Five management principles from companies modernizing our vehicles, buildings, and electric grids

1. Converging worlds
Five management principles from
companies modernizing our vehicles,
buildings, and electric grids
April 2012
At a glance
Industry is radically
reframing how it can
increase productivity and
improve the efficiency and
stability of our vehicles,
buildings, and electric grids.
Cities, campuses, and
corporations need to
manage energy use more
actively and in a more
aggregated way.
The first step in navigating
the opportunities—for
both buyers and sellers of
products and services—is
to start from within.

2. New products, services—even business models—are It’s no small task to save oil and
energy—for the most part it requires
emerging from companies working to modernize our making vehicles and buildings
vehicles, buildings, and electric grids. These companies are far more efficient than what we
envisioning new ways to create value for their customers know today. Together, vehicles
and buildings are among the most
by looking at problems in a more aggregated way. In this significant users of oil and energy
report, they tell how they need to work differently with their in the United States: Transportation
customers, suppliers, and others to shape their futures as is responsible for 70% of petroleum
consumption,2 and buildings account
market conditions evolve. for 75% of electricity consumption.3
Growing concern about energy as a
long-term business risk is why most
Nearly half of CEOs who participated in
companies want to take a more active
PwC’s 15th Annual Global CEO Survey
role in managing their own energy use.
are concerned about rising energy
Globally, about 70% of companies have
costs.1 With good reason: Price forecasts
sustainability initiatives of varying
for all commodities are heading up,
scopes in place, many with a conviction
and energy prices top the charts (see
that managing energy use is necessary
Figure A). Energy—whether in the
to remain competitive.4 For companies,
form of electricity, gas, oil, or fuel—is
the task of becoming more energy
connected to a broad spectrum of other
efficient is also tied to productivity
business issues, too, including climate
and environmental benefits—but
change, natural resource constraints,
the energy efficiency is the easiest to
food prices, water availability, political
quantify. An income-producing office
risk, and transportation challenges.
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, it’s
wasting an average of 22 days a year in
traffic 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 efficient but can
have other economic benefits too.
1 PwC, PwC’s 15th Annual Global CEO Survey, January 2012.
2 US Department of Energy, Transportation Energy Data Book 2011, June 2011.
3 US Department of 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.
2 Converging worlds

3. Progressive companies are looking for • Identifying which facilities should
gains by tackling their transportation produce their own energy supply
and building energy use as one or manage their own water use
larger issue rather than separate
• Tailoring logistics and fleet
ones. They’re using technology
management to match the
in a broad range of activities to
needs of each type of route
find the best ways to reduce cost,
and geographic region
improve productivity, and minimize
environmental impacts, including: • Examining use of office space,
fleets, and other assets to eliminate
• Analyzing energy use for pricing and
waste and maximize utilization
sourcing options with the lowest cost
and the least environmental damage
World commodity prices are forecast to ride
Figure A. Key commodity prices are forecast to rise
Index, 2005 = 100
450
400
350
300
250
200
150
100
50
0
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
2019
2022
2025
2028
2031
2034
Energy prices
Food prices
Metals prices
Raw materials prices
Source: Oxford Economics
Converging worlds 3

4. While innovation means new possibilities, it also
means increased complexity for building and
vehicle fleet owners and operators who will find
themselves faced with successive waves of innovation.
They will need to sort through products, services,
and business models they’ve never seen before.
Their providers—those who are precision energy-management tools
modernizing the electric system and that analyze the energy use of each
making cars, trucks, and buildings building system and notify a control
several times more efficient than center when HVAC, lighting, and data
they are today—see the common centers aren’t working optimally.
goal. They see far greater potential
And it’s not just the technologies
for lower costs, greater productivity,
that are changing; business models
and greater environmental benefits
are, too. Some solar companies, for
by completely redesigning solutions.
example, are challenging conventional
They’re reframing their partnership
business models by leasing arrays
networks and extending the roles
rather than selling them, as a way
they’ve traditionally played. When
to help customers manage up-front
it makes sense, they’re partnering,
capital requirements. Transportation
mashing up technologies, and forming
providers are investing in technologies
new business models. What’s emerging
that promote car sharing—targeting
is an entirely new ecosystem where
the market segments that can’t or
energy, information, building, and
won’t buy cars or those who realize
transportation technologies converge.
their fleets are sorely underutilized.
Technological evolution is at the heart Such innovations reframe choices for
of this change. For example, to work customers and, as a result, reframe
optimally, smart grids need smart the competition, leading companies
buildings, but the legacy systems in to anticipate new types of threats.
most buildings aren’t up for the task.
While innovation means new
They simply weren’t designed for it.
possibilities, it also means increased
Now, cheap sensors that are making
complexity for building and vehicle fleet
these building systems smarter can
owners and operators who will find
also connect building systems to
themselves faced with successive waves
each other and to other buildings—
of innovation. They will need to sort
somewhat like nodes in a network.
through products, services, and business
Tech-savvy providers are using
models they’ve never seen before.
these sensors to create things like
4 Converging worlds

