$400 Billion in annual CRE cost savings may be hiding in plain sight!

I read Maureen Ehrenberg’s The Future of Facilities is Digital post today.   Maureen describes a digital future for commercial real estate , but doesn’t clearly articulate why facilities executives need to digitize their building processes.  The reason, as always, comes down to dollars, and I estimate that digital transformation of global commercial/corporate real estate will eventually save at least $400 billion annually.

In her article, Maureen describes two examples; one reacting to a power outage in a building, and the other an office coffee maker that goes down depriving staff of their morning cuppa java.    In both cases the solution involves sending people to correct the problem.  Looking at her simple example, she says:

The coffee maker goes on the fritz. A coffee-loving employee steps into the room, discovers the problem, and scans a barcode on the coffee maker with their mobile device to report the incident online. A pre-approved, vetted supplier is automatically dispatched to repair the machine, which might even be fixed remotely. The digital system takes care of it all, with each stage of the process clearly noted and tracked online. Not only does the repair essentially take care of itself, but the fix also happens fairly rapidly, minimizing the disappointment of office coffee enthusiasts.

Finding the broken machine really isn’t where operating costs are incurred.   Fixing it is.   And, that’s the piece, the actual service intervention, that needs to be managed to reduce operating costs.

If, as Maureen suggests, the bar-code directly connects the coffeemaker to a pre-approved vendor, how does the facility operator know that the repair was completed in a timely manner, or control the cost of the repair?

I suggest that the entire service process needs to be digitized (in case you haven’t guessed, that’s what we are do at BuiltSpace), so that not only does the barcode (or a sensor on the coffee machine) trigger the service intervention, and the service request go to the vendor, but the vendor’s processes are integrated (through shared “digital” buildings), to capture when the vendor arrives on site, when the work is completed, what the problem was, and what the whole intervention costs.  It’s all done by mobile app, connected to the building, creating a digital service history for each facility.

But it shouldn’t stop there.  The invoice for the coffee machine repair should be delivered, in near real-time, to the facilities operator, with a direct link back to the equipment serviced.   (And, if it works for the coffee service company, the HVAC contractor, plumber, electrician, cleaner, and everybody else involved in servicing your buildings can also be digitized).

If you can measure building services, you can manage them.  Is there waste?  You bet.  Both sides of each service transaction have high administrative overhead to deal with the paperwork generated by each service intervention.   Field service technicians often arrive on site lacking even basic information about what they are asked to troubleshoot.   Facilities staff spend an inordinate amount of time trying to discover if invoiced work was ever done.    Digitizing service transactions allow facilities operators to shed their own administrative costs while digitally monitoring more cost-effective vendors armed with their own efficient processes.

It’s actually easier to start with transformation of business processes than “connecting” each building.   With process improvement there is no hardware to engineer, install or maintain.   You simply need to subscribe to a “digital building” in the cloud, and require that your service providers provide their services-as-data, using the mobile apps provided by our platform.  You simply invite them to the buildings they service on your behalf.    Digital building subscriptions are available for as little as $300 per year.

How much opportunity for cost reduction is hiding in plain sight, across your CRE portfolio?  BuiltSpace will help you find it.

Wishing you a very healthy and prosperous year ahead.

Rick@builtspace.com

About my $400 billion estimate

I estimate overall efficiency improvements of 30-40 percent will be possible when all building service processes are digitized, with each service intervention delivered as data in real-time, and data shared via a common “digital building” repository.

I’ve used IFMA’s global outsourced facilities estimate of $1.12 trillion, (but that clearly underestimates the full cost of operating facilities as it doesn’t include the administrative and management costs for the real estate owner, only the outsourced costs).   Based on this estimate, a 35% savings in operating costs, globally, could provide $400 billion in annual savings to commercial/corporate real estate operators.