How Rodney Clark and His Team Are Developing The Market For Smart, Healthy, and Sustainable Buildings

A confluence of global trends – decarbonization, sustainability, the future of work, energy inflation, and cybersecurity – has created an enormous market for smart, healthy, and sustainable buildings.

Buildings are responsible for 47% of global energy consumption and over a quarter (27%) of annual global carbon emissions according to the International Energy Agency (IEA). The market for smart buildings is estimated to be $150 Billion. Investment analysts and industry leaders see the total addressable market for decarbonized, healthier, safer and more intelligent buildings exceeding $250 Billion. By any measure, the market for the software, insights, and services that optimize the cost, return on assets, and carbon footprint of the equipment that runs buildings dwarfs the market for manufacturing and servicing that equipment.

Johnson Controls (JCI) is a 135 year old brand that is well positioned to lead this market. Their management is quickly evolving the business from its legacy roots in heating, ventilating, and air conditioning (HVAC) equipment and controls to become a global leader in the large emerging market for smart, healthy, and sustainable buildings.

In the last two years, the company has aggressively built and acquired software solutions that help building operators connect their equipment and controls and leverage AI to better manage emissions, security, air quality, and operating costs. This strategy makes sense because there is almost no way for building owners to hit their emissions and carbon zero targets without addressing their large, diverse, and highly fragmented installed base of HVAC equipment and controls.

To jump start their efforts, Johnson Controls acquired FogHorn (which develops Edge AI software for industrial and commercial IoT use cases) and Tempered Networks  (which provides cybersecurity for buildings across diverse groups of endpoint devices, edge gateways, cloud platforms and service technicians). As the centerpiece of their strategy, they launched a software platform –  OpenBlue – that allows building owners, managers, and sustainability executives to connect their diverse and fragmented portfolio of HVAC, fire, security, electrical, power, and refrigeration equipment to deliver breakthrough building performance. In the last year, the company has expanded the suite of OpenBlue software solutions to help customers leverage the power of connected devices – and the edge data they create – to reduce their carbon footprint, total cost of ownership, return on assets, security risks, and energy usage.

“The OpenBlue digital platform gives us the ability to work across the diverse and fragmented set of equipment types, brands and data sources you will find in a typical building portfolio,” says Rodney Clark, the VP and Chief Commercial Officer at Johnson Controls.

For example, Fiserv Forum, a multi-purpose arena in Milwaukee, has connected HVAC and security related equipment to the OpenBlue software platform, enabling more than 1,500 connected data points.  They used this intelligence to reduce its carbon footprint, achieving LEED Gold certification from the U.S. Green Building Council, making it among the leaders in sports and entertainment venues.

Perhaps their biggest asset is the learning data sets that the company and their partners can use to create a virtuous cycle of continuous improvement “flywheel” that fuels services growth and fuels a virtuous cycle of value creation that expands customer relationships.

“The sum of intelligence that connected devices and our ecosystem of customers and partners creates a massive AI learning data set, sales,” says Clark, who is tasked with building the Smart, Healthy and Sustainable building category and adapting their commercial model so their sales and partner channels can develop it. This is because the “multiplier” effect from connecting more and more equipment, “spaces”, and controls creates enormous economic benefits across the equipment portfolio – relative to optimizing one piece of equipment. “More intelligent devices, more connections, more applications and use cases creates exponential value to customers, Clark continues.”

Rodney Clark, the VP and Chief Commercial Officer at Johnson Controls

For example, the company has connected over 11,000 “chillers” to the OpenBlue platform in the past several years. These connected chillers – which are refrigeration systems used to cool fluids or dehumidify air in both commercial and industrial facilities  – collectively generate over 140 million data “pings” every day, providing a real time stream of data about the health, efficiency, and operation of that equipment and the environments it supports. AI analyzes and learns from this data in real time to identify potential risks, issues, or inefficiencies building operators should be aware of. Out of these millions of data points it will elevate a few critical actions for building managers and maintenance teams need to take to avoid unplan. One client connected that connected 27 chillers gets about 40 actionable reports a month out of 700 data pings a day.  Because of the proscriptive nature of the analysis, most problems are prevented or self-optimized. So out of 40 monthly events, only, a few require repair trucks or teams to mobilize.

Johnson Controls is well positioned to become the dominant player in this market. “With over 8 million customers, a huge installed base of equipment and controls, and over 25,000 channel partners to help install, service, connect, and optimize that equipment Johnson Controls has the distribution scale, touch points, and technology to lead this market” according to Rodney Clark, the VP and Chief Commercial Officer at Johnson Controls. “Most of the equipment competitors in the segment focus on a single type of equipment or specialized building automation controls. On the services side, competitors tend to provide specific analytics or data capabilities.”

Reaching this large market will require significant commercial and business model transformation, as well as building a new market category from scratch. 135 year old businesses do not transform overnight. That puts a lot of pressure on Clark – and the sales, marketing, partner channel, customer experience, and operations teams that report to him in his expanded role of Chief Commercial Officer.

Clark came to Johnson Controls 7 months ago from Microsoft, where he gained 25 years’ experience leading their IoT business, managing business partner channels, and put business processes in place to accelerate into the digital era.  “I was attracted to the role because of the size of the opportunity and the challenge of leading a complete business transformation,” says Clark. “Right now, we are going through a significant change management process,” he emphasizes.

