pwc greenbiz verge final april 20 2012

7/29/2019 Pwc Greenbiz Verge Final April 20 2012

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April 2012

At a glance

Industry is radicallyreframing how it canincrease productivity andimprove the efciency andstability of our vehicles,buildings, and electric grids.

Cities, campuses, andcorporations need tomanage energy use moreactively and in a more

aggregated way.

The rst step in navigatingthe opportunitiesforboth buyers and sellers ofproducts and servicesisto start from within.

Converging worldsFive management principles from

companies modernizing our vehicles,buildings, and electric grids


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2 Converging worlds

Nearly half of CEOs who participated inPwCs 15th Annual Global CEO Sur vey

are concerned about rising energy

costs.1 With good reason: Price forecasts

for all commodities are heading up,

and energy prices top the charts (see

Figure A). Energywhether in the

form of electricity, gas, oil, or fuelis

connected to a broad spectrum of other

business issues, too, including climate

change, natural resource constraints,

food prices, water availability, political

risk, and transportation challenges.

New products, serviceseven business modelsareemerging from companies working to modernize ourvehicles, buildings, and electric grids. These companies areenvisioning new ways to create value for their customersby looking at problems in a more aggregated way. In thisreport, they tell how they need to work differently with theircustomers, suppliers, and others to shape their futures asmarket conditions evolve.

1 PwC, PwCs 15th Annual Global CEO Survey, January 2012.

2 US Department o Energy, Transportation Energy Data Book 2011, June 2011.

3 US Department o Energy, Buildings Energy Data Book 2010, March 2011.

4 MIT Sloan Management Review and Boston Consulting Group, Sustainability Nears a Tipping Point, January 2012.

5 Texas Transportation Institute, Urban Mobility Report 2011, September 2011.

Its no small task to save oil and

energyfor the most part it requires

making vehicles and buildings

far more efcient than what we

know today. Together, vehicles

and buildings are among the most

signicant users of oil and energy

in the United States: Transportation

is responsible for 70% of petroleum

consumption,2 and buildings account

for 75% of electricity consumption.3

Growing concern about energy as a

long-term business risk is why most

companies want to take a more activerole in managing their own energy use.

Globally, about 70% of companies have

sustainability initiatives of varying

scopes in place, many with a conviction

that managing energy use is necessary

to remain competitive.4 For companies,

the task of becoming more energy

efcient is also tied to productivity

and environmental benetsbut

the energy efciency is the easiest to

quantify. An income-producing ofce

for an average company, for example,

spends about 30% of its operating

costs on energy, but a third of that cost

could be trimmed with commercially

available technologies and active

management.If that same company

delivers goods in an urban area, its

wasting an average of 22 days a year in

trafc congestion, part of a total of $2.3

billion a year in unwanted congestion

costs for US trucks.5 Technologies that

help avoid congestion, then, not only

make employees more efcient but can

have other economic benets too.


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3Converging worlds

Figure A. Key commodity prices are forecast to rise

Index, 2005 = 100

0

50

100

150

200

250

300

350

400

450

2034

2031

2028

2025

2022

2019

2016

2013

2010

2007

2004

2001

1998

1995

1992

1989

1986

1983

1980

Source: Oxford Economics

Raw materials prices

Metals prices

Food prices

Energy prices

Progressive companies are looking for

gains by tackling their transportation

and building energy use as one

larger issue rather than separate

ones. Theyre using technology

in a broad range of activities to

nd the best ways to reduce cost,

improve productivity, and minimize

environmental impacts, including:

Analyzing energy use for pricing and

sourcing options with the lowest cost

and the least environmental damage

Identifying which facilities should

produce their own energy supply

or manage their own water use

Tailoring logistics and eet

management to match the

needs of each type of route

and geographic region

Examining use of ofce space,

eets, and other assets to eliminate

waste and maximize utilization


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4 Converging worlds

precision energy-management tools

that analyze the energy use of each

building system and notify a control

center when HVAC, lighting, and data

centers arent working optimally.

And its not just the technologies

that are changing; business models

are, too. Some solar companies, for

example, are challenging conventionalbusiness models by leasing arrays

rather than selling them, as a way

to help customers manage up-front

capital requirements. Transportation

providers are investing in technologies

that promote car sharingtargeting

the market segments that cant or

wont buy cars or those who realize

their eets are sorely underutilized.

Such innovations reframe choices for

customers and, as a result, reframe

the competition, leading companies

to anticipate new types of threats.

While innovation means new

possibilities, it also means increased

complexity for building and vehicle eet

owners and operators who will nd

themselves faced with successive waves

of innovation. They will need to sort

through products, services, and business

models theyve never seen before.

