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Secrets of Success and Thoughts on Where the BAS Industry is Headed
Scott Cochrane, President and CEO of Cochrane Supply & Engineering, Interviews Martin Villeneuve, SVP of Distributed Building Technology for Acuity Brands and President of Distech Controls
For the last 20 years, I have enjoyed meeting executives from the BAS companies that support our industry. Many I meet come from notable backgrounds with higher level education, billions of dollars of responsibility, and they’re usually taller than me and very professional. They usually look like they are fresh off Wall Street demanding respect through confidence—and then there is Martin… WHO??!! Martin Villeneuve is the Senior Vice President of Distributed Building Technology for Acuity Brands and President of Distech Controls. He was brought into the role when Distech Controls was acquired by Acuity Brands six years ago.
When I first met Martin, I knew he was special. He was not perfect, not tall and did not know everything. Instead, he was curious, likable and before I knew it, I was having a great conversation with him about our industry that has continued throughout our relationship. A true knowledge base of our industry, Martin started more than 20 years ago as a Tech / Project Manager for Distech Controls when they were initially a BAS contractor. He helped them turn into a world-class manufacturer, even taking him to Europe where he successfully built a market-leading business for Distech Controls. He’s now back in Canada working for Acuity Brands, the American parent company of Distech Controls, successfully showcasing the ingenuity and drive that has made the brand successful—all while being this super nice, unassuming guy who just loves the BAS industry.
Cochrane: Can you tell us about your start in the BAS industry and the early years?
Villeneuve: Of course. I will tell you first that before choosing HVAC engineering at school, I was hesitating between management, management and admin, and engineering, because I was, like you said, curious about how things work. So, I remember discussing it with my family and then decided I was going to go into engineering first, and then once I felt like I knew enough about how things worked I would go into management. So, I chose HVAC engineering, and in the world of HVAC engineering, you can choose a lot of different things such as heating, cooling, ventilation, fire and security. Or you can choose controls where you get a glimpse of everything without going into the details of designing every machine. But you get to touch everything, plus you're in controls from a technology perspective. So, that's why I chose the BAS industry.
Cochrane: Did you get formally educated then or was this all through career education? Was this more like choosing your first jobs and stuff like that?
Villeneuve: I went to school for HVAC engineering, which was a three-year degree here in Québec, Canada.
Cochrane: And then from there you focused on controls when you came out or was your first job with Distech Controls or did you go to work for another company first?
Villeneuve: No, my first job was with a controls integrator / systems integrator in Québec called Regulvar. I was perhaps employee number 400 and I was hired before I finished my schooling. I worked for that company for two years before being convinced by Etienne Veilleux, the founder and President of Distech Controls, to come and help him build the product for his systems integrator business. At that time, the idea was to build a product for our own use and after that it evolved obviously.
Cochrane: So what was it like? You came into Distech Controls and they were a BAS contractor at the time, and they became this global BAS manufacturer. Going back to when you were making your first decision to go there, what was driving Etienne to say let's do this? And then within that first five years, you guys rose to success. What made him decide to make it like this? What made him decide that he’s going to compete against Honeywell? Can you speak to that from that time period and what made you guys decide to go for it, if you will?
Villeneuve: It was not a smooth or easy ride. There was personal sacrifice and we incurred some debt to fund the product development and innovation.
Cochrane: So in the early days, a lot of people made personal sacrifices to start it up?
Villeneuve: Yeah, definitely. In the early days, when Etienne finally convinced me to join Distech Controls after more than a year of meetings and interviews, I joined their team as a Project Startup Director and I soon realized that projects were really hard to commission and start because the product was not mature enough or ready. I remember going into Etienne’s office at 5pm or 6pm at night and leaving his office around 8pm or 9pm, without even remembering why I entered at first—so he was a very convincing and thoughtful leader. I was very young at the time and he said to me, “Martin, if the product is not ready, would you come into the development department and help us develop the product?” I had not initially planned on coming to Distech Controls to achieve this task, but I embraced it and worked internally with R&D for more than a year, guiding them on what the control system needs to do at minimum in order to achieve the projects we sold outside.
Cochrane: Were the original controls all LON-based? Was LNS-based your first version?
Villeneuve: Yes, LNS version 1, then 1.5 and so on.