5. There’s an entire ecosystem coming together around
the promise of lower costs, greater productivity,
and greater environmental benefits
What’s changing?
Technological
evolution 1. Cheap and ubiquitous computing and
communications enable convergences
across energy, IT, building, and
Deployment transportation systems.
4. Innovations add greater and use
benefits—but also far greater
complexity—to building and
fleet energy management. Market
conditions 2. Markets drive adoption, and
combinations of solutions are
tailored to unique settings.
Technology
3. Industry provides the tools and business
t
o manage complex systems model
and link them together. When innovation
synergies exist, companies
partner for greater benefits,
mash up technologies, and form
new business models.
What are customers looking for?
Customers are looking for a new type of value creation where solutions
can be customized, linked together, or combined for greater results.
Energy Building
• Renewable energy • Certified green buildings
• Distributed energy • Building energy management
• Smart grid technologies • Demand response and real-time
• Demand response and real-time electricity pricing
electricity pricing • Space utilization and sharing
Information Transportation
• Processors and sensors in meters, • Intelligent transportation systems
cars, roads, and buildings • Congestion and road-charging
• Big Data storage, analytics, and systems
management • Smart and connected vehicles
• Automation capabilities built on the • Alternative-fuel vehicles
Internet of Things • Car sharing
Converging worlds 5

6. “I look at some of the innovations out there, and I
just think it’s kind of mind-boggling what’s going
to happen. The possibilities are vast, and the
combinations, exponential.”
—Carl Bass, Autodesk
Technological evolution is changing the As a result, both the nature of the
very nature of how energy, information, products and services companies
buildings, and transportation are offer and how they operate and
procured and managed. For example: interact with suppliers, customers,
and others will need to evolve.
• Distributed energy generation is
becoming cheaper and cleaner. How quickly will companies and
Smart grids enable two-way their customers see real implications
conversations with companies from these trends? “If you’re trying
and their utilities for real-time to replace the volume of coal-fired
pricing. And energy will become power plants and natural-gas-fired
easier to store, which may also power plants, you’re talking about long
change how it’s bought and sold. time frames,” says Stephan Dolezalek,
managing director of CleanTech at
• Vehicles and buildings are
VantagePoint Capital Partners. “But
becoming part of a vast Internet of
if you’re talking about using existing
Things, in which any device can be
systems to manage energy more
addressed, monitored, controlled,
efficiently, you may move much more
and optimized. Data can be opened
rapidly than people would think.”
to third parties, allowing for
aggregation, analysis, and reuse. As with previous convergences
enabled by technology, this one
• Building operators are able to
will require making organizational
harness rich data streams that
changes, bridging functional silos,
help them optimize energy
and adopting different ways of
and resource use, enhance
thinking. “We need to think about
comfort and productivity, and
organizational structure if we’re really
improve utilization rates.
going to embrace transformation,”
• Smart and connected vehicles know says David Bartlett, vice president of
where they can park, avoid traffic industry solutions at IBM. “It’s never
jams, or rent themselves out to other just about the technology; it’s about
drivers or riders. Electric vehicles how we can step up to adopting it.”
connect to the grid or to buildings—
either of which could be designed
to draw on a vehicle’s battery in
ways that improve distribution
and management of power.
6 Converging worlds