That’s an understatement. Transforming Johnson Controls commercial model comes with a lot of specific challenges. To succeed, Clark’s team needs to move from product to solution selling, engage new buyer personas, shift selling effort to customer expansion, build a new category, and extend channel partners into cross sell, integration, and software services. This is an ambitious agenda. So it’s important that Clark has an extremely broad span of control over the entire revenue cycle and the commercial resources required to make these changes. “Rodney Clark is a great example of the next generation of business to business growth leaders – we call them CXOs – because he leads marketing, sales, customer experience, and the operations that support them,” says Chris Hummel, the President of Green Thread and co-author of the book Revenue Operations. His span of control includes account management, channel sales and over 25,000 business partners who account for 44% of revenues and represent the pathway to expanding the services business. For example, his breadth of control over commercial resources allow him to better align marketing, sales, and partner channels around the common purpose of achieving business outcomes for customers and expanding customer lifetime value. His CXO role will help his other core initiatives succeed –  implementing a sales excellence initiative, adding new routes to market, and redefining roles and incentives along the revenue cycle to maximize customer lifetime value, “connectedness”, and channel performance.

In sales, education is a big hurdle. Selling the notion of SMART Buildings requires account managers and business partners to educate customers about the value of IOT and edge data – which is one of the most valuable assets in the business, according to Clark. “The next frontier in our commercial transformation is getting technical sales and engineers to buy into and sell the benefits of connected systems which is a big change from the past,” says Clark. “For example, we’ve invested in eight OpenBlue innovation centers to better educate clients and partners about how to manage smarter, more sustainable and better connected buildings and spaces and “future proof” their buildings using software, analytics and AI.

Another challenge is changing the focus from selling product, features and price to selling solutions, value and business outcomes. Building competencies in solution selling and Customer Value Management are particularly important issues because communicating, quantifying, and demonstrating the “multiplier effect” connected devices and AI can have on building performance can be tricky. To do this, sellers must communicate and validate the many value creation pathways OpenBlue creates beyond operating cost efficiency – including but not limited to: Improving the return on assets, reducing total cost of ownership, visibility into future problems and achieving sustainability goals. For example, a client that connected 27 chillers to OpenBlue saw payback periods on equipment are accelerated from three to five years to one year.  Their total cost of ownership and the carbon footprint is reduced by almost a third (30%). Equipment uptime improved as unplanned equipment failures and the time to repair are reduced by over 60%.

To provide validation for this value story, Clark’s team is recognizing visionary leaders – called OpenBlue Pioneers –  that are leveraging edge AI data and connected devices to reduce carbon emissions from their buildings, improve safety, and deliver more personalized experiences for visitors. The most recent cohort of winners include one of the first fully AI-integrated buildings in the Middle East, the most net energy-positive building in the northern hemisphere, a London factory that was able to reduce its carbon emissions to net zero by 2030, and eight World Cup venues in Qatar connected in a single digital platform to help them run safely, efficiently and more sustainably.

Another go to market challenge Clark and his team have taken on is enabling partners and account managers to target and engage different buyer persona. “We’re asking our sales teams and business partners to go beyond the traditional facilities managers and procurement buyers and reach out to new C-level buyer persona at accounts– like building owners and Chief Sustainability Officers (CSO’s) – who value the business outcomes we can deliver,” says Clark. This makes sense as the number of Chief Sustainability Officers in the boardroom and C-suite has tripled in recent years and now represent a fixture at almost every (98%) of organization with a top ESG rating.

Clark’s biggest selling focus is to expand and enable their partner channel ecosystem toturn it into an even greater growth asset.“My biggest selling challenge is developing and educating a partner ecosystem that can help our customers leverage the OpenBlue software platform to manage all aspects of building operations and all data to create value,” says Clark. “Today, most of our partners install, service, and maintain one type of mechanical equipment. They are operationally excellent, great at what they do, and local which is an important factor in the service business. Evolving them to cross sell and connect equipment, and introduce software services will require nuance and patience,” warns Clark. “You need to pace it in a way to bring the largest and best channel partners along or your value story will get too far ahead of your ability to execute.”

“The goal of our partner program is to create a path (ladder) where partners can create and realize more value for their clients by cross selling more products and services to expand revenues and introduce new revenue streams that generate more projects and grow customer lifetime value,” says Clark. “As evidence, our multi-product partners are growing 5% faster than those that carry a single product. “

At the highest level in the partnership system, Clark and his channel team are developing channel partners that have more tech solution and software platform sales competencies. These include systems integrators,  independent software vendors (ISVs)  and technology partners who can connect the dots across the equipment portfolio using the OpenBlue platform to deliver connectivity services. “We are developing emerging technology partners which include independent software vendors (ISVs) that can write Building Automation Systems software that leverages the IOT data our platform generates, and technology firms who sell a connected more equipment and devices into our platform.

The Partner Program includes certification in the new platform, cross sell incentives for up to eleven products instead of just one, technology and integration skills, and account management support. To help partners develop accounts, Clark and his team are arming these partners with Propensity to Buy data to help them segment their local markets, prioritize the best accounts to develop, and identify the next best product to introduce to them. “Our core operating principles for driving scalable and consistent growth in these channels are to have a customer first focus, lead with innovation, grow industry capability through talent, and partners, and enable scale wherever possible,” says Clark.

In marketing, repositioning the brand to both define and win a new category is the major challenge “Creating a new market category is important because the shift  to smart, healthy, and sustainable buildings is a core product focus and driver of firm value for us,” says Clark.. “The goal is to create an umbrella positioning for the brand assets around equipment, automation, and control brands that make up Johnson Controls that reflects the new direction of the business. We need to establish one Johnson Controls aligned on one message, and a core set of digital assets that provide an umbrella that can travel across all of our products – including legacy brands like Ansul®, Metasys®, Simplex®, TYCO® and YORK®.”

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