New business models for manufacturers of smart building technology
Many product manufacturers in building services engineering are increasingly relying on new, digital solutions to differentiate themselves. In most buildings, however, their use fails due to limited building budgets.
A solution to this dilemma is now emerging that has already been successfully introduced in the consumer industry and will allow revenues to be generated from the use of the new offerings.
Insight in brief
- Smart solutions that significantly reduce operating and maintenance costs and protect the environment
- In the case of investor buildings that are not used by the owner himself, the construction budgets are usually too small for smart technology.
- Cost calculation per period of use or per usage process using pay-per-use would be ideal.
- With distributed ledger technology, added value per use can be charged directly.
For the manufacturers of building services engineering, the problem in many projects is that the building owner and the construction companies prefer low-cost products in order to reduce construction costs. On the other hand, smart solutions can significantly reduce operating and maintenance costs and relieve the environment. In addition, smart building services engineering can also enable new functions and more comfort for the users by intelligently linking the devices of different suppliers from different trades. In the case of buildings that are used by the building owner himself, there is therefore a good chance that he will opt for higher investments in order to benefit from them during operation.
The situation is different for investor buildings that are not used by the building owner himself. Here the construction budgets are usually too small for smart technology. It is the tenants of such buildings, rather than the investors, who would benefit most from the reduction in operating costs. At the time of construction, however, only the first tenants, if any, are known. Therefore, decisions against smart technology are often made without the tenants. In the case of investor buildings, which account for a very high proportion of new buildings, it is almost always only the price of the building technology that counts.
So the crucial question is: If manufacturers have to lower the price of their smart products for the investor, how can they later charge the user for their added value?
Pay per use with Distributed Ledger as a solution?
Economically, a new business model would make sense: A manufacturer initially sells his smart products to the construction company carrying out the work at the market price of the conventional equipment. In later operation, he can then unlock the smart functions for the user and charge him for the added value. Since the user generally does not want to invest and may prefer to rent out running costs as ancillary costs, a calculation per useful life or per usage process would be ideal. The principle: Pay per use. But how does pay-per-use work with changing tenants? It would be far too costly to conclude a complex contract with each tenant for use.
How can the use of the value-added offer be reliably proven in operation and charged with little effort?
In the article "The new business models of the Machine to Machine Economy" we have dealt with the new Distributed Ledger Technology (DLT). Among other things, it offers the following possibilities for product manufacturers in building services engineering:
- Forgery-proof proof of use: Which functions were used at what time?
- Forgery-proof proof of data transfer: Which data from the devices was transferred to whom at what time?
- Forgery-proof proof of software updates: Which software versions were used on the devices and when?
- Forgery-proof cost calculation: Which costs were charged for the use of functions or for the use of data?
- Microtransactions: Since practically no transaction costs are incurred, transactions can be carried out economically in the range of a few euro cents.
In other industries, such as the automotive industry, intensive work is being done on the use of distributed ledger technologies. But it also offers interesting approaches for other industries. In building services engineering, the use of smart offers can be tracked and calculated in this way. It also enables a data economy in which suppliers of data can make secure agreements on payment for their use.
In this way, the trades that install a sensor could sell the sensor data to other trades. A manufacturer of office lights with presence detectors could "resell" the information of the presence to the air conditioning or corridor lighting. This saves the suppliers of these trades from installing their own sensors.
Data Economy and Pay per Use with Distributed Ledger
Manufacturers of technical building equipment can use this technology to charge directly for the added value of their products per use or also sell data to the building management system or other trades. This extends the business model for technical building services. They can sell their "hardware" to the executing construction company at low cost during the construction phase. During operation they can generate additional income by selling use-dependent added value and by selling the use of their data to third parties.
Certainly there will also be projects where tenants change and product manufacturers cannot plan with certainty whether the operator will want to use and pay for the additional services. The product manufacturers must therefore decide which projects they want to supply with smart products. Builders who use the building themselves can of course also buy the smart products at higher prices and thus use the added value and data free of charge. To calculate this surcharge at purchase, there would then be a concrete price calculation based on the costs saved in the company.
We are following the development of the technology with great interest and are holding talks on the subject with product manufacturers and facility management companies. In building services engineering, early adopters will have the chance to design the newly emerging ecosystem for building data - and thus secure a competitive edge.
What will your business model of tomorrow look like? We would be happy to support you with our technical expertise and our cross-industry experience. Please contact us!