{"id":20325,"date":"2016-11-18T17:50:39","date_gmt":"2016-11-18T22:50:39","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/internet-of-commercial-buildings-changes-at-johnson-controls\/"},"modified":"2016-11-18T17:50:39","modified_gmt":"2016-11-18T22:50:39","slug":"internet-of-commercial-buildings-changes-at-johnson-controls","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/internet-of-commercial-buildings-changes-at-johnson-controls\/","title":{"rendered":"Internet of Commercial Buildings: Changes at Johnson Controls"},"content":{"rendered":"<p>Founded by the inventor of the first thermostat in 1885, Johnson Controls has grown into a $38bn diversified industrial and technology company [1]. Johnson Controls\u2019 Buildings division provides services and products for commercial building heating, ventilation, air conditioning (HVAC) and fire and security needs [2].<\/p>\n<p>Within this division, the company\u2019s traditional business model has been focused around the lifecycle of a building [3]:<\/p>\n<p><a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-17-at-10.47.57-PM.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignright size-medium wp-image-20315\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-17-at-10.47.57-PM-300x293.png\" alt=\"screen-shot-2016-11-17-at-10-47-57-pm\" width=\"300\" height=\"293\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-17-at-10.47.57-PM-300x293.png 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-17-at-10.47.57-PM-600x586.png 600w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-17-at-10.47.57-PM.png 688w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<ul>\n<li>Plan and design \u2013 assist engineers in creating specifications for a new building\u2019s HVAC and security systems<\/li>\n<li>Construct \u2013 deliver and install specified products at the right time during a new building\u2019s construction process<\/li>\n<li>Operate and maintain \u2013 assist building operators in ensuring their HVAC and security systems run smoothly<\/li>\n<li>Retrofit and replace \u2013 update and refresh an aging building\u2019s HVAC and security systems<\/li>\n<\/ul>\n<p>To deliver on these four elements of the company\u2019s business model, the company\u2019s operating model has been focused on product development, engineering services, product manufacturing, and maintenance and replacement services.<\/p>\n<p>With the advent of digital technology and the adoption of low cost distributed computing, internet, cloud, and mobile platforms, Johnson Controls has adapted both its business and operating models in several ways. I will highlight one successful change \u2013 remote building monitoring and management \u2013 as well as one failed change \u2013 the cloud-based building management community platform for innovation.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Remote Building Monitoring and Management<\/strong><\/p>\n<p>A major innovation in the buildings industry came in the 1990s when Johnson Controls introduced the Metasys building automation system (BAS) which automated control of HVAC, security, fire, and lighting equipment based on pre-set parameters. The following decade, this same equipment were equipped with processing units that recorded performance data and linked to the BAS system, which was equipped with internet connectivity for transmission of these data [4].<\/p>\n<p>This led to a variety of changes in the company\u2019s business and operating models. Johnson Controls product engineers were now able to access performance data for critical HVAC equipment such as chillers (commercial-scale heaters and air conditioners) and could analyze these data to better understand the conditions under which the equipment operated optimally, as well as the causes of equipment failure. The company could then take these insights and feed them back into the product development process to develop longer lasting and higher efficiency products. The service arm of the company could use these insights to sell customers predictive maintenance contracts rather than preventive maintenance contracts, significantly reducing cost and unexpected system downtime [5]. In many cases, buildings operated a patchwork of HVAC equipment and building systems, and, using these performance data, Johnson Controls engineers could also teach building designers and operators how to optimize the interaction between these systems in a building [6] [7].