Their providersthose who are

modernizing the electric system and

making cars, trucks, and buildings

several times more efcient than

they are todaysee the common

goal. They see far greater potential

for lower costs, greater productivity,

and greater environmental benets

by completely redesigning solutions.

Theyre reframing their partnershipnetworks and extending the roles

theyve traditionally played. When

it makes sense, theyre partnering,

mashing up technologies, and forming

new business models. Whats emerging

is an entirely new ecosystem where

energy, information, building, and

transportation technologies converge.

Technological evolution is at the heart

of this change. For example, to work

optimally, smart grids need smart

buildings, but the legacy systems inmost buildings arent up for the task.

They simply werent designed for it.

Now, cheap sensors that are making

these building systems smarter can

also connect building systems to

each other and to other buildings

somewhat like nodes in a network.

Tech-savvy providers are using

these sensors to create things like

While innovation means new possibilities, it alsomeans increased complexity for building and

vehicle eet owners and operators who will fndthemselves faced with successive waves of innovation.They will need to sort through products, services,and business models theyve never seen before.


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5Converging worlds

Energy

Renewableenergy

Distributedenergy

Smartgridtechnologies

Demandresponseandreal-time

electricitypricing

Information

Processorsandsensorsinmeters,

cars,roads,andbuildings

BigDatastorage,analytics,and

management

Automationcapabilitiesbuiltonthe

InternetofThings

Theres an entire ecosystem coming together aroundthe promise of lower costs, greater productivity,and greater environmental benefts

Whats changing?

Marketconditions

Technological

evolution

3.Industryprovidesthetools

tomanagecomplexsystems

andlinkthemtogether.When

synergiesexist,companies

partnerforgreaterbenets,

mashuptechnologies,andform

newbusinessmodels.

2.Marketsdriveadoption,and

combinationsofsolutionsare

tailoredtouniquesettings.

4.Innovationsaddgreater

benetsbutalsofargreater

complexitytobuildingand

eetenergymanagement.

1.Cheapandubiquitouscomputingand

communicationsenableconvergences

acrossenergy,IT,building,and

transportationsystems.

Technology

and business

model

innovation

Deployment

and use

Building

Certiedgreenbuildings

Buildingenergymanagement

Demandresponseandreal-time

electricitypricing

Spaceutilizationandsharing

Transportation

Intelligenttransportationsystems

Congestionandroad-charging

systems

Smartandconnectedvehicles

Alternative-fuelvehicles

Carsharing

What are customers looking for?

Customersarelookingforanewtypeofvaluecreationwheresolutions

canbecustomized,linkedtogether,orcombinedforgreaterresults.


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6 Converging worlds

Technological evolution is changing the

very nature of how energy, information,

buildings, and transportation are

procured and managed. For example:

Distributed energy generation is

becoming cheaper and cleaner.

Smart grids enable two-way

conversations with companies

and their utilities for real-timepricing. And energy will become

easier to store, which may also

change how its bought and sold.

Vehicles and buildings are

becoming part of a vast Internet of

Things, in which any device can be

addressed, monitored, controlled,

and optimized. Data can be opened

to third parties, allowing for

aggregation, analysis, and reuse.

Building operators are able to

harness rich data streams thathelp them optimize energy

and resource use, enhance

comfort and productivity, and

improve utilization rates.

Smart and connected vehicles know

where they can park, avoid trafc

jams, or rent themselves out to other

drivers or riders. Electric vehicles

connect to the grid or to buildings

either of which could be designed

to draw on a vehicles battery in

ways that improve distributionand management of power.

As a result, both the nature of the

products and services companies

offer and how they operate and

interact with suppliers, customers,

and others will need to evolve.

How quickly will companies and

their customers see real implications

from these trends? If youre trying

to replace the volume of coal-redpower plants and natural-gas-red

power plants, youre talking about long

time frames, says Stephan Dolezalek,

managing director of CleanTech at

VantagePoint Capital Partners. But

if youre talking about using existing

systems to manage energy more

efciently, you may move much more

rapidly than people would think.

As with previous convergences

enabled by technology, this one

will require making organizational

changes, bridging functional silos,

and adopting different ways of

thinking. We need to think about

organizational structure if were really

going to embrace transformation,

says David Bartlett, vice president of

industry solutions at IBM. Its never

just about the technology; its about

how we can step up to adopting it.

I look at some of the innovations out there, and Ijust think its kind of mind-boggling whats goingto happen. The possibilities are vast, and thecombinations, exponential.

