The Digital Building Council (DBC) hosted a panel at Smart Buildings Show this year. Their executive officer Justin Kirby moderated the Rethinking Smart Building ROI and the business case(s) panel. It was a full house with lively discussion, so he compiled a summary report and selected some notable quotes from the session.


There is much talk of smart building ROI, but if you look beyond what is more quantifiable like energy efficiency, there is little consensus about how that is meaningfully calculated – particularly given the challenges of aligning the different agendas of owners, operators and occupiers, including what success looks like to them. This backdrop has driven recent discussions between cost consultants and those at the forefront in smart building design and deployment about re-framing ROI around value and rethinking the business case(s) beyond sqm. The idea of the panel was to give a flavour of the different perspectives involved in that discussion with the following cross-section of participants:



Jess Costanzo, commercial director at Simmtronic; chairperson at the Digital Buildings Council

Daniel Watson, UK director at Hereworks

Jonathan Wilson, partner at Gardiner & Theobald LLP

Shreya Sheth, head of building technology & sustainability at PATRIZIA

Viktoras Cesnulevicius, senior digital buildings consultant at Facility Performance Consulting

Main Themes

There was consensus about the need to move beyond traditional financial metrics and embrace a more holistic approach to Smart Building ROI, e.g. by encompassing user experience, ESG more broadly, cybersecurity, and operational efficiency.

Panellists also discussed bridging the Project-Operations Gap as an overarching challenge that still needs addressing. Put another way, removing the disconnect between digital construction and digital operations helps ensure that the value proposition of smart buildings is realised in the operational phase.

The need for collective action to establish industry-wide standards, frameworks, and best practices was acknowledged, i.e. to streamline procurement, implementation, and management of smart building technologies.

Key Challenges


What’s driving that acknowledged need for collective action is the addressing of the following challenges to avoid the risk of smart buildings not fulfilling their potential:


  • Ambiguous Client Briefs: Lack of clarity regarding desired outcomes and success criteria hinders effective implementation and ROI measurement.
  • Value Engineering: Cost-cutting measures often lead to the removal of crucial smart building features, diminishing the overall value proposition.
  • Procurement Misalignment: Traditional construction procurement models are ill-suited for integrating smart building technologies, leading to fragmented delivery and increased costs.
  • Knowledge & Skills Gap: Lack of understanding and expertise among those at the sharp end of operation and maintenance of digital buildings.
  • Marketing Hype vs. Operational Reality: Disparity between promised benefits and actual operational performance undermines trust in smart building technologies.


Recommendations

There were several recommendations made, such as shifting focus from Capex to Opex as highlighted by Jess Costanzo:


“If 20% of a building's expense is that capital expense of building it, surely we should be more focused on what's going to improve and optimise operational efficiencies."

Dan Watson also argued the case for Success Criteria over Use Cases: 


"A use case doesn’t give you enough information to determine success. What we need to start seeing during the design phase is more clearly defined success criteria to enable better measurement and achievement of desired outcomes.”

Other recommendations included:

  • Avoided Costs: Incorporating factors like cybersecurity and risk mitigation into ROI calculations to reflect a more comprehensive picture of value.
  • Embodied Carbon: Considering the environmental impact of materials and construction processes as part of a holistic ROI assessment.
  • Standardization as a Cost-Saving Measure: Implementing standardized approaches to technology integration, metering strategies, and network infrastructure can lead to significant capex savings.

What the future holds

Looking ahead, panellists envision smart building technologies becoming the standard for all building types within five years, seamlessly integrated and no longer subject to value engineering as Shreya Sheth predicts:


“We have to go beyond the 3-30-300. Smart buildings will become a norm in five years...it will not be value engineered anymore."

Coming back to closing the ‘Project-Operations Gap,’ the discussion included addressing contractual structures, enhancing operational capabilities, and fostering greater collaboration across stakeholders, being crucial steps towards realising the full potential of smart buildings in the operations phase.

New roles were also discussed. For example, the Master Systems Integrator one and how it is both being redefined and might evolve in different directions, including the one suggested by Jonathan Wilson:


“I think there will be a digital main contractor. I think that’s going to be a standalone package because it’s so integral and there’s so much intelligence in it that it will demand that kind of oversight."

Bring things back to the present, Viktoras Cesnulevicius thinks we have moved past the early adopters market and there have been enough Minimum Viable Products (MVPs) and Proof of Concepts (PoCs) – hence his conclusion that the supply chain needs to “either prove you deliver and prove the ROI or die.”

Call to action

Given my role at the DBC, it might not be so surprising that I might conclude the above appears to support the need for the industry to actively engage in initiatives that contribute to the development of standards, frameworks, and best practices. Doing so can help clients more clearly define their desired outcomes and success criteria when procuring smart building technologies, particularly for those not so far along the smart building journeys,


When it comes to rethinking Smart Building ROI there’s a growing shift in focus towards a holistic approach to that investment in technology that balances efficiency and effectiveness by encompassing user experience, ESG goals, cybersecurity, and operational efficiency (among other things). Just as important is the need for investment in training and upskilling those expected to use smart technologies for maintenance and operations. That investment can be overlooked but is essential to ensuring the long-term performance and value of digital buildings.