<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Platform for Innovation in Building Management<\/strong><\/p>\n<p>Buildings account for 40% of energy usage in the US, presenting a major opportunity for carbon footprint reduction through energy efficiency improvement [8]. In order to accelerate this, the building design, construction, and operation industries will need to increase the pace of innovation in their business models. In 2011, Johnson Controls introduced \u201cPanoptix,\u201d a cloud-based platform that sought to consolidate data from disparate building systems (e.g., building automation systems (BAS), smart grids, security systems) and enable applications to use that data to monitor and manage building operations. The platform was intended to be equipment OEM agnostic, be open to 3<sup>rd<\/sup> party developers, and include community elements for building managers and experts to interact and share knowledge. Upon its introduction, Panoptix was heralded by analysts across sectors as a radical innovation in the buildings industry [9].<\/p>\n<p>By 2015, however, the platform was shut down and the offering removed from the company\u2019s product portfolio [10], due to challenges of creating a true platform environment. Observers report the root cause to be a failure to evangelize the platform and the opportunities it generated to 3<sup>rd<\/sup> party application developers [11]. Another root cause may be the potential tension between the risk of Johnson Controls disintermediating their own BAS product and ceding control over customers\u2019 buildings to 3<sup>rd<\/sup> party app developers. Other system OEMs may have held similar views, actively resisting the release of data from their systems to be used in the platform, thereby limiting the opportunity for network effects to expand the value of the platform.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Looking Forward<\/strong><\/p>\n<p>Regardless of the cause, the future of innovation for Johnson Controls Buildings division lies in this sort of platform technology and the effective cultivation of a community of application and service providers who cooperate for rapid innovation. This fact is borne out by other competitors in the industry investing in products similar to Panoptix, such as Schneider Electric&#8217;s EcoStruxure platform [12]. Effectively capitalizing on this opportunity will require Johnson Controls and other industry players to adjust their operating models to focus on building world class platforms, while mitigating risks of disintermediation in their other business models.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>799 words.<\/strong><\/p>\n<p><strong>\u00a0<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>[1] Johnson Controls, \u201cAbout Us,\u201d [http:\/\/www.johnsoncontrols.com\/about-us\/our-company], accessed November 2016.<\/p>\n<p>[2] Johnson Controls, \u201cGlobal Capabilities,\u201d [http:\/\/www.johnsoncontrols.com\/global-capabilities\/buildings], accessed November 2016.<\/p>\n<p>[3] Johnson Controls, \u201cBuilding Wide Systems Integration: Powered by Brains,\u201d [http:\/\/www.johnsoncontrols.com\/-\/media\/jci\/insights\/2015\/be\/files\/be_wp_poweredbybrains.pdf], accessed November 2016.<\/p>\n<p>[4] Johnson Controls, \u201cMetasys Building Automation System,\u201d [http:\/\/www.johnsoncontrols.com\/buildings\/building-management\/building-automation-systems-bas], accessed November 2016.<\/p>\n<p>[5] Johnson Controls, \u201cSmart Connected Chillers,\u201d [http:\/\/www.johnsoncontrols.com\/buildings\/specialty-pages\/connected-chillers], accessed November 2016.<\/p>\n<p>[6] Johnson Controls, \u201cBuilding Wide Systems Integration: Powered by Brains,\u201d [http:\/\/www.johnsoncontrols.com\/-\/media\/jci\/insights\/2015\/be\/files\/be_wp_poweredbybrains.pdf], accessed November 2016.<\/p>\n<p>[7] Johnson Controls, \u201cCentral Chiller Plant Optimization,\u201d [http:\/\/www.johnsoncontrols.com\/buildings\/services-and-support\/optimization-and-retrofit-services\/central-plant-optimization], accessed November 2016.<\/p>\n<p>[8] US Energy Information Administration, \u201cFrequently Asked Questions,\u201d [http:\/\/www.eia.gov\/tools\/faqs\/faq.cfm?id=86&amp;t=1], accessed November 2016.<\/p>\n<p>[9] Bloom, Eric, et al, \u201cSmart Buildings: Ten Trends to Watch in 2012 and Beyond,\u201d Pike Research, 2Q 2012.<\/p>\n<p>[10] Johnson Controls, \u201cPioneering the Internet of Things in Buildings,\u201d [http:\/\/www.johnsoncontrols.com\/buildings\/specialty-pages\/iot], accessed November 2016.<\/p>\n<p>[11] Van Alstyne, Marshall W., et al, \u201c6 Reasons Platforms Fail,\u201d 性视界 Business Review, March 31, 2016, [https:\/\/hbr.org\/2016\/03\/6-reasons-platforms-fail], accessed November 2016.<\/p>\n<p>[12] Schneider Electric, \u201cThe EcoStruxture Platform,\u201d [http:\/\/www.schneider-electric.com\/b2b\/en\/campaign\/innovation\/platform.jsp], accessed November 2016.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Digitization and the &#8220;Internet of Things&#8221; is driving change throughout the lifecycle of a commercial building.<\/p>\n","protected":false},"author":2579,"featured_media":20460,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-20325","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - 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