Carl Bass, Autodesk


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7Converging worlds

Increasingly, the marketplace and the customers arelooking for a new type of value creation, which is Id

prefer not to deal with the complications of all thoseelements of the ecosystem. Help me string it together.Optimize it for me, and make it easier for me to accessthat value.

Mark Vachon, GE

Customers arelooking for anew type of valuecreationTo nd out more about how

companies are working differently

to understand and shape their

futures, PwC and GreenBiz selected

a panel of leaders from 15 companies

with a stake in the four domains

showing the greatest potential for

convergences: energy, information,

buildings, and transportation.

We found common insights from

our panel that we believe are useful

to all companies as they work to

understand their opportunities.

The panel told us how todays

circumstances are acceleratingchange and requiring them to work

differently. These companies

1. Think systemically to capture

technology and market shifts

2. Set a clear vision but prepare

for multiple futures

3. Widen the circle of innovation

and speed up the cycles

4. Look for opportunity in

underutilized assets

5. Harness the value of Big Data

Their goal is to build organizational

capabilities that bring returns to

the business no matter how (or howquickly) technologies evolve.

We believe their insights should be of

interest to any business leader who

wants to reduce costs, mitigate risks,

or contribute to overall protability

of the businessall while improving

environmental outcomes. For those

focused on mitigating risks or reducing

costs in company operations, we

hope youll see new ways of thinking

about your business, assets, and

partnerships. For those seeking tocreate new revenue opportunities, we

hope youll be inspired as you envision

your future and the capabilities youll

need to achieve your objectives.

The sections that follow summarize

our panels insights.


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8 Converging worlds

Whether your company is building

a new city, creating a transportation

network, or changing your operations

to reduce energy and waste, an

integrative view can help you ensure

youre actually solving a problem,

not creating a new or bigger one.

All of our panelists are working on

innovative technologies, such aselectric-vehicle charging systems,

building analytics systems, or

intelligent energy metering devices. But

theyre also working on large cross-

sector issues like modernizing the

electric grid, tackling trafc gridlock,

or building sustainable megacities,

thinking that is supported by a market

demand for smarter infrastructures

(see Figure C). Taking an integrative

approach allows them to move beyond

individual products and services

and to examine how a systems partsinuence one another and the whole.

Cisco explains how this way of thinking

led to a co-creation process in the

development of a Korean greeneld city,

New Songdo City. One of the projects

requirements was that the city produce

one-third less greenhouse gas emissions

than a typical city its size. The idea

was to engage new actors in the city

planning process from the get-go,

says Gordon Feller, Internet Business

Solutions Group at Cisco. This included

national government, local government,

citizen organizations, technology

companies, private developers, and

public agencies that were established

in the economic free zone. So we

expanded the circle of partners and,in the process, were able to identify

some breakthrough innovations.

Cisco has staked its role in this

ecosystem on owning the urban

operating system. This assumes the

growing viability of a cities-as-a-

service approach, which is maturing

alongside mobility-as-a-service and

other business models that monetize

service delivery alongside product

sales. It also depends on integrating the

products and services and know-howof a wide range of partners. Its a

radically new model for city managers

and the companies (like Cisco) that

sell to them. But it also forms the

basis of Ciscos strategy; its this kind

of repositioning that is helping Cisco

understand its role and dene it further.

1.Think systemically tocapture technologyand market shifts


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9Converging worlds

We see convergence as being literally the starting point and the end point,primarily because we think thats where our customers are headed, and we wantto be as responsive as possible to their demands. And one of their demands is:

Break down the silos; bust the barriers.

Gordon Feller, Cisco

Figure B. A market shift toward smart infrastructure development

Smart city smart inrastructure investment by industry, world markets: 2010-2020,in $ Billions

Source: Pike Research

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

20202019201820172016201520142013201220112010

Smart building

Smart transport

Smart utilities

Smart government

US$

Billions


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10 Converging worlds

In addition to thinking more

systemically, companies are taking

a longer-term view, creating one or

more scenarios about where and how

markets will change and about the

opportunities. Without a long-term

view of where things are going and

where you want them to go, I think

its going to be very hard to end up

really playing a central role in anyof this, says Bill Weihl, manager of

energy efciency and sustainability at

Facebook. The social media company

has been a leader in data center energy

efciency as well as in encouraging

collaboration and transparency around

solutions for data center energy use.

Once companies have a vision in

mind, the business case for taking

innovations to scale or to maturity

becomes clearer. Boeing, for example,

sees an opportunity to play a role inthe utility space by working with the

US Department of Defense to address

its growing energy concerns both in

xed military bases and in the eld.

We crafted a strategy focused on

leveraging things we do and things

we ownparticularly approaches

that provide command and control

to lots of objects inside a large

network, like a smart grid, says Tim

Noonan of Phantom Works Ventures

and Boeing Energy at Boeing.

