Building Efficiency<br />Using Human Centered Design to Bring Something New to the World<br />Drew (Andrew) McInnes<br />
Outline of Discussion<br />Innovation Challenge<br />What Problem to Solve<br />Getting to the Right Solution (Using Human...
Innovation ChallengeIncrease the energy efficiency of existing US commercial buildings<br />Challenge<br />Break with conv...
How We Got StartedFirst up was determining what problem we needed to solve<br />Stock of Energy in Building Operations (Si...
Problem We Needed to SolveReframe how managers and contractors interact in “small buildings”<br />My Rationale<br />75% of...
Getting to the Right SolutionStarted by observing 45 managers and contractors<br />Unmet Needs (ZMET Photos)<br />Uncovere...
How Much They Would Value ThisWas what we sought to understand next through experiments<br />Hidden Aspirations (ZMET Phot...
Getting Us to the Right Idea …Like US Postal Service, bridge the last mile of communication<br />HVAC System Operations<br...
… and Our First Design ChoicesFraming our solution <br />In order to give managers and contractorswhat they value the most...
Our Proposed SolutionBreakthrough HVAC monitoring system<br />ActionableInformation<br />Data Server<br />Utility<br />Int...
Performance Optimization
Safety/Diagnostics
Service / Maintenance Predictability
ROI/Payback Analysis</li></ul>HVAC<br />Monitor<br />System<br />Equipment<br />Offers actionable information as powerful ...
Brining Us to Ask How best to deliver this product and service solution<br />Customer Segments<br />Key Partners<br />Key ...
Leading Us to Business Model InnovationWe selected a subscription based revenue model to test with customers<br />SaaS wit...
Question Then BecameWhat is best way to execute on model to achieve profitability in business<br />Answer depended upon ou...
Super Small<br />Small to Medium<br />Small<br />Results of Trade Off AnalysisMedium-size buildings is where to first stri...
Resulting Business Developing prototype and signing up beta users<br />Focused on Retrofit Market (Medium-Size Buildings)<...
Existing pain (managers writing checks with no ability to manage costs)
Upcoming SlideShare
Loading in …5
×

Drew Mcinnes - Using human centered design to bring something new into the world

1,458 views

Published on

Published in: Technology, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,458
On SlideShare
0
From Embeds
0
Number of Embeds
11
Actions
Shares
0
Downloads
3
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Drew Mcinnes - Using human centered design to bring something new into the world

  1. 1. Building Efficiency<br />Using Human Centered Design to Bring Something New to the World<br />Drew (Andrew) McInnes<br />
  2. 2. Outline of Discussion<br />Innovation Challenge<br />What Problem to Solve<br />Getting to the Right Solution (Using Human Centered Design)<br />Designing the Right Business Model<br />End Result<br />
  3. 3. Innovation ChallengeIncrease the energy efficiency of existing US commercial buildings<br />Challenge<br />Break with convention and create solution that actually increases energy efficiency of existing commercial buildings in United states<br />Conventional Approaches<br />Force IT solutions upon users through “C-level”<br />None of these solutions meet customer expectations however, leading to minimal impact on efficiency<br />Facts<br />5 million buildings (>1,000 ft2)<br />Account for 15% of total US energy consumption<br />Current approaches fall short and like humans, no two buildings are alike<br />
  4. 4. How We Got StartedFirst up was determining what problem we needed to solve<br />Stock of Energy in Building Operations (Simplified Version of My Original Model)<br />Energy <br />Converted to Work <br />(HVAC Operation)<br />(35%)<br />Energy Wasted<br />Energy Supplied<br />(80%)<br />(100%)<br />Balancing<br />Feedback<br />HVAC System<br />Degradation <br />and Failure <br />Energy<br />Actually Converted to Work<br />(Discrepancy of -15%)<br />Put my systems thinking “hat” on and saw we needed to solve a human problem more than a technical one to fulfill our intention<br />
  5. 5. Problem We Needed to SolveReframe how managers and contractors interact in “small buildings”<br />My Rationale<br />75% of building managers lack resources to keep their HVAC systems running properly themselves<br />So these managers hire contractors to watch over their systems in order to achieve “peace of mind”<br />“Peace of mind” that someone knowledgeable is always watching over the HVAC system “24/7”<br />BUT, contractors can only meet this intangible need with an intangible solution<br />One called “trust