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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
7/29/2019 Pwc Greenbiz Verge Final April 20 2012
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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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12 Converging worlds
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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14 Converging worlds
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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16 Converging worlds
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.
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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
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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
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20 Converging worlds
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.
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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.
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22 Converging worlds
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.
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