Through a series of grants from the

American Recovery and Reinvestment

Act of 2009 (ARR A), as well as related

projects and company investment,

Boeing slowly began to develop an

energy strategy that it is working to

implement today. Weve explored a

number of areas that we think have

a lot of potential, Noonan says. Not

all of them are going to pay off, but

I think we placed some good bets

across generation, transmission,

distribution, storage, and carboncapture that have strong upside for us

both strategically and nancially.

2.Set a clear visionbut prepare formultiple futures


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11Converging worlds

Facilities and fleets

Whether its residential orcommercial, theres a

constellation of newtechnologies for energyefficiency, generation, anddemand response ready toconnect systems like HVACand lighting to the energy gridand communications network.The second piece is connectinggrid appliances, like theelectric vehicle to the facility.

Command & control center

Business customers, partners,and suppliers along the valuechain

Large corporations and theirnetwork of suppliers already

manage fleets and facilities in arange of operatingenvironments. Whats new hereis learning how data canaccelerate innovation cycles.

Institutional andcommercial campuses

Corporate campuses, collegesand military bases will gain

more by taking a holistic viewof possible technologies toconnect and control criticalsystems. While a facility-by-facility approach couldmake sense, portfoliomanagement can present moreoptions for successive waves ofinnovation.

Cities and public works

Cities and regions are formingpublic-private organizations to

manage entire portfolios ofprojects, many of which tackletraffic congestion, reliable andaffordable electricity, and asmarter, greener urban livingexperience.

Whats your companys role and the visionfor your future?

When you look at what Henry Ford did with the ModelT, it opened up the highways for people. But our newmodel has to be a different model, and that differentmodel has to address mobility challenges.

John Viera, Ford


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As part of their growth strategies,

companies are identifying new

opportunities to take advantage of

their existing assets and expertise for

innovation; but theyre also looking

to nontraditional and unexpected

sources to enhance what they already

have to offer. Youve got to make

money at the end of the day, says Mark

Vann of the Advanced TechnologyGovernment Business Development

group at General Motors. You need

to nd partners where there are

synergies, where a group of us together

can cost-justify making a leap in

an investment or a technology.

Companies we spoke with identify

three types of collaboration that

are fostering their innovation. The

collaborations could be to build or

manage electric grids, construct or

operate smart buildings, design ormanage cities infrastructures, provide

integrated and adaptive transportation

services, manage distributed and

diverse energy systems, or more.

Customers. First, companies are

working more closely than ever

with their customers to identify new

opportunities to address their needs

over the short and medium terms.

While customers are looking for

ways to succeed in an increasingly

dynamic marketplace, theyre waryof companies that bring a one-size-

ts-all, plug-and-play solution to the

table. Forming close partnerships

to seek innovative, exible, yet

tailored solutions can overcome

such obstacles. I think theres

nothing that our clients distrust

more than someone coming to them

with the solution, because we dont

know what the solution is going

to be, says David Pogue, national

director of sustainability at CBRE.

We need to work with them on the

opportunities, and together we needto determine the best solutions.

Internal. Second, theyre

encouraging internal cross-

functional collaborations to nd

fresh perspectives. Sometimes

it involves technological cross-

pollination. General Electric, for

example, leveraged aerospace

engineering from its aviation

business, as well as materials

science and mechanical engineering

expertise from across the companyto become the leading US wind

turbine manufacturer. But

technology solutions alone arent

always sufcient, so companies

are reaching into other parts of

their businesses to nd expertise

on such things as customer service

or marketing. What were doing,

of course, is expanding the circle

beyond the engineers to people

who are trained in other elds

and who are also great sources of

innovation, says Ciscos Feller.

3.Widen the circleof innovation and

speed up the cycles


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13Converging worlds

External. Finally, theyre looking

to other players in their industries

or in adjacent industries to take

a broader, multidisciplinary

approach to specic customer

issues. At Microsoft, for example,

this is creating new opportunities

to work with utility and energy

industry partners. All of these

folks are really deep energy expertswho are now nding themselves

in the software solution business

at a level they never have been

in before, says Rob Bernard,

chief environmental strategist at

Microsoft. And thats where the

partnership and the synergy come

inbecause were not a solutions

company in the energy space. So

it creates the opportunity and the

conditions for a partnership.

Where have we seenconvergences like this before?

We have seen technology convergences before, and those that have preceded

may be instructive to understanding the business implications of todays

convergence. VantagePoint Capital Partners Stephan Dolezalekprovides

this perspective.