7. “Increasingly, the marketplace and the customers are
looking for a new type of value creation, which is ‘I’d
prefer not to deal with the complications of all those
elements of the ecosystem. Help me string it together.
Optimize it for me, and make it easier for me to access
that value.’”
—Mark Vachon, GE
Customers are 3. Widen the circle of innovation
and speed up the cycles
looking for a 4. Look for opportunity in
new type of value underutilized assets
creation 5. Harness the value of Big Data
To find out more about how
Their goal is to build organizational
companies are working differently
capabilities that bring returns to
to understand and shape their
the business no matter how (or how
futures, PwC and GreenBiz selected
quickly) technologies evolve.
a panel of leaders from 15 companies
with a stake in the four domains We believe their insights should be of
showing the greatest potential for interest to any business leader who
convergences: energy, information, wants to reduce costs, mitigate risks,
buildings, and transportation. or contribute to overall profitability
of the business—all while improving
We found common insights from
environmental outcomes. For those
our panel that we believe are useful
focused on mitigating risks or reducing
to all companies as they work to
costs in company operations, we
understand their opportunities.
hope you’ll see new ways of thinking
The panel told us how today’s about your business, assets, and
circumstances are accelerating partnerships. For those seeking to
change and requiring them to work create new revenue opportunities, we
differently. These companies hope you’ll be inspired as you envision
your future and the capabilities you’ll
1. Think systemically to capture need to achieve your objectives.
technology and market shifts
The sections that follow summarize
2. Set a clear vision but prepare our panels’ insights.
for multiple futures
Converging worlds 7

8. 1. Think systemically to Whether your company is building was to engage new actors in the city
capture technology a new city, creating a transportation planning process from the get-go,”
and market shifts network, or changing your operations says Gordon Feller, Internet Business
to reduce energy and waste, an Solutions Group at Cisco. “This included
integrative view can help you ensure national government, local government,
you’re actually solving a problem, citizen organizations, technology
not creating a new or bigger one. companies, private developers, and
public agencies that were established
All of our panelists are working on
in the economic free zone. So we
innovative technologies, such as
expanded the circle of partners and,
electric-vehicle charging systems,
in the process, were able to identify
building analytics systems, or
some breakthrough innovations.”
intelligent energy metering devices. But
they’re also working on large cross- Cisco has staked its role in this
sector issues like modernizing the ecosystem on owning the “urban
electric grid, tackling traffic gridlock, operating system.” This assumes the
or building sustainable megacities, growing viability of a cities-as-a-
thinking that is supported by a market service approach, which is maturing
demand for smarter infrastructures alongside mobility-as-a-service and
(see Figure C). Taking an integrative other business models that monetize
approach allows them to move beyond service delivery alongside product
individual products and services sales. It also depends on integrating the
and to examine how a system’s parts products and services and know-how
influence one another and the whole. of a wide range of partners. It’s a
radically new model for city managers
Cisco explains how this way of thinking
and the companies (like Cisco) that
led to a co-creation process in the
sell to them. But it also forms the
development of a Korean greenfield city,
basis of Cisco’s strategy; it’s this kind
New Songdo City. One of the project’s
of repositioning that is helping Cisco
requirements was that the city produce
understand its role and define it further.
one-third less greenhouse gas emissions
than a typical city its size. “The idea
8 Converging worlds

9. “We see convergence as being literally the starting point and the end point,
primarily because we think that’s where our customers are headed, and we want
to 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 infrastructure investment by industry, world markets: 2010-2020,
in $ Billions
Smart Cities
$18
$16
$14
$12
US $ Billions
$10
$8
$6
$4
$2
$0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Smart utilities
Smart transport
Smart building
Smart government
Source: Pike Research
Source: Pike Research
Converging worlds 9

