Navigant Research Blog

HVAC Vendors Providing More Than Just Heating and Cooling

— January 5, 2017

Heating, ventilation, and air conditioning (HVAC) controls represent a critical part of building energy management, as they are often the single biggest users of building energy. A recent article posted on Energy Manager Today states that “[Companies] within [the HVAC Industry] are unanimously eager to learn and grow in continual pursuit of advanced levels of efficient operation.” While the ultimate measure of success for global energy managers is the amount of energy saved, supporting industry sectors such as lighting and HVAC provide the actual tools to help them realize their targets.

In the HVAC industry in particular, leading vendors such as Trane and Carrier are redefining what it means to provide a supporting role to global energy managers. Similar to other industries where digitization has enabled a more detailed understanding of energy consumption, these leading vendors are finally realizing the value locked within their extensive building relationships and the knowledge they have gained working in buildings for many decades. Both Trane and Carrier have quietly developed highly capable building energy management systems that rival other leading offerings in the market.

Digitization Driving Progress

Data and software capabilities are the key drivers here. The expanded software capabilities built into newer controllers give these HVAC vendors the ability to transform their knowledge of cooling and heating into new, holistic optimization strategies for the operation of their equipment in conjunction with other critical building systems. The good news is that even though some of these offerings were years in the making, the advancements are still in the earliest stages of development. As additional data and experience are gained with these systems and new working relationships, the results are expected to be even more dramatic.

As described in Navigant Research’s recent Leaderboard Report: Commercial HVAC Systems, Trane and Carrier have evolved digital offerings that help to understand, integrate, and coordinate disparate building systems, allowing for improved efficiency and lower lifecycle costs. Similar to leading website and Internet commerce companies that tout page views as a measure of their value, Trane and Carrier have realized and begun to exploit the value locked in their existing customer bases and vast knowledge of building operations to help move the HVAC industry into the digital age.

 

Understanding Related Markets to Identify Differentiators

— November 11, 2016

HVAC RoofTo an end user or purchaser, categories of commercial building technologies can look and largely feel the same. Take, for example, the commercial HVAC market, where most vendors offer systems with little differentiation other than minor specification or performance differences. Look at the product offerings from any of the large HVAC OEMs and you’ll find a host of chillers, air handlers, and packaged systems with little difference between brands other than the nameplate. An engineer might balk at this statement, but it is their responsibility to look for and understand these small differences. Other stakeholders, such as a company’s CFO or a facilities manager, might have different features that are important to them, such as cost, automation capabilities, or service and maintenance programs included with a purchase.

Lost in Translation

So how do companies in highly technical markets differentiate themselves when detailed engineering specifications may get lost in translation? Through the development and execution of their overall go-to-market strategies. “Go-to-market” means meaningful and insightful customer engagement with products, services, and information that is specifically important to them. This is very Marketing 101, but it can’t be stressed enough.

In the HVAC market, companies such as Trane and Johnson Controls are differentiating themselves by pushing deeper into whole building optimization so that they can leverage their extensive existing customer bases to drive growth, smooth revenue streams during difficult economic times, and upsell customers with new product and service offerings. Other leading HVAC OEMs are offering mobile toolsets to sales and engineering staff in the field to help identify differentiators and promote their technologies over competitor offerings in understandable terms and with information that is meaningful to the particular audience.

Strategy Shift

Finding, enabling, and promoting differentiation can at times entail a high-level strategy shift, and these shifts can take years of effort and determination to realize. Implementing a strategy that calls for embedding digital intelligence into current equipment offerings may entail a shift in the culture of the entire company. It may also involve developing or acquiring significant new internal capabilities that currently don’t exist. If this course of action is followed and implemented soundly, however, it can be difficult for competitors to duplicate.

The key to all of this is not only knowing and understanding the market for the specific technologies, but also related markets, competing expenditures, and even the economy. In the case of Johnson Controls and Trane, they now must understand the HVAC market, the building energy management system market, and potentially the energy service company market, among others.  This is how markets evolve and change, helping to create new products, services, technologies, and ways to compete along the way.

 

Diving Deeper into IoT for Small and Medium Buildings

— October 31, 2016

HVAC RoofOn October 27, I joined Sunita Shenoy from Intel, Doug Harp from CANDI Controls, and Vladi Shunturov from Lucid for a roundtable discussion on the role of the Internet of Things (IoT) in developing intelligent small and medium buildings (SMBs). We wanted to tackle the big question of how technology—and specifically IoT—can transform smaller buildings for efficiency, cost savings, and broad business improvement.