In the development of information technologies, we started with a

mainframe computer that pushed information to a dumb terminal. We then

migrated to ever-smaller, more-powerful microcomputing platforms that

distributed computing power, reducing the need for those mainframes. But

then we discovered that we wanted to reconnect things, which ultimately

led to the development of the Internet. Now, weve come full circle, with

massive numbers of devices talking to central computers in the cloud.

That piece, I think, represents the ultimate possibility for our physical

infrastructure. As cities and companies start thinking about managing

complex systems and acquire the tools that connect the systems together

and manage distribution of power, they can do it on a building level or acommunity level and suddenly theyre efciently managing electron ows,

temperature, comfort levels, lightingbasically, the human experience.

Information technology continues to get bound ever more deeply into

the Internet of Things. Today we have one Internet where we want very

active involvement, control, and constant interaction. There will be a

second layered Internet, where we want to minimize our interaction, as

systems handle things automatically and provide us with the best user

experience but do so in the background. The management of lighting,

transport, and energy will be background managed through business

services. If it can do what I need it to, without my having to interfere,

thats ultimately how energy and transport will be delivered to us.

As big incumbents try to move into that future, some of them will

be able to capture the new technology and integrate it and others

will be left behind. The only possible way that an incumbent can

deal with this is to change from within by embracing it or just

acknowledge that failure to change is, in almost every part of the

global economy today, something thats sure to lead to certain death.


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We see this process of opening the system as actuallyaccelerating the path to innovation.

Gordon Feller, Cisco

6 PwC, PwCs 14th Annual Global CEO Survey, January 2011.

Across the board, companies are

seeing their need for partnerships

swell. The larger the scale of these

kinds of projects, the greater the

number of players, says Clay Nesler,

vice president of Global Energy &

Sustainability at Johnson Controls.

But a larger network of partners doesnt

have to mean the process slows down.In fact, many companies say theyre able

to accelerate the process of innovation

through collaborations that leverage

partners expertise efciently.

I would say the velocity of work

has increased quite a bit, says Mary

Beth Stanek, director of Federal

Environmental & Energy Regulatory

Affairs at General Motors. You

have more groups working faster on

advanced-technology collaboration

so we can get to the market quickly.

If you look at the Chevy Volt timing

from inception to launch, it was

probably one of the fastest vehicle

launches weve ever done.

Conditions are driving companies

to look for opportunities to jointogetherto go to market with arms

linked. Its about companies using

their combined capabilities to provide

greater benets for their customers

than if each went it alone. This is a

broad trend seen across all industries

and echoed in other research. Forty

percent of global CEOs now expect the

majority of innovation in the future

will be co-developed in collaborative

networks outside their organizations.6

Our panelists said that both internal

and external stakeholders are

important partners in designing new

strategies and ensuring their success.

You have to be exible with regard to

these types of partnership structures,

says Mark Vachon, vice president of

ecomagination at GE. Weve focused

not only on expanding the sources of

innovation and technology but also

on how we scale and commercialize

the ideas weve partnered on.

40%of global CEOs now expect the

majority of innovation in the

future will be co-developed

in collaborative networks

outside their organizations.


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15Converging worlds

Market acceleration ledby governments

Business expects governments

to be among the largest

customers for clean,

smart, and green solutions

because of the need forinfrastructure improvements.

The worlds infrastructure

investment needs for energy,

road and rail transport,

telecommunications,

and water are likely to

average 3.5% of world

gross domestic product

through 2030, or about US$71 trillion, OECD says.7 In some cases, the

private sector will lead infrastructure projects, through public and

private partnerships, as it has in the buildout of telecommunications

networks in both developed and developing countries.

Around the world, government-supported drives are laying the

groundwork for smart infrastructures, with investments in the

modernization of electricity grids. Smart-grid investment in

China will reach at least US$96 billion by 2020, as part of that

countrys long-term stimulus plan.8 In the United States, US$4.5

billion was allocated to smart-grid initiatives under ARRA.

Large stimulus efforts have been accompanied by an array of

federal and subnational government programs providing incentives

designed to promote market acceleration, including:

Production tax credits

Cash grants and loans in lieu of tax credits

Renewable-energy standards

Regional cap-and-trade programs

Feed-in tariffs

Fuel efciency standards

Commercial benchmarking laws for energy use

Guidelines that allow interval data from utilities to be open source and

available to third parties

Guidelines for privacy and data security of interval data

To accelerate change, industry working groups are working closely

with government agencies on a wide range of industry standards

that dene the boundaries for collaboration and competition.

7 OECD, Inrastructure To 2030: Telecom, Land Transport, Water and Electricity, Volume 2, August 2007

and PwC, 10Minutes on Global Inrastructure, March 2010.

