoffman, a veteran business journalist, is highly-regarded for his news and analysis features and insightful CEO interviews. Representing BusinessWeek on air for twenty-one years, Mr. Hoffman was the morning business news voice on the ABC Radio Networks from 1995 to 2006. Mr. Hoffman also represented The Wall Street Journal, on air, for eleven years. His daily WCBS CEO Radio feature was recognized by the New York Press Club as best radio business news report in both 2012 and 2015. In this podcast, Mr. Hoffman invites some of America’s most dynamic CEOs to share their stories as business builders and perspectives on free enterprise.