For years, SMB owners disregarded opportunities to invest in intelligent building solutions because the ROI based on energy efficiency alone just did not pencil out. Today, the low-cost controllers, gateways, and sensors that make up an IoT platform solution deliver the kind of actionable insight that garners customer investment. Customers can utilize cloud-based software to translate a new array of data into impactful information regarding equipment operations, occupancy, and energy to help make strategic decisions around building operations costs. (You can hear our discussion around this important industry evolution by accessing the archived webinar on demand.) We received many great questions from the audience during the webinar—so many in fact that we could not address all of them in the allotted time. Below is one great question that we did not get to that highlights some additional important aspects of the market development for IoT in SMBs.

“To many SMBs, the whole concept of IoT and BEMS [building energy management systems] may be foreign. While the simplicity, affordability, security, easy install, etc. may have appeal, how do you make a concrete business case that makes the concept appear favorable to the non-tech-savvy SMB user who sees such tech as complex, an unwanted intrusion into their daily tasks, and are unsure of the ROI?”

Day-to-Day Results

As we saw with our research around another tech-focused trend, big data, customers don’t care about the jargon or buzz words. What resonates is the impact the technology will have on their day-to-day jobs and possible corporate objectives. The customer point of view is certainly not one-dimensional, and one of the challenges for market development is framing the business case in terms that speak to the variety of potential buyers. Our research suggests that the following aspects of IoT-enabled intelligent building solutions resonate with SMB customers:

  • Wireless solutions that can be installed in less than a day, without business disruption
  • Dashboards and reports that quantify the impact of operational inefficiencies in terms of energy, costs, and clear/prioritized action items
  • Business-specific insights such as space utilization for offices or occupancy data to inform product placement in retail

You can find additional detail about this trend in Navigant Research’s recent Building Energy Management Systems for the Midmarket report.

 

Moving Toward Building Systems Integration with New Market Offerings

— September 26, 2016

HVAC RoofThe More Things Change?  

Energy efficient building market trends in 2011 included the increased adoption of intelligent systems throughout commercial buildings. The main focus of these systems was to more effectively manage energy consumption. Today, most vendors serving the commercial buildings market have moved toward intelligent building systems and controls. These systems not only manage building energy consumption, but also critical aspects of a building’s operations, including tenant comfort, asset management, wayfinding, predictive maintenance, and a host of other functions. It’s now a strategic necessity for commercial buildings to have some form of software monitoring, data collection, visualization, and control of key systems as this market evolves.

The Convergence of Building Equipment and Operational Silos

The industry as a whole is recognizing the benefits of taking a more holistic view of managing disparate building systems and processes. New construction design is made simpler by dealing with fewer vendors and systems that may not easily communicate with one another. Retrofits can also be made simpler and less costly with Wi-Fi wireless networking technologies. Overall, maintenance and serviceability can be managed more easily, and duplication of sensors, software monitoring solutions, controls, and other system infrastructures can be eliminated.

Earlier this month, Acuity Brands, Inc. introduced the nLight ECLYPSE controller, which allows the integration of commercial building lighting systems with a building’s heating, ventilation, and air conditioning (HVAC) controls onto one common platform. Acuity follows Daintree Networks, which offers ControlScope, a programmable wireless HVAC thermostat that connects to any conventional or heat pump HVAC system. These advanced tools give building owners and managers the ability to configure, monitor, and control an integrated set of critical building equipment systems using a common interface. With real-time data acquisition and monitoring, the efficiency of critical building systems and operational processes can be maximized while maintaining optimal energy consumption.

Adoption Hurdles Still Exist

These benefits do not preclude the presence of hurdles to the adoption of integrated building systems. As with any technology adoption cycle, early adopters see the benefits of these types of technologies, but others are slower on the uptake. Facilities managers can be hesitant to change and be trained on the most effective use of integrated systems with a common interface. The vast amount of data collected by a multitude of sensors is effective only if it is being used, and used appropriately. Connected devices of any kind increase the risk of security breaches, necessitating the coordination of facilities management and IT departments—a historically uncommon pairing. Finally, proving that the financial ROI and payback period estimates are within acceptable corporate standards continues to be a significant vendor challenge.

Acuity Brands and Daintree Networks have taken an important strategic step with their integrated technology offerings. It all makes sense and should see increasing adoption in the market over time. But commercial building operations has been one of the industries that is historically slow to adapt to technological change. With strategies and technologies that help vendors access both new construction and retrofits in commercial buildings, it may be inevitable that fully integrated building systems become commonplace in the coming decade.

 

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