8 International Energy Agency, Technology Roadmap: Smart Grids, 2011.

$71TInvestment needed toimprove basic infrastructurethrough 2030


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Entrepreneurs in both incumbent

and start-up companies are looking

for opportunities to identify and

manage underutilized assets or to

create products and services that

optimize others underutilized assets.

Over the past few decades,

information technology companies

have turned to utilization to boostdata center efciency, create faster

processors, and more. Todays

innovators look for opportunities

where utilization can either reduce

cost, increase revenue or both.

For example, in 2010, unused capacity

on Amazons servers led the company

to introduce its popular EC2 cloud

offering, turning underutilized

assets into a new revenue stream.

Since EC2s release, revenue jumped

from $240 million in the third

quarter of 2010 to $470 million

in the third quarter of 2011.9

9 Andrew Hickey, Amazons Q3 Cloud Revenue Skyrockets,CNN, October 2011.

10 Cisco, European City Connects Citizens and Businesses or Economic Growth, October 2011.

In another example, the city of

Amsterdam reduced the physical

amount of ofce space it leases by 40%

through a partnership with Cisco. The

city now boasts modern and up-to-date

work solutions, such as encouraging

and enabling telecommuting, and

creating exible, shared workspaces.

All told, the initiative is saving

the city 10 million annually.10

Vehicle-sharing models take asset

utilization to another level. Fleets

of cars, bicycles, trucks, and other

vehicles are available by the hour for

individual use and are conveniently

located throughout a community,

campus, or city. While car sharing

started with community member-

based services, the concept has broad

potential to change how cities, colleges,

and corporations manage and maintain

eets. Vehicle owners see radicallyhigher utilization and potential

revenue, and users have new choices

for how they use transportation.

4.Look for opportunityin underutilizedassets


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17Converging worlds

Market barriers mean no easy entry

Finding the right economic model has been elusive in

many smart, clean, and green ventures. Even when the

economics make sense on paper, there is a mentality

that needs to change, and its often hard to convince

buyers that they should be the ones to go rst.

Existing public policies and market structures can act as

disincentives for change: most policies were designed for

systems to work as they do now, not how they could in the

future. We found broad recognition among our panelists

that the right market incentives are

critical to reducing commercial risk

so they can take new ideas to scale.

For example, US commercial

buildings waste about a third of

the energy they consume, but there

are few incentives for building

owners to improve them. Typically,

leases are written so that tenants

are responsible for utility costs,

while landlords are responsible

for capital costs related to energy

systems, such as HVAC maintenance or on-site generation.

Because, in effect, the landlord pays for the project but the

tenants receive the benets, the landlord has no nancial

incentive for making efciency improvements. Thats

one of the countertrends right now to buildings becoming

smarter and more energy efcientthe investment

realities in the marketplace arent supporting it, says Bob

Best, executive vice president of Jones Lang LaSalle.

The commercial building market isnt the only place these

problems exist. In the utility business, existing policies

and rate structures typically discourage power providers

from supporting energy-efciency effortsat least

on any meaningful scale. In other casese.g., vehicle

efciency standards or pricing and policies for on-site

solartechnology has also changed faster than policy.

The picture is slowly changing, as companies seek

opportunities to work with regulators and competitors

to craft policies that support innovation and incentivize

efciency industrywide. For example, when FedEx wanted

to spur the development of

electric-vehicle technologies for

the tens of thousands of trucks

it runs every day, it lobbied

to raise federal fuel economy

standards. By doing so, it gave

technology and manufacturing

companies a stronger incentive

to develop and deploy efcient,

electric-vehicle technologies.

And when FedEx worked with

Environmental Defense Fund

on hybrid-electric vehicle

development for commercial trucks, it made the

project non-proprietary to promote innovation and

collaboration among manufacturers and operators to

encourage widespread adoption. Using hybrid-electric

and all-electric vehicles for light delivery is just one

component of FedExs corporate strategy to reduce the

use of petroleum; theres another strategy for its heavy

trucks and a third for its 700 planes. The company

has improved energy efciency every year since 2005,

with a 15.1% improvement through scal year 2010.

Existing publicpolicies and marketstructures canact as disincentives

for change.


18/24


One of the natural consequences of

placing sensors throughout buildings,

in vehicles, and within energy systems

is the very large amounts of detailed

data theses sensors generate. But

were only beginning to see how this

tsunami of data fosters new innovation.

Saul Zambrano of Pacic Gas and

Electric Companys Customer Energy

Solutions group sees potential. Theenhanced capability and the data sets

that underlie it really are creating this

new innovation cycle around smarter

grids and smarter buildings, he says.

