IoT Value Proposition for the Built Environment

Internet-of-ThingsDefining a value proposition for IoT requires understanding and quantifying the impact IoT has on your costs, assets, and value chain.  Essentially, IoT connected devices, including energy and environmental sensors, have the potential to lower costs, improve productivity, and mitigate risks.  In addition, in order to effectively optimize building energy efficiency, measurement of energy consumption relative to the conservation program initiated, is ran imperative.   The following article discusses how intelligent connected devices can help companies achieve savings and Improve operations as well as improve productivity by providing a safer, sustainable, and environmentally friendlier workplace.

Reduce Costs

Intelligent connected IoT devices can lower operating costs and transaction costs by enabling monitoring, measuring, and managing everything from supply chain and operational activities to equipment, assets, and environmental conditions.  The ability to autonomously gather detailed data from operations and events in near real time provides better understanding of operations.  The ability to autonomously alert and control connected devices, provides improved operational control, thus limiting waste, errors, defects and time.

Connected IoT can also lower transaction costs. Transaction costs can be thought of as the costs involved with conducting business.  Think of the costs associated with purchasing goods from a supply house or store versus ordering online.  Going to the store involves travel time and costs, selection time, price comparisons, checkout time, and transport back.  An online transaction such as Amazon or Alibaba is rather seamless in comparison with simplified price comparison and checkout.

Transaction costs involve monitoring, measuring, and managing business activities. Transaction costs were first defined by Ronald Coase, the 1991 Nobel Prize laureate in Economics with his research published in 1937 “The Nature of the Firm”.  Intelligent connected IoT devices provide remote monitoring measuring, and managing of business activities and operations, thus lowering transition costs.

By reducing transaction costs, advances in technology and innovation can translate into higher productivity. By lessening time and manpower associated with measuring, monitoring, and managing, operations and events, transaction costs can be reduced.   Lower transaction cost can lead to improving worker productivity and operational performance improvement.

Granular visibility into the business processes, from supply chain operations and activities to customer engagements can provide the insight to improve business value.  Sensor data collection and analysis are the competitive tools of the future.

Measurement & Verification

Paramount to optimizing building energy efficiency is knowledge of what energy conservation measures (ECM) were most effective in improving energy efficiency.  Measurement and verification is an essential aspect of optimizing energy efficiency.  How can a building management system optimize energy efficiency without measuring energy consumption?

To effectively optimize energy efficiency, a feedback loop is required to assess what ECM drives the highest energy efficiency.  While driving a vehicle, a gauge indicating your MPG helps to improve fuel efficiency by letting you know that fast acceleration is detracting from your vehicles fuel efficiency.  A building is no different.  Measurement and verification systems provide a means to effectively optimize energy efficiency. IoT devices and analytics enable measurement data logging and analysis that optimize energy efficiency while monitoring environmental conditions, and thereby, act to lower operating costs and maintain comfort.

To illustrate how IoT devices help in reducing costs, let’s examine some examples of deploying IoT devices to reduce energy costs.  Our first example is lighting control and traffic flow mapping.  While the use of motion sensors is become more pervasive in office and workplaces, the gathering of information on energy usage and traffic movement, can add substantial insight into patterns and energy consumption.

The ability to control connected devices and gather information on ambient conditions and operations, provides a deeper understanding on activities, true costs, and resource utilization.  In addition, lighting control devices can be equipped with sensors to monitor temperature, humidity, and energy usage, a better understanding of a buildings’ energy efficiency can be measured and benchmarked to evaluate opportunities for improvement.

In one example, temperature, humidity, and carbon dioxide (CO2) levels were used to manage cooling and heating efficiency.  Very low levels of CO2 are often associated with over ventilating a building by bringing in too much outside air.  By calculating cooling and heating degree-days, the difference between set cooling and heating temperatures to outside air temperatures, a more effective means in assessing the efficiency of the cooling and heating systems is established.