10. 2.
Set a clear vision In addition to thinking more fixed military bases and in the field.
but prepare for systemically, companies are taking “We crafted a strategy focused on
multiple futures a longer-term view, creating one or leveraging things we do and things
more scenarios about where and how we own—particularly approaches
markets will change and about the that provide command and control
opportunities. “Without a long-term to lots of objects inside a large
view of where things are going and network, like a smart grid,” says Tim
where you want them to go, I think Noonan of Phantom Works Ventures
it’s going to be very hard to end up and Boeing Energy at Boeing.
really playing a central role in any
Through a series of grants from the
of this,” says Bill Weihl, manager of
American Recovery and Reinvestment
energy efficiency and sustainability at
Act of 2009 (ARRA), as well as related
Facebook. The social media company
projects and company investment,
has been a leader in data center energy
Boeing slowly began to develop an
efficiency as well as in encouraging
energy strategy that it is working to
collaboration and transparency around
implement today. “We’ve explored a
solutions for data center energy use.
number of areas that we think have
Once companies have a vision in a lot of potential,” Noonan says. “Not
mind, the business case for taking all of them are going to pay off, but
innovations to scale or to maturity I think we placed some good bets
becomes clearer. Boeing, for example, across generation, transmission,
sees an opportunity to play a role in distribution, storage, and carbon
the utility space by working with the capture that have strong upside for us
US Department of Defense to address both strategically and financially.”
its growing energy concerns both in
10 Converging worlds

11. “When you look at what Henry Ford did with the Model
T, it opened up the highways for people. But our new
model has to be a different model, and that different
model has to address mobility challenges.”
—John Viera, Ford
What’s your company’s role and the vision
for your future?
Facilities and fleets Institutional and Cities and public works Business customers, partners,
commercial campuses and suppliers along the value
chain
Command control center
Whether it’s residential or Corporate campuses, colleges Cities and regions are forming Large corporations and their
commercial, there’s a and military bases will gain public-private organizations to network of suppliers already
constellation of new more by taking a holistic view manage entire portfolios of manage fleets and facilities in a
technologies for energy of possible technologies to projects, many of which tackle range of operating
efficiency, generation, and connect and control critical traffic congestion, reliable and environments. What’s new here
demand response ready to systems. While a facility- affordable electricity, and a is learning how data can
connect systems like HVAC by-facility approach could smarter, greener urban living accelerate innovation cycles.
and lighting to the energy grid make sense, portfolio experience.
and communications network. management can present more
The second piece is connecting options for successive waves of
grid appliances, like the innovation.
electric vehicle to the facility.
Converging worlds 11

12. 3.
Widen the circle As part of their growth strategies, tailored solutions can overcome
of innovation and companies are identifying new such obstacles. “I think there’s
opportunities to take advantage of nothing that our clients distrust
speed up the cycles
their existing assets and expertise for more than someone coming to them
innovation; but they’re also looking with ‘the solution,’ because we don’t
to nontraditional and unexpected know what the solution is going
sources to enhance what they already to be,” says David Pogue, national
have to offer. “You’ve got to make director of sustainability at CBRE.
money at the end of the day,” says Mark “We need to work with them on the
Vann of the Advanced Technology opportunities, and together we need
Government Business Development to determine the best solutions.”
group at General Motors. “You need
• Internal. Second, they’re
to find partners where there are
encouraging internal cross-
synergies, where a group of us together
functional collaborations to find
can cost-justify making a leap in
fresh perspectives. Sometimes
an investment or a technology.”
it involves technological cross-
Companies we spoke with identify pollination. General Electric, for
three types of collaboration that example, leveraged aerospace
are fostering their innovation. The engineering from its aviation
collaborations could be to build or business, as well as materials
manage electric grids, construct or science and mechanical engineering
operate smart buildings, design or expertise from across the company
manage cities’ infrastructures, provide to become the leading US wind
integrated and adaptive transportation turbine manufacturer. But
services, manage distributed and technology solutions alone aren’t
diverse energy systems, or more. always sufficient, so companies
are reaching into other parts of
• Customers. First, companies are
their businesses to find expertise
working more closely than ever
on such things as customer service
with their customers to identify new
or marketing. “What we’re doing,
opportunities to address their needs
of course, is expanding the circle
over the short and medium terms.
beyond the engineers to people
While customers are looking for
who are trained in other fields
ways to succeed in an increasingly
and who are also great sources of
dynamic marketplace, they’re wary
innovation,” says Cisco’s Feller.
of companies that bring a one-size-
fits-all, plug-and-play solution to the
table. Forming close partnerships
to seek innovative, flexible, yet
12 Converging worlds