This explosion of information,

commonly referred to as Big Data,

is ushering in a new type of analytics

that enables management to make

decisions with a precision comparable

to scientic insight. The newest

analytic methods use rigorous scientic

techniques, including hypothesisformation and testing, statistical

sampling, and visualization tools.

Data analytics can turn the invisible

into the visible when partners come

together to make sense of the data.

IBM talks about an early facilities

management implementation, which

made use of 10,000 data sources to

provide a robust picture of a facilitys

operations. The value, however,

came from applying the customers

knowledge about priorities and needsalongside IBMs analysis tools to provide

actionable information about how to

optimize the facilitys operations.

We provided the IT constructs, but

the facilities team was key in providing

the experience and what type of rules

made sense, says IBMs Bartlett. I

guess what they didnt realize was

the capability of IT to give them a

command view, to give them visibility

and automation that they hadnt had

before. So, theyre seeing the potential

for new energy savings as a result.

Data analytics can also provide

insight into new products and services

customers need. For CBRE, the

opportunity lies in tapping into large

data sets across its customers. If I

have all of the data for one client who

owns 30 buildings in a portfolio, maybe

then I can do a commodity buy for the

energy for those buildings, says Pogue

of CBRE. Right now, owners think of

individual buildings, but what we want

to do is begin to view the managementand benets in a more aggregated way.

The potential for companies to use

data more effectively can transform

not only the products and services

companies provide, but also how those

companies organize to respond to

business goals and customer need. As

Zambrano says, Historically, utilities

were very silo structured. Analysis of

the data thats coming in is effectively

going to require a shift in capability

around horizontal management, andso, its part of the business change.

5.Harness thevalue of Big Data


19/24

19Converging worlds

11 Marc Gunther, Why GM is working with car-sharing frm RelayRides,GreenBiz.com, March 2012.

Is your strategyt for the future?At the heart of convergences among

energy, information, building, and

transportation technologies is the

potential for far greater economic and

environmental benets than weve

seen before. Convergence represents

an opportunity to dene the direction

of industry by harnessing the power of

both technology change and business

model innovation. In fact, innovation

does not focus exclusively on new

technology. Developing new business

models and new strategies is every

bit as importantsometimes more.

GM is just one company embracing

the idea that both technology change

and business model innovation must

work side by side to create the future

of the organization. Today, GM isrst and foremostin the business of

selling as many cars as it can. But it is

also testing a car-sharing model that

leverages its existing OnStar system;

GM vehicle owners will soon be able

to use OnStar to rent out their cars.11

Figure C. Radical ideas rely on a combination of technology

change and business model innovation

Source: Davila, Epstein, and Shelton, Making Innovation Work: How to Manage It,

Measure It, and Proft rom It, August 2005.

Breakthrough ideasGame changers

Breakthrough ideasGame changers

Radical ideasNew businesses

Incremental ideasProtect/improve

existing

New

Closetoexisting

Close to existing

New

Technologychange

Business model change

If I have all of the data for one client who owns 30 buildings in a portfolio, maybethen I can do a commodity buy for the energy for those buildings. Right now,owners think of individual buildings, but what we want to do is begin to view themanagement and benefts in a more aggregated way.

David Pogue, CBRE


20/24


For companies that buy, own, oroperate buildings and eets

Nearly every company has at least one facility, with

its attendant energy, water, and resource needs. And

most depend on transportation networks to deliver

employees to their ofces, if not also to deliver products

and services to the market. Therefore, companies

ability to functionand to do so protablydepends

on these systems and how efciently they run.

What should you do now?

Determine the level of signicance energy spending is to

your business and whether your organization is prepared

to see the larger potential benets for your specic needs

and circumstances. Buyers, owners, and operators of

buildings and eets can consider the following questions:

Are the people who perform transportation, IT, and

facilities management functions at your company

up-to-date on these trends? What opportunities

do they have to reduce business costs or improve

efciency in light of new developments?

Have you considered what types of new skills your

company will need? Are you supporting growth for

your people in roles (such as building engineers or

energy managers) that need to evolve or expand?

How well do space planning and utilization

metrics match your talent strategies? You might

be sitting on space you dont really need.

Have you evaluated options to buy energy in different

ways? Are you talking to current and potential

new service providers about those options?

Taking action

We see very different opportunities for buyers and sellersof energy, building, transportation, and informationtechnology solutions. Here are some things to think about,based on where you think your biggest opportunities are.


21/24

21Converging worlds

For providers, incumbents,and new market players

Customers will help drive your new view of value creation,

if youre prepared to listen. Mark Vachon of GE put it this

way: Its about listening to what trends are out there,

and reverse engineering that capability back into the

business. And so if youre really listening these days,

youre hearing a lot more around I need a solution. I

need you to be part of solving my broader problem.