Figure 1 IoT Devices and Data Analytics

Figure 1: IoT Devices and Data Analytics (Source: Arkados)

Other effective energy efficiency gains can be developed through demand control/demand response systems that make use of sensor data to modulate heating and cooling systems.  Analytics combined with sensor data can be used in anticipation of weather events to precool a building and then reduce cooling requirement at peak utility rates or during demand response. Analytics software such as the Arkados ArkTIC TM platform provides algorithms to identify anomalies and establish alarms, alerts, and faults to reduce costs, risks, and maintenance.

Mitigate Risks

IoT connected devices and sensors provide a means to monitor, measure, and manage lighting, cooling and heating systems.  Furthermore, analytics can be used to develop predictive models such sounds and vibrations could indicate a pump or compressor could be in need of maintenance before system failure.

If fact, the benefit of early warning alerts and detection could substantially reduce risks and prevent adverse events before they happen. Examples include threshold alerts for failure prevention such as refrigeration for food and medicine. Predictive alerts could save thousands of dollars before an event occurs.

For products such as vaccines and pharmaceuticals that required refrigeration, the value of lost products could be hundreds of thousands and perhaps even in the millions of dollars. An early warning system could alert on aberrant temperatures or excessive humidity levels to avert loss.

Air quality is an important factor in providing a safe and productive work environment. Building sensors can provide data on particulates in the air, the presence of volatile organic compounds (VOCs), and other harmful impurities.  The threshold alerts and warnings could provide immeasurable value for your staff.  While the data collections and alerts can save property and lives, device control based on measurement and analytics is now the future of IoT.

Water leakage is another warning that connected IoT sensors could provide before damage occurs to motors or equipment. While sometimes failures occur without warning, earlier detection and prevention is a means to mitigate risks to property and assets.

Similarly, IoT sensors can be used to monitor the presence of impurities and VOCs in the water supply.  The value created from context-aware connected devices with the ability to extract data and control devices can be immeasurable. Big data and analytics are paramount to completing the value proposition.

Building a network of IoT connected devices is not complete without data and analytics.    The analysis of sensor data and IoT connected devices enables us to identify where to focus attention and direct activities to improve efficiencies and productivity.  Value is created from device control as well as the data collected through monitoring, measuring, and managing IoT devices.  The magnitude of the impact on your business depends on insights and action taken from analyzing the data.

Efficiency gains can be extended across your value chain.  IoT devices also provide the ability to capture granular data on your business processes to assess effectiveness and efficiency.    The value impact on your business can be measured by analyzing processes and activities that generate economic and financial value for the firm.

Figure 2 IoT Sensor Dashboard (Source: Tableau)

                         Figure 2: IoT Sensor Dashboard (Source: Tableau)

The use of software connecting with intelligent IoT devices enable both device control and the ability to monitor, measure, and manage the devices.  The capture and analysis of data from connected devices provide the framework to generate value.  Intelligent IoT devices and analytics provide value by lowering costs and reducing risks.  These connected devices also provide measurement and verification that enable BMS platforms to optimize building energy efficiency and comfort. The take-away is intelligent connected IoT devices create value by lowering costs, optimizing efficiency, and mitigating risks when combined with big data and analytics.

Authored by:
Michael S. Davies, CFA

Mike is the Chief Strategy Office for Arkados, an Integrated Software and Technology Solutions Provider for Internet of Things (IoT) Applications and Analytics for intelligent devices. Mike is developing strategies and analytics to create value for energy and resource conservation through context aware connected devices, data analysis, visual analytics and renewable energy solutions.

Mike began his career selling software into vertical markets leading to marketing strategy consulting engagements. After business school he advanced to Wall Street as a financial analyst providing research and analysis on technology including semiconductors, data and wireless communication companies. Mr. Davies has provided business strategy and technology consulting to Apple, IBM, the Port Authority of NY & NJ, and NJ Dept. of Transportation. Analytics is a common thread throughout his career and his book Analytics 2 Insight on Amazon is featured in Data Science Association bookstore. Mike has been featured on CNBC, CNN, and Bloomberg with citations in the Wall Street Journal and Investor’s Business Daily. Mike graduated from Columbia University with BA in Economics and a MBA from University of California, Los Angeles.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s