Cochrane: Yes, yes, I totally remember! That was the right move back then because that was bleeding technology at the time, especially in Canada, I don't think LON really got to Canada. You know, I thought you guys were one of the first ones that really made that happen there. Wasn't that kind of the case?
Villeneuve: Yeah, there were a few local manufacturers in Québec that did LON and we were using their product realizing that we could do better if we did it ourselves and if we invested enough in research and development. In Québec, we have the possibility to get grants to invest into research and development so we maximized it a lot, and through my guidance and then other people that we hired that I knew from the domain, we built a respectable team in order to build a product.
Cochrane: Wow, that's so cool. When did you guys feel it take off? When did you decide hey, let's go for it because we got something here?!
Villeneuve: That’s not exactly how it happened. Our minds were split in half between developing the channel network to sell our product and achieving the project we committed to locally in Québec to do with our product and staff—and at one point, there was not enough resources to achieve both. So, we were forced to choose between being a local contractor and being a manufacturer. It was a hard choice, but Etienne made the right decision. We decided to sell our BAS contractor division and focus on being a manufacturer. We divided our revenue, probably by half at the time, and hoped to survive the swing over to being a manufacturer.
Cochrane: Did the contracting entities stay alive or did it fizzle out with the acquisition?
Villeneuve: Yeah, we sold to a business called VCI that was an Ontario-based systems integrator that wanted to expand in Montreal. They did not succeed, however, and another systems integrator in Québec, ACCS, took over most of the projects that Distech Controls did in the past and some of the original employees went to work for.
Cochrane: I love hearing about this—I know who all these people are, so it's neat to hear it all come together.
Villeneuve: This was back in 2002 that we made this decision, when I was 26. At that time, Etienne decided to go all in and put everything on becoming a manufacturer. We even had a hard time convincing some of our employees that were on the contracting side to stay on with the manufacturing business. It was a very big debt. But then we succeeded, and we finally were able to build quality product and enough of a channel to help us. We signed an OEM deal with Johnson Controls shortly after. We decided to give up on their LonWorks line and OEM the Distech Controls line, which gave us both revenue and credibility in the market.
Cochrane: Yep, I remember that and that's where we first started using the Distech Controls product was with the old LN controllers from Johnson Controls. Great history! Let's move on a little bit to your time in Europe. I know you've helped Distech Controls build a very successful business over there. But in your own nature, of course, you're very curious. You learned a ton and you've shared a lot with me over the years about stuff in Europe that you've seen—so could you summarize today what you'd say are the major differences between those markets in your eyes?
Villeneuve: Yeah, I found Europe different in some ways and similar in other ways. The difference is mostly coming from the cost of energy, country regulations, and the desire to distinguish their buildings through technology. All of this arrived to a pinnacle of there being much more technology per square foot. Usually in a building in Europe spaces are smaller, so they need to be used with more considerations compared to North America I would say. The cost of energy makes for a little battle, for example, between who controls what between the lighting controls, the HVAC controls, and the sunblind controls. They cannot insulate the walls or the roof or the windows enough in order to save an adequate amount of energy, so they really maximize the controls piece of it as much as possible.
Everybody that traveled to Europe noticed that it is very rare to find a switch on the wall. Lights are automatic, so if you apply the same visible principle that we see with lights, it's almost the same with BAS and the rest of the controls in either a room or a building. So, this combined with local practices and country-level regulations, it's the same need everywhere. Everywhere on the planet we need to control comfort, heating, cooling and lights. From a conceptual point of view it's the same thing, but then trade regulations vary country by country and the manufacturer-specific development that influences the regulation in the country model sees the needs differently from one country to another. This is why you're going to see the UK, France, Germany, etc. with varying requirements. But when you analyze it deeply, it was because of a regulation at one point or a manufacturer that had a feature set at one point, but in fact they all need the same thing.
Cochrane: Sounds like California and the U.S.
Villeneuve: Very much. California is very similar to I would say a country in Europe from a regulation perspective. It was tailored because of regulations, energy costs and likely manufacturer presence at one point.
Cochrane: Yeah, so what do you see happening here? There's more value on the technology there for obvious reasons that you pointed out, but what's going to happen here? Do you see that trend happening here or is this trend different in North America in terms of that?
