Digital Transformation meets Facilities Management Transforming People, Process & Place with the Internet of Things

Rick Rolston CEO BuiltSpace Technologies Corp.

Cap Gemini defines digital transformation as the use of technology to radically improve the performance or reach of enterprises.  

This raises some immediate questions:

• Can digital transformation be applied to real estate and facilities management?
  

• Where can we expect to find radical improvements in performance?
  

• How does the Internet of Things fit into this transformation process?
  

• And, how do we measure the performance improvement?

Let’s start with the end result.   How do we define performance?    To an asset manager, performance may be measured in terms of operating cash flow or capitalization rate.  To a facilities manager, performance may be measured in operating costs per square meter, or the number of end-user complaints per period.  To the energy manager performance is likely measured in energy intensity (kWh) per square meter or energy savings.   In the C-suite, there is no doubt that performance will be measured in financial terms.

How, then, do we find radical improvements in financial performance across large portfolios of real estate assets?   Cap Gemini identified customer experience, operational processes, and business models as key targets for digital transformation.   Not only are these transformation targets, but they are interconnected. 

In my blog of January 2016 I looked at how external digital transformation is already challenging commercial real estate.   I described how WeWork and others are already transforming real estate with on-demand real estate business models that replace traditional multi-year leases with space-on-demand, for a day, a week, or a year.  Now, it’s not a question of leading the transformation, but surviving it. 

On-demand real estate (a new business model) is the new norm, and on-demand services to the end-customer (customer experience) will be supported by on-demand back-of-the-house services (operational performance).  And, we have to measure it all in financial terms.

If the technology used to transform enterprises is the Internet of Things (IoT), how can the IoT radically transform customer experience, operational performance or traditional business models?   Radical transformation is a big ask, and there are really only a few options for adding value or reducing costs.

What are the options?

• We can deploy IoT technologies to avoid labor costs.
  

• We can use IoT devices to measure inputs like energy, water, and raw material, as well as waste outputs, and optimize the use of these resources, reducing waste, and therefore costs.
  

• We can optimize productivity, comfort, or customer experience in order to build “brand” and deliver superior services.
  

• We can build develop new cross-enterprise business models in order to create new revenues or reduce costs.
  

But, it’s not so easy to find those savings.  For example, let’s assume that we can install a device on a heat pump air filter, for a one-time cost of $50 that tells the facilities manager when the air filter should be replaced.   Current practice is to replace the filter every 90 days, at a cost of $40, as part of the quarterly equipment inspection.   This inspection is conducted on about 20 heat pumps per day, where the technician has scheduled, and prepared the filters in advanced, in order to complete as many changes as possible today, minimizing labor cost per intervention.  

The proposed IoT device, to be deployed across hundreds of heat pumps, alerts the technician when it’s time to replace individual filters, at random locations, based on how dirty each filter becomes.   As a result the technician needs to now rework his schedule to replace the individual filter as it becomes clogged.  In doing so, he loses the economy of large-scale replacement, possibly resulting in additional trips to site, and higher costs per replacement. 

If the technician is able to maintain the same cost per replacement, through efficient scheduling and the average filter change interval is extended by 30 days (from 90 to 120 days), it’s a simple calculation to discover it will take 12 years to recover the $50 investment in the IoT device, based on labor savings alone.   If the cost per replacement increases even slightly, there is no benefit to remote monitoring.

[an error occurred while processing this directive]Of course there are many examples where remote monitoring would provide an acceptable, or superior, return on investment, but in order to determine the viability of IoT deployment, facilities managers need to clearly understand the costs, and that’s where there is opportunity for radical performance improvement.

To make IoT investment decisions, such as the above example, we need to be able to better measure operating costs, to the equipment level, in real time.   Traditional accounting processes (paper work orders, mailed or emailed invoices, paper PM records) take days or weeks to complete, and generally fail to collect accurate, equipment level, data about operating and service costs.   As we have seen in the above example, the viability of IoT technology can be very sensitive to process costs. 
Measuring operational costs in real time becomes a pre-requisite to IoT deployment and on-going facilities management. 

There is room for radical transformation of these operational processes.    What if we could shorten the average length of a service intervention from 30+ days, to just one day?   What if we could reduce the average hours per work order from 5-6 hours, to just 2.5 to 3 hours?   What if we could eliminate 98 percent of administrative workload when managing workflows, from service request to invoice?  What if equipment level service records and financial costs could be accounted for in real-time even when external contractors complete services?

Better information, and improved operational efficiency will ripple across business processes to transform customer experience and enable new business processes.  Operational process improvement goes far beyond “reducing truck rolls” by remotely monitoring buildings with IoT devices.  Fewer truck rolls can and will be further optimized with more efficient truck rolls, driven by better process and better information available when and where needed.

Radical transformation.  Bring it on!

About the Author

Rick Rolston is the CEO of BuiltSpace Technologies Corp. (Vancouver BC, Canada), helping facilities managers, service providers and tenants to radically transform building services with the BuiltSpace integrated services management platform.