Smart Buildings in the Age of the IoT
Disruption within the building technologies market is long overdue. Legacy business ecosystems are organised around vertical silo’s and thrive on vendor lock-in with customers. This situation has been established over the last 30 years and now is under siege by small start-ups. In the age of IoT, a complete rethinking of portfolio and marketing strategy is required in order to capture the next wave of smart building innovation. With Data and Data Analytics at the core, new business models and ecosystems are about to emerge creating a new market for data and lifecycle services and breaking with the legacy approach that has become the trademark of this industry. This article describes a framework for a portfolio strategy as well as evidence for new emerging business ecosystems.
SMART BUILDINGS: from hardware centred to data/context centred approach
Historical Perspective: Smart Buildings are not new, first appearing in the late 1970ties, in the age of software, a smart or intelligent building had a BMS at its core. Today, we live in the age of data / IoT and our understanding of a smart building has evolved towards one of a cognitive building, aware of the people and their context and responding appropriately.
Legacy Market – The historical context is important as it explains why the transition to these cognitive buildings is so difficult overcoming 30 year legacy of best practices and business ecosystems that are designed for vendor lock-in instead of open interoperable systems. In order to realise the potential of smart buildings, this legacy market needs to be opened up
Data Aggregation – With IoT technologies maturing and sensor costs in decline, the cost of capturing data is at an all-time-low. The cost of data aggregation, meaning adding the necessary context to the data, converting the data into information, makes or breaks any smart building business case. The status quo in the building system industry is a systematic data lock-up in vertical silo’s raising an innovation barrier but also introducing a significant disruption potential.
Hardware Centred Approach: The legacy building technology and system integration industry pushes hard towards smart building implementations promoting feature rich fully vertically integrated use cases. These smart environments host prestigious corporations that, in the war for talent, believe that offering employees a smart working environment will reduce churn as well as serve as living labs for smart building use cases. Projects such as the EDGE, SPARK and the CUBE are good posterchild example projects. The data lakes that are the result of such projects are more like data swamps and neither the building owners nor the corporate clients can derive value from it. These are ivory tower innovation projects, shiny gems in glass displays.
The majority of building operators/ owners is left with the questions how technology can do for them I order to make the building smart, looking very much at the business case for the immediate and future investments needed to realise the promised benefits. For this customer segment, the evolution towards a smart building is a journey in which every step taken matches the strategic operations agenda and contributes to reaching operational KPI’s.
Data / Context Centred Approach: in designing a smart building environment from ground up, a layer by layer approach needs to be taken to have in-built flexibility. Not all environments are the same and over time, will change during the lifecycle of the building. At the centre of this layered structure is always data and context. This is the smart buildings Alamo, the last line of defence and all layers that are added to this core, need to feed the central data core.
Once that is in place, data analytics can give input for strategy discussions that define priorities as well as giving essential feedback on whether the smart building measures have reached their target.
The data core also defines all data formats that building system suppliers need to comply witth. The data formats should be based on open standards avoiding lock-in at data level.
This data driven innovation allows a “layer by layer” approach aligned with an evolving customer needs and operational strategy.
Fig 1: Common view of data at the centre of smart building strategy
GROUND ZERO FOR SMART BUILDING PORTFOLIO
The Building Systems Industry bolsters a significant disruption potential, but that is not a compelling event to induce change. The proposed view around an open approach on smart building development needs a compelling ground zero approach and a channel to bring it to market.
Ground Zero of Smart Building Strategy: the bulk of building owners / operators face a common set of challenges that rank high on the agenda. Developing a value proposition around this common set of challenges is a good starting point for any smart building strategy designed to partner with building owners on their smart building journey. The most general challenges that all building operators have are:
Meeting Compliance Requirements
OPEX Reduction
A smart building portfolio strategy should build on these 2 pillars offering simple, cost effective solutions for the most basic challenges and a roadmap for incrementally tackling more complex challenges.
At the core of this is data transparency, a vendor independent view on data from the building as well as from the surrounding enterprise systems.
Compliance Reporting Requirements: increasing regulations as well as pressure from the investment community around corporate social responsibility drives the need for data transparency and reporting.
Investment Community - GRESB Reporting: increasing pressure to report and reduce CO2 footprint as part of an environment, social and governance transparency initiative.
NZEB EU Directive: additional reporting requirements (by EU) as of 2030
Increase in Fire and Safety Compliance reporting requirements after e.g. Grenfell Tragedy (UK – 2017)
In the age of IoT, this reporting can be generated in an automated way by reading live data coming from the building and combining it with data from ERP and other Enterprise Systems. The business case for doing this is driven by comparing it to manual reporting. This investment in data transparency will need to be done by all building owners.