Villeneuve: Now, honestly, I see the same trend happening since energy costs are always going to rise. We're always wanting to save energy, probably with COVID as well. It is going to be very important to have the right technology in order to make sure we have the right quantity of air ventilation per room, and we want to track the number of people more than CO2 sensors. So, I would say in Europe they are more ready to accomplish that than us and in North America because we tried to save on the amount of controls we put in a room. We're trying to put 12 rooms on the same VAV because they're all on the north side. Now we see that with the pandemic, it was an error and doesn’t help us get people back in spaces.
Cochrane: Now, not to uncover some of your secrets, but we all know, Martin, that that a lot of the new Distech Controls innovations mirror some of the strategies that made you successful in Europe. In terms of that occupant experience, Distech Controls is one of the first companies to actually offer something along those lines to the BAS industry and I'm just curious how well is that being received out there in terms of being a leader in that regard? Is it still too fresh you think or are you guys starting to see more traction there?
Villeneuve: So obviously, Scott, you said it well, that's a trade secret. But I’m happy that you ask. One of Distech Controls’ proven paths to success is that we're using the best of what we learn from a technology perspective and application in any of the countries that we’re present in and we're normalizing it in our standard platform worldwide, which other competitors have a hard time doing. I think it's more by accident that they keep everything separated than by willingness or by the size of their organization that one hand cannot talk to the other. This is already tough to do in an organization like Distech Controls’, but it's more natural because of our DNA.
So effectively, yes, we've learned a great deal of stuff regarding smart room control, applications, and occupant experience in Europe. This was, you know, the de facto standard in Europe because one building has to compete with another. If they want to rent to a tenant, they need to differentiate their building with things other than the quality of the space, the size of the room, the size of the window, etc. It's really technology that differentiates the building, and by bringing that into North America, I would say this is one of the first subjects that building owners, consulting engineers, and architects are interested in. So, this would get our foot in the door.
Now, if you're asking me if all of it is implemented down the road because of the fact that it goes to a general contractor then to a mechanical contractor and then underneath the mechanical contractor, there's a lot of value engineering. This is where we see systems integrators being directly under the general contractor in the market more often, and there's more of the master system integrator role because building owners realized that the value provided by the system integrator for controls is much more important to be only a sub of a mechanical contractor.
Cochrane: I agree. I've been hearing recently that a lot of large real estate holders, especially in the United States, are dumping their real estate. But, they're keeping their gems and one of the things that they're talking about is investing more into the technology in a smaller group of buildings and making those buildings more competitive. This is sort of the future of big real estate they're talking about in North America, which would mean we'd be trending towards what you see in Europe now—which is you’ve got two buildings that pretty much are the same today. What's going to make them different is that better technology and that better occupant experience, and because people will be much more competitive for that space now than they were before. So I think it will help, I’m like you, I want to see the occupant experience drive these conversations in BAS, not the mechanical engineers anymore. We need to move over to let the people in the buildings tell us what they want.
Villeneuve: This is going to drive the difference. I believe this is going to drive the change in North America in the years to come. The SI’s involvement with the general contractor is going to change a lot, and like you said, instead of being relinquished under the mechanical contractor, the building owners are going to work much more direct with the systems integrator, which are there for the lifespan of the building.
Cochrane: Yep, and they become a different type of entity to the building owner. Much more of a technology provider, not just a mechanical electrical service provider. With all this being said and all of this cool stuff you’re working on, would you please just pick one of the technologies that you guys are playing with as a company, that you're incorporating into your products, and tell us how it's just going to change the BAS industry? You're working with some really neat stuff like Bluetooth, the occupant experience, a bunch of apps—I mean most people don't even have apps.
Villeneuve: Yeah, first we're focused on making sure our product is built from an occupant experience point-of-view to easily respond to the need of the of the occupant… so that's one. The Bluetooth technology, the ECLYPSE Sky Ecosystem, and everything that is built around this. Then the second pillar is to be able to make it so system integrators, which have massive resource constraints, can go in and out of a project as fast as possible in order to execute more in a more profitable way. We're building tools for them to normalize the work that they do, like the Builder tool that automatically generates code sequences and our Auto Commissioning Tool. You don’t want to send a guy to commission 1,000 VAV’s when you can have an auto commissioning tool.
