May 2014

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Analytics Do Not Save Money

Analytics do provide insight into the actions you can take to save money, but by themselves, do not save you money.

Paul Oswald
Paul Oswald
Environmental Systems, Inc (ESI)

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Sounds absurd right?  With all that’s been written about analytics, fault detection, automated diagnostics, continuous commissioning, or whatever you prefer to call it, the truth is that the technology itself does not save money.  For a couple of reasons; first, it’s not about the technology; it’s about people and process.  Technology is merely the enabler.  Second, analytics is a tool, not the remedy.  Think of it this way; you don’t feel well so you go to the doctor and the doctor orders an MRI. The MRI costs money. However, the MRI does not cure your ailment; it simply gives the doctor insight as to what is wrong.  The cure could be relatively simple (low cost) in the form of a prescription, or it could be major (high cost) in the form of surgery.  Either of these remedies (corrective actions) will cost money in order to fix your ailment. The MRI is analytics; you need to spend money on it but by itself, it will not save you money.

Similar to the MRI, meaningful bottom-line results from an analytics implementation is the result of people and process.  While it’s true that you need good technology, technology is only an enabler of the solution; it is not the solution in itself.

Case in point; at the upcoming IBCon event in Las Vegas, June 18 – 19, there will be a fair amount of discussion regarding the number of offerings in the market that fall into the analytics category.   It is a dizzying array of products and features all claiming to do the same thing.  However, what is frequently lacking in discussions of analytics is the importance of people and process in order to achieve a successful outcome.  Further, there seems to be a pervasive notion that analytics save you money.  Analytics do provide insight into the actions you can take to save money, but by themselves, do not save you money.

The following are just a sample of key points that have little to do with technology, but are critical to a successful result.


How much money is allocated for corrective action?  This may seem obvious, but all the money spent on analytics won’t return a penny to the bottom line if the issues identified by the solution are not actually addressed.  It is frequently assumed that simply implementing an analytics solution will produce results.  If an organization’s maintenance strategy is “run to failure,” it is virtually impossible for any analytics solution to achieve the desired results.  Sufficient money and resources must be allocated to correct the issues identified by the solution.   

Process or Work Flow

Corrective action needs to be implemented in the context of a clearly defined process.  The key to a successful implementation, one that is aligned with an organization’s budget and resources, is to build a process around the technology.  The process manages the rate at which corrective action is taken to reflect that which the organization can effectively support.  Identifying more issues than can be realistically addressed only serves to frustrate stakeholders and undermine support for the solution.  The ultimate solution is built around a process that effectively triages, prioritizes, and ultimately, corrects the issues that have the greatest impact on the organization’s bottom line without placing an undue burden on its budget and resources.

We often hear that more data is better; more rules are better and so on.  The truth is, more is not always better if it does not align with the organization’s ability to process it, or return value sufficient to offset the cost to obtain it.

Prioritization and Cost Impact

There are a number of methods for prioritizing the issues identified by an analytics solution:

Frequency and duration are easily understood and easy to quantify.  However, cost impact is another story.  There is very little quantifiable data available to measure cost impact; there are just too many variables that influence cost impact value.  For example, consider an economizer failure.  To have an accurate cost impact value requires us to consider (at a minimum) the following:

For a single site implementation, this may not seem too difficult and would only need to be tailored for each asset to which this rule applies.  However, when implementing this rule across hundreds or thousands of sites, the effort required to capture and input this data is a formidable task.  As such, an approach that is effective in these situations is to apply some level of generalization.  This provides a reasonable level of accuracy for the amount of time required to set up the data.  Is it completely accurate for each piece of equipment?  No.  However, keep in mind that we are using this to prioritize corrective actions, not to predict absolute cost avoidance.  Regardless of the method chosen, it should be something that is mutually accepted by the service provider and the customer.  In this way, actions and results are transparent and understood by all stakeholders.

Corrective Action

Once prioritized, how are corrective actions implemented?  Typically, they’ll fall into one of three buckets:  immediate action, scheduled, or an aggregate.  Immediate action items are those that are both urgent and important.  Scheduled items are those that are important, but not necessarily urgent.  And, other corrective actions can be aggregated together to form more strategic improvement projects.  Regardless of the approach, it is imperative that the corrective action process keep pace with the issues that are identified.

Think of the process as a lens.  In its initial deployment, we expect to find many issues.  The rules give us a broad view of our portfolio, our building, and our assets.  As issues are identified, prioritized, and corrected our focus becomes more concentrated.  Simply put, we move from looking at the low hanging fruit to searching for change in the couch.  If the process fails to correct the obvious, we’ll never find the change in the couch and our efforts will be stymied.  This is one of the primary purposes of the process; to “throttle” the amount of issues to a level that is consistent with that which the organization can handle from a staffing and/or budget availability standpoint.

The budget must provide for both the analytics solution and corrective action.  It is rather straightforward to establish a budget for implementing the analytics solution.  However, consideration must also be given to budgeting for continuous corrective action and the level of “throttling” that needs to take place to make the overall process sustainable.  Identifying more than can be corrected is of little value and could ultimately be counter-productive to the effort.

Current Condition

What is the current condition of the equipment and is there an active program for maintenance and improvements?  Once the analytics solution is implemented, what is it likely to find?  A building or portfolio of buildings whose equipment is well maintained and has a regular replacement cycle in place will likely result in fewer “major” issues discovered by the analytics solution. 

However, applying analytics to equipment that has not been properly maintained will likely result in significant findings that will likely include major repairs.  This needs to be considered when planning an analytics solution because the findings could be overwhelming.  This is not to say that it shouldn’t be done or that equipment that has not been maintained properly is not a good candidate for an analytics solution.  Quite to the contrary, these are excellent situations for analytics and the opportunity for meaningful results is significant. However, there needs to be a clear understanding that the problem wasn’t created overnight and it won’t be corrected overnight. 

Implementing analytics should be done with the understanding that analytics is not a discrete project.  Rather, it is a continuous process where issues are identified and corrected in a prioritized manner, within the limits of staff and budget.  When those tasks are completed, another level of issues are identified and addressed.  As each successive layer of issues is resolved, the process narrows its focus and moves to greater levels of detail, which continues to drive greater levels of efficiency and ultimately cost savings.  Keep in mind though there is no “silver bullet” to achieve success.  It’s an on-going commitment to continuous improvement.  

About Environmental Systems
ESI is a professional services firm providing building efficiency solutions. Our clients seek our expertise in helping them assemble the ideal solution that is aligned with the needs of their businesses. Through thought leadership and innovative services, ESI delivers the desired results our clients require.
Visit us at the IBCon event in Las Vegas, June 18 – 19, booth number 507.

About the Author
Paul Oswald is president of Environmental Systems, Inc (ESI).  Paul has over 30 years of experience in building automation, system integration and energy management. His experience includes product strategy and development, business and channel development, and services. 

About IBCon
IBcon is the largest gathering of authorities on the topic of open architected, interoperable and integrated IP centric smart, connected, high performance and intelligent buildings. IBcon focuses on ALL aspects of the "Intelligent Building", from automated HVAC, lighting and security, to new components such as digital signage, parking, fire/life safety, access control, command and control centers, grid connectivity, as well as the organizational changes required to facilitate the intelligent integration of key business processes into the high performance building ecosystem.


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