Meeting customer demands to solve broader problems

and bring innovative solutions to the table requires

companies to engage simultaneously in collaboration

and competitionwhat some call co-opetition.12

In highly fragmented or immature markets, innovation

skills and entry points will sort out who does what bestnot

unlike what weve seen in other sectors where digital and

mobile technologies have initiated structural change.

What should you do now?

A structured approach to identifying and capturing valuefor your company begins with a few simple questions:

What is your corporate view of this landscapehow

energy, information, buildings, and transportation services

are meshing together? Whats your companys role in it all?

Do you feel your organizations innovation capabilities

are a match for the nature of change in this space?

Do you feel your marketing and sales approach is

succeeding where smart, clean or green attributes

should be part of the sales process?

Are you comfortable that you are collaborating with theright network and identifying the right future partners?

Providers have phenomenal opportunities ahead as they come

to understand and then shape their futures. Yet as Ciscos

12 Eric Bloom, In Smart Buildings, Co-opetition Is on the Rise,Pike Research Blog, February 2012.

Get more in personand online

GreenBiz Group is engaging the business

community on ways to accelerate convergence

and reduce commercial risk for both users

and providers of clean, smart, and green

technologies. Join us in a series of GreenBiz

VERGE events and online discussions.

To participate, see:www.greenbiz.com/verge

Feller, puts it: Simply because you see the convergence

doesnt mean youre equipped and capable to deal with it.

Indeed, every companyno matter the motivation to

actshould be looking beyond the technology changes

and preparing itself organizationally to stay t for

the future, ready to adapt as conditions change.
http://www.greenbiz.com/vergehttp://www.greenbiz.com/vergehttp://www.greenbiz.com/verge


22/24


David Bartlett

Vice President of Industry SolutionsIBM

Carl Bass

President and CEOAutodesk

Rob Bernard

Chief Environmental StrategistMicrosoft Corporation

Bob Best

Executive Vice President, Energy

& Sustainability Services

Jones Lang LaSalle

Stephan Dolezalek

Managing Director, CleanTech

VantagePoint Capital Partners

Gordon Feller

Internet Business Solutions GroupPublic Sector Practice

Cisco Systems

Dave Gralnik

Senior Vice President, Renewable

Energy Services

Jones Lang LaSalle

Mitch Jackson

Vice President

Environmental Affairs & SustainabilityFedEx

Joe Mercurio

Manager of Government & Military Fuel

Cells & Electric Vehicle Programs

General Motors

Clay Nesler

Vice President, Global Energy& Sustainability

Johnson Controls

Tim NoonanVice President, Phantom Works

Ventures and Boeing Energy

Boeing

David Pogue

National Director of Sustainability

CBRE

Mary Beth Stanek

Director of Federal Environmental

& Energy Regulatory AffairsGeneral Motors

Mark Vachon

Vice President, ecomagination

General Electric

PwC and GreenBiz Group

Advisory

Joel Makower, Chairman and Executive Editor, GreenBiz Group

Clinton Moloney, US Sustainable Business Solutions, PwCDon Reed, US Sustainable Business Solutions, PwCRob Shelton, US Growth & Innovation, PwC

Editorial, writing, design, and production

Eric Faurot, President and Chief Strategist, GreenBiz Group

Peggy Fresenburgand Judy Traveny, US Studio, PwCDee Hildy, US Thought Leadership, PwCCeleste LeCompte, ContributorDerek Top, Senior Editor and Program Director for VERGE, GreenBiz Group

Acknowledgments

During the preparation of this publication, we beneted greatly from

interviews and conversations with the following executives.

Mark Vann

Manager of Advanced TechnologyGovernment Business Development

General Motors

John Viera

Global Director, Sustainability and

Vehicle Environmental Matters

Ford Motor Company

Bill Weihl*

Manager of Energy Efciency

and SustainabilityFacebook

Saul Zambrano

Senior Director, Products, CustomerEnergy Solutions

Pacic Gas and Electric Company

*This interview was conducted in December 2011, beore Bil l joined Facebook.


23/24

23Converging worlds


24/24

www.pwc.com/us/sustainability

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Sustainable Business Solutions,

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[email protected]

Brian Carey

US Advisory Cleantech Leader

(408) 817 7807

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US Sustainable Business Solutions

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Don Reed

US Sustainable Business Solutions(617) 530 4403

[email protected]

Rob Shelton

US Growth & Innovation

(408) 817 [email protected]

To have a conversation

about how we can help your

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through effective sustainability

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pwc greenbiz verge final april 20 2012

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