13. • External. Finally, they’re looking
to other players in their industries
or in adjacent industries to take Where have we seen
a broader, multidisciplinary
approach to specific customer convergences like this before?
issues. At Microsoft, for example,
this is creating new opportunities We have seen technology convergences before, and those that have preceded
to work with utility and energy may be instructive to understanding the business implications of today’s
industry partners. “All of these convergence. VantagePoint Capital Partners’ Stephan Dolezalek provides
folks are really deep energy experts this perspective.
who are now finding themselves
In the development of information technologies, we started with a
in the software solution business
mainframe computer that pushed information to a dumb terminal. We then
at a level they never have been
migrated to ever-smaller, more-powerful microcomputing platforms that
in before,” says Rob Bernard,
distributed computing power, reducing the need for those mainframes. But
chief environmental strategist at
then we discovered that we wanted to reconnect things, which ultimately
Microsoft. “And that’s where the
led to the development of the Internet. Now, we’ve come full circle, with
partnership and the synergy come
massive numbers of devices talking to central computers in the cloud.
in—because we’re not a solutions
company in the energy space. So
That piece, I think, represents the ultimate possibility for our physical
it creates the opportunity and the
infrastructure. As cities and companies start thinking about managing
conditions for a partnership.”
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 a
community level and suddenly they’re efficiently managing electron flows,
temperature, comfort levels, lighting—basically, 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,
that’s 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 that’s sure to lead to certain death.
Converging worlds 13

14. “We see this process of opening the system as actually
accelerating the path to innovation.”
—Gordon Feller, Cisco
Across the board, companies are have more groups working faster on
seeing their need for partnerships advanced-technology collaboration
swell. “The larger the scale of these so we can get to the market quickly.
kinds of projects, the greater the If you look at the Chevy Volt timing
number of players,” says Clay Nesler, from inception to launch, it was
vice president of Global Energy probably one of the fastest vehicle
Sustainability at Johnson Controls. launches we’ve ever done.”
But a larger network of partners doesn’t Conditions are driving companies
have to mean the process slows down. to look for opportunities to join
In fact, many companies say they’re able together—to go to market with arms
to accelerate the process of innovation linked. It’s about companies’ using
through collaborations that leverage their combined capabilities to provide
partners’ expertise efficiently. greater benefits for their customers
than if each went it alone. This is a
“I would say the velocity of work
broad trend seen across all industries
has increased quite a bit,” says Mary
and echoed in other research. Forty
Beth Stanek, director of Federal
percent of global CEOs now expect the
Environmental Energy Regulatory
majority of innovation in the future
Affairs at General Motors. “You
will be co-developed in collaborative
networks outside their organizations.6
40%
Our panelists said that both internal
and external stakeholders are
important partners in designing new
strategies and ensuring their success.
“You have to be flexible with regard to
these types of partnership structures,”
of global CEOs now expect the says Mark Vachon, vice president of
majority of innovation in the ecomagination at GE. “We’ve focused
future will be co-developed not only on expanding the sources of
in collaborative networks innovation and technology but also
outside their organizations. on how we scale and commercialize
the ideas we’ve partnered on.”
6 PwC, PwC’s 14th Annual Global CEO Survey, January 2011.
14 Converging worlds

15. Market acceleration led
by governments
Business expects governments
$71T
to be among the largest
customers for clean,
smart, and green solutions
because of the need for
infrastructure improvements.
The world’s infrastructure Investment needed to
investment needs for energy, improve basic infrastructure
road and rail transport, through 2030
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
country’s 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 efficiency 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 define the boundaries for collaboration and competition.
7 OECD, Infrastructure To 2030: Telecom, Land Transport, Water and Electricity, Volume 2, August 2007
and PwC, 10Minutes on Global Infrastructure, March 2010.
8 International Energy Agency, Technology Roadmap: Smart Grids, 2011.
Converging worlds 15