But, that is the table stake for me—that is what you need to do in order to be attractive to both building owners and systems integrators. But if you ask me, the cool technology that will probably help us revolutionize the world of BAS again, it's probably AI. Artificial intelligence holds the potential to move us from having to control a building to having an autonomous building. I think there are a lot of steps in between in order to reach that level, such as understanding the systems, the digital twin, and the cloud infrastructure.
But in the end, AI is going to change our industry completely and that's why we're working on that internally: having AI capability in our ECLYPSE APEX controller that is scheduled to be released later this year and having an overall platform to maximize the use of it.
Cochrane: You going to give all that away in this article?? I love it. I think you guys are on the right track and I'm happy you're saying that. Just the fact that you're using those words and talking about it makes me excited about the future for Distech Controls for sure.
Villeneuve: It's just too long for me to wait. I see everything we have and I cannot hire fast enough. We hired close to 60 employees in 2020, a pandemic year. I'm looking at the road map that we have and we could hire another 100 people and still have jobs for them for years to come. So, I'm just constrained by the amount that I can invest, but we're investing A LOT and I'm happy that Acuity Brands sees that opportunity and gives us the leverage we need to execute.
Cochrane: You're dancing with the big boys now! I know you said you wanted to and I can tell you are. Let's get to the last question now. I did prepare for this by interviewing two of your key lieutenants to get a little more background on you. I interviewed Scott Hamilton and Ryan Sen. What both of them would not stop telling me is how much you are liked by your team at Distech Controls and how much they respect you. I know they're very happy having you as their leader and it's not just because of the success of Distech Controls, there's more to being a good leader than just success. Is there anything you can share with me about how you've been able to develop such a great relationship with your team to get them to respond the way they do? What is the secret, Martin, to good leadership in our industry?
Villeneuve: Probably the secret is to not have any secrets. It’s to be an open book. You can’t have a hidden agenda with people for profit. It’s essential to be genuine with your people and to put as much effort in as they would if they were in the same position. You need to respect their work by working yourself out of the situation. That's one point, but also hiring is so important. Hiring the right people with the right motivation. In the past, at times, we've made the wrong choice and I've seen how much it negatively affects the organization. That’s why I put an enormous effort into the hiring process to vet out the candidates to make sure they are here for the right reason and that they're going to have the passion.
Not every person can develop the passion for this industry. This industry could be boring for some, but could be very exciting for others. The trick is always to find the people who are going to be excited by this industry and will go those extra miles in order to reach the result and be a challenger in the industry. To help us achieve a long-term dream of being one of the Big Four at one point. We’re striving to displace one competitor on that list, though not necessarily remove them. I think competition is healthy in the industry, but from being considered a nobody in the industry with zero revenue less than 20 years ago to being considered one of the big four or big five in the industry would be an accomplishment that cannot even be described.
Cochrane: What's going to make you feel like you're in the big Four? I mean, is it a revenue goal? Is it a market share goal? When will you know you arrived?
Villeneuve: It's market share. When I'm looking at markets today, I tell myself we have a long way to go.
Cochrane: Well, I think you're an awesome leader and I want to show a lot of people that people can lead from within this industry, we don't have to always think we have to bring people in from the outside. So credit to you guys and your company.
Villeneuve: I’m very appreciative, thank you. You made me think about how it could also be motivating for some of my employees to say, “Yeah, I don't have to come from a different background to eventually leave that BAS organization and Martin is proving it.” Well, thanks to the trust the new leadership in Acuity had in me at the beginning, giving me and my team the opportunity to prove ourselves.
At the end of the day, I love my job. I love what I do and I could not see myself doing anything else.
So… other BAS manufacturers BEWARE. With Martin at the helm of Distech Controls, you better keep working hard—because I know Martin will be…
Hear more insights from Martin and his future predictions for BAS technology in his keynote presentation at Controls-Con 2021. Controls-Con is a virtual Smart Building Controls Conference and the World’s First Master Systems Integrator Conference taking place May 5-7, 2021. Dive into the latest technologies, trends, and best practices in building automation, controls and operational technology. Learn more by visiting www.controlscon.com.
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