OPEX Reduction: with rising energy and labour costs, the annual building operational cost are well above 5% of the investment costs. Having better control over operational expense is always on the agenda as it directly relevant for the margin and overall financial performance of the building portfolio. Within these costs, Energy Consumption (35%) and Facility Management (41%) are the largest cost positions (graph below – based on Central Europe values). Both should be in at the centre when building a business case and value proposition around smart building.
Fig 2: Operational Expenses Overview (est. own research)
Energy Consumption: In the age of IoT, monitoring energy consumption is or soon will become a standard practice (as well as being a compliance requirement). Optimising energy consumption based on planned or actual usage of the building, weather forecast or by just optimising heating / cooling cycles is a logical extension. An estimated 10-20% of the Energy Cost can be reduced by applications that intelligently interact with building systems based on live building data making the business case for implementation relatively easy.
Facility Management: an estimated 15-20% of Facility management costs can be saved by deriving intelligence and acting on data coming from the building and other Enterprise systems. Starting with simply measuring performance, advancing into streamline maintenance processes, plan and automate workflows. Based on a survey executed by Schneider Electric (2016 – USA), only 15% of facility managers utilize predictive maintenance tools to assess and target equipment maintenance and 72% of facility managers feel that available building information is not adequate enough for optimum facility maintenance planning. There is a lot of improvement potential in improving facility management costs by using smart technologies – a total estimated
These 2 customer needs offer a ground zero approach for a smart building portfolio strategy. At the core of which is a central view on data generated during the lifecycle of a building.
SMART BUILDING PORTFOLIO BLUEPRINT
Using data insight from the central data repository and applying a consultative approach to engaging with building owners/ operators on strategic issues, information needs are identified. This information need leads to data requirements and the implementation of sensor/ IoT networks or API integration. The approach is by definition vendor independent as information need is at the core of the hardware implementations. This step by step approach, starting from creating data transparency (step 1) over efficiency management (step 2) and resulting in business process management (step 3) is a natural evolution path to a smart building that by definition fits the operational and strategic targets of the building owner (Fig 3).
Fig 3: Portfolio Blueprint Smart Building
The disruptive character of this data centric approach is that it allows for step by step engagement, is flexible and open towards integrating with multiple vendors and forms a basis of a strategic partnership with building owners/ operators. By following this approach, the data integration costs are minimised playing a major factor in favour of the business case for implementing applications that offer incremental improvement in operational efficiency. In order to avoid lock-in on the data side, open standards (IFC, PAS,…) should be used wherever possible.
GOTOMARKET / ECOSYSTEM – Technology Contracting & Lifecycle Services
Any Portfolio idea is useless in absence of a business ecosystem that supports it bringing to the market. The good news is that in the conservative real estate market, the adoption of digital technologies is causing movement and there seems to be an appetite for change in moving from transaction based services to a model of lifecycle services.
Cushman & Wakefield, driven by a decline in B2B revenue derived from intermediation, is seeking to move more towards business model that yield recurring revenues. The partnership with MCS (www.mcs.be) signals an increased focus on operational services and is a good indicator that there is surge of energy in the real estate industry, a necessary impuls as it has been asleep at the wheel for the last 10 years.
Also Real estate developers like OVG Real Estate are starting to explore the long term view on smart buildings exploring partnerships with Engineering Companies (e.g. Deerns) and Technology Companies (e.g. bGrid) guaranteeing the sustainability of buildings along their lifecycle. It is this kind of cooperations that set the blueprint for the business ecosystems that will be successful in the age of IoT.
In such a Business Ecosystem, the role of Technology Contractor emerges. A Technology Contractor involves all parties — owners, design and constructions teams – early in the planning phase and forces data-driven connectivity and interoperability decisions in order to realise the full potential of the IoT in smart buildings. It is obvious that within that role data aggregation competence as well as MEP, installation and IoT technology competence are key. This role extends the build phase of the project and covers the complete lifecycle by being responsible for all data interfaces and data flow during the lifecycle of the building. In the absence of such a technology contractor, the usual walled garden and data silo landscape will re-emerge. The Engineering Companies (e.g. Deerns) are the earmarked players for taking up a Technology Contracting Role while building strong partnerships with IoT technology / Data companies (e.g. bGrid). This is unusual for the Design and Engineering industry as projects are usually transactional and do not roll-over in a lifecyle service with recurring revenue.
A further role that emerges in the sidelines of such a new business ecosystem is a Professional Services role (business process consulting): analysing the datastreams and recommending improvement measures to optimise (see Fig 1)
Energy Consumption
User Experience and Efficiency
Maintenance and Facility Management
Security & Safety
BRINGING IT ALL TOGETHER
All the necessary ingredients to shake up the building systems industry and unleash innovation in the smart buildings market in the age of IoT are given.
High Disruption Potential (silo approach of legacy suppliers)
High Innovation Potential (data centred approach – cognitive buildings)
Compelling Event: increased need for reporting and customer demand for transparency
Formation of New Business Ecosystems that offer a goto market channel
The time to act on this opportunity is now. Let’s make it happen.