16. 4.
Look for opportunity Entrepreneurs in both incumbent In another example, the city of
in underutilized and start-up companies are looking Amsterdam reduced the physical
assets for opportunities to identify and amount of office space it leases by 40%
manage underutilized assets or to through a partnership with Cisco. The
create products and services that city now boasts modern and up-to-date
optimize others’ underutilized assets. work solutions, such as encouraging
and enabling telecommuting, and
Over the past few decades,
creating flexible, shared workspaces.
information technology companies
All told, the initiative is saving
have turned to utilization to boost
the city €10 million annually.10
data center efficiency, create faster
processors, and more. Today’s Vehicle-sharing models take asset
innovators look for opportunities utilization to another level. Fleets
where utilization can either reduce of cars, bicycles, trucks, and other
cost, increase revenue or both. vehicles are available by the hour for
individual use and are conveniently
For example, in 2010, unused capacity
located throughout a community,
on Amazon’s servers led the company
campus, or city. While car sharing
to introduce its popular EC2 cloud
started with community member-
offering, turning underutilized
based services, the concept has broad
assets into a new revenue stream.
potential to change how cities, colleges,
Since EC2’s release, revenue jumped
and corporations manage and maintain
from $240 million in the third
fleets. Vehicle owners see radically
quarter of 2010 to $470 million
higher utilization and potential
in the third quarter of 2011.9
revenue, and users have new choices
for how they use transportation.
9 Andrew Hickey, “Amazon’s Q3 Cloud Revenue Skyrockets,” CNN, October 2011.
10 Cisco, European City Connects Citizens and Businesses for Economic Growth, October 2011.
16 Converging worlds

17. Market barriers mean no easy entry
Finding the right economic model has been elusive in and rate structures typically discourage power providers
many smart, clean, and green ventures. Even when the from supporting energy-efficiency efforts—at least
economics make sense on paper, there is a mentality on any meaningful scale. In other cases—e.g., vehicle
that needs to change, and it’s often hard to convince efficiency standards or pricing and policies for on-site
buyers that they should be the ones to go first. solar—technology has also changed faster than policy.
Existing public policies and market structures can act as The picture is slowly changing, as companies seek
disincentives for change: most policies were designed for opportunities to work with regulators and competitors
systems to work as they do now, not how they could in the to craft policies that support innovation and incentivize
future. We found broad recognition among our panelists efficiency industrywide. For example, when FedEx wanted
that the right market incentives are to spur the development of
critical to reducing commercial risk electric-vehicle technologies for
so they can take new ideas to scale. Existing public the tens of thousands of trucks
it runs every day, it lobbied
For example, US commercial policies and market to raise federal fuel economy
buildings waste about a third of structures can standards. By doing so, it gave
the energy they consume, but there technology and manufacturing
are few incentives for building act as disincentives companies a stronger incentive
owners to improve them. Typically, for change. to develop and deploy efficient,
leases are written so that tenants electric-vehicle technologies.
are responsible for utility costs, And when FedEx worked with
while landlords are responsible Environmental Defense Fund
for capital costs related to energy on hybrid-electric vehicle
systems, such as HVAC maintenance or on-site generation. development for commercial trucks, it made the
Because, in effect, the landlord pays for the project but the project non-proprietary to promote innovation and
tenants receive the benefits, the landlord has no financial collaboration among manufacturers and operators to
incentive for making efficiency improvements. “That’s encourage widespread adoption. Using hybrid-electric
one of the countertrends right now to buildings becoming and all-electric vehicles for light delivery is just one
smarter and more energy efficient—the investment component of FedEx’s corporate strategy to reduce the
realities in the marketplace aren’t supporting it,” says Bob use of petroleum; there’s another strategy for its heavy
Best, executive vice president of Jones Lang LaSalle. trucks and a third for its 700 planes. The company
has improved energy efficiency every year since 2005,
The commercial building market isn’t the only place these with a 15.1% improvement through fiscal year 2010.
problems exist. In the utility business, existing policies
Converging worlds 17

18. 5. Harness the One of the natural consequences of “We provided the IT constructs, but
value of Big Data placing sensors throughout buildings, the facilities team was key in providing
in vehicles, and within energy systems the experience and what type of rules
is the very large amounts of detailed made sense,” says IBM’s Bartlett. “I
data theses sensors generate. But guess what they didn’t realize was
we’re only beginning to see how this the capability of IT to give them a
tsunami of data fosters new innovation. command view, to give them visibility
Saul Zambrano of Pacific Gas and and automation that they hadn’t had
Electric Company’s Customer Energy before. So, they’re seeing the potential
Solutions group sees potential. “The for new energy savings as a result.”
enhanced capability and the data sets
Data analytics can also provide
that underlie it really are creating this
insight into new products and services
new innovation cycle around smarter
customers need. For CBRE, the
grids and smarter buildings,” he says.
opportunity lies in tapping into large
This explosion of information, data sets across its customers. “If I
commonly referred to as “Big Data,” have all of the data for one client who
is ushering in a new type of analytics owns 30 buildings in a portfolio, maybe
that enables management to make then I can do a commodity buy for the
decisions with a precision comparable energy for those buildings,” says Pogue
to scientific insight. The newest of CBRE. “Right now, owners think of
analytic methods use rigorous scientific individual buildings, but what we want
techniques, including hypothesis to do is begin to view the management
formation and testing, statistical and benefits in a more aggregated way.”
sampling, and visualization tools.
The potential for companies to use
Data analytics can turn the invisible data more effectively can transform
into the visible when partners come not only the products and services
together to make sense of the data. companies provide, but also how those
IBM talks about an early facilities companies organize to respond to
management implementation, which business goals and customer need. As
made use of 10,000 data sources to Zambrano says, “Historically, utilities
provide a robust picture of a facility’s were very silo structured. Analysis of
operations. The value, however, the data that’s coming in is effectively
came from applying the customer’s going to require a shift in capability
knowledge about priorities and needs around horizontal management, and
alongside IBM’s analysis tools to provide so, it’s part of the business change.”
actionable information about how to
optimize the facility’s operations.
18 Converging worlds

19. “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. Right now,
owners think of individual buildings, but what we want to do is begin to view the
management and benefits in a more aggregated way.”
—David Pogue, CBRE
Is your strategy Figure C. Radical ideas rely on a combination of technology
change and business model innovation
fit for the future?
At the heart of convergences among
energy, information, building, and
transportation technologies is the
potential for far greater economic and Breakthrough ideas Radical ideas
New
environmental benefits than we’ve Game changers New businesses
seen before. Convergence represents
Technology change
an opportunity to define 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
Close to existing
technology. Developing new business Incremental ideas Breakthrough ideas
models and new strategies is every Protect/improve Game changers
bit as important—sometimes more. existing
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 Close to existing New
of the organization. Today, GM is—
first and foremost—in the business of Business model change
selling as many cars as it can. But it is
also testing a car-sharing model that Source: Davila, Epstein, and Shelton, Making Innovation Work: How to Manage It,
leverages its existing OnStar system; Measure It, and Profit from It, August 2005.
GM vehicle owners will soon be able
to use OnStar to rent out their cars.11
11 Marc Gunther, “Why GM is working with car-sharing firm RelayRides,” GreenBiz.com, March 2012.
Converging worlds 19

20. Taking action
We see very different opportunities for buyers and sellers
of energy, building, transportation, and information
technology solutions. Here are some things to think about,
based on where you think your biggest opportunities are.
For companies that buy, own, or
operate buildings and fleets
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 offices, if not also to deliver products
and services to the market. Therefore, companies’
ability to function—and to do so profitably—depends
on these systems and how efficiently they run.
What should you do now?
Determine the level of significance energy spending is to
your business and whether your organization is prepared
to see the larger potential benefits for your specific needs
and circumstances. Buyers, owners, and operators of
buildings and fleets 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
efficiency 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 don’t 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?
20 Converging worlds

21. For providers, incumbents, Feller, puts it: “Simply because you see the convergence
and new market players doesn’t mean you’re equipped and capable to deal with it.”
Customers will help drive your new view of value creation, Indeed, every company—no matter the motivation to
if you’re prepared to listen. Mark Vachon of GE put it this act—should be looking beyond the technology changes
way: “It’s about listening to what trends are out there, and preparing itself organizationally to stay fit for
and reverse engineering that capability back into the the future, ready to adapt as conditions change.
business. And so if you’re really listening these days,
you’re 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 competition—what some call “co-opetition.”12
In highly fragmented or immature markets, innovation Get more in person
skills and entry points will sort out who does what best—not and online
unlike what we’ve seen in other sectors where digital and
mobile technologies have initiated structural change.
GreenBiz Group is engaging the business
What should you do now? community on ways to accelerate convergence
and reduce commercial risk for both users
A structured approach to identifying and capturing value and providers of clean, smart, and green
for your company begins with a few simple questions: technologies. Join us in a series of GreenBiz
• What is your corporate view of this landscape—how VERGE events and online discussions.
energy, information, buildings, and transportation services To participate, see: www.greenbiz.com/verge
are meshing together? What’s your company’s role in it all?
• Do you feel your organization’s 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 the
right network and identifying the right future partners?
Providers have phenomenal opportunities ahead as they come
to understand and then shape their futures. Yet as Cisco’s
12 Eric Bloom, “In Smart Buildings, Co-opetition Is on the Rise,” Pike Research Blog, February 2012.
Converging worlds 21

22. Acknowledgments
During the preparation of this publication, we benefited greatly from
interviews and conversations with the following executives.
David Bartlett Clay Nesler Mark Vann
Vice President of Industry Solutions Vice President, Global Energy Manager of Advanced Technology
IBM Sustainability Government Business Development
Johnson Controls General Motors
Carl Bass
President and CEO Tim Noonan John Viera
Autodesk Vice President, Phantom Works Global Director, Sustainability and
Ventures and Boeing Energy Vehicle Environmental Matters
Rob Bernard Boeing Ford Motor Company
Chief Environmental Strategist
Microsoft Corporation David Pogue Bill Weihl*
National Director of Sustainability Manager of Energy Efficiency
Bob Best CBRE and Sustainability
Executive Vice President, Energy Facebook
Sustainability Services Mary Beth Stanek
Jones Lang LaSalle Director of Federal Environmental Saul Zambrano
Energy Regulatory Affairs Senior Director, Products, Customer
Stephan Dolezalek General Motors Energy Solutions
Managing Director, CleanTech Pacific Gas and Electric Company
VantagePoint Capital Partners Mark Vachon
Vice President, ecomagination
Gordon Feller General Electric
Internet Business Solutions Group
Public Sector Practice
Cisco Systems
Dave Gralnik PwC and GreenBiz Group
Senior Vice President, Renewable
Energy Services Advisory
Jones Lang LaSalle
Joel Makower, Chairman and Executive Editor, GreenBiz Group
Mitch Jackson Clinton Moloney, US Sustainable Business Solutions, PwC
Vice President Don Reed, US Sustainable Business Solutions, PwC
Environmental Affairs Sustainability Rob Shelton, US Growth Innovation, PwC
FedEx
Editorial, writing, design, and production
Joe Mercurio
Manager of Government Military Fuel Eric Faurot, President and Chief Strategist, GreenBiz Group
Cells Electric Vehicle Programs Peggy Fresenburg and Judy Traveny, US Studio, PwC
General Motors Dee Hildy, US Thought Leadership, PwC
Celeste LeCompte, Contributor
Derek Top, Senior Editor and Program Director for VERGE, GreenBiz Group
*This interview was conducted in December 2011, before Bill joined Facebook.
22 Converging worlds

23. Converging worlds 23

24. www.pwc.com/us/sustainability
To have a conversation
about how we can help your
company increase revenue,
reduce cost, or manage risk
through effective sustainability
strategies, contact:
Kathy Nieland
Sustainable Business Solutions,
Practice Leader
(504) 558 8228
kathy.nieland@us.pwc.com
Brian Carey
US Advisory Cleantech Leader
(408) 817 7807
brian.d.carey@us.pwc.com
Clinton Moloney
US Sustainable Business Solutions
(415) 498 8442
clinton.a.moloney@us.pwc.com
Don Reed
US Sustainable Business Solutions
(617) 530 4403
donald.j.reed@us.pwc.com
Rob Shelton
US Growth Innovation
(408) 817 4251
rob.shelton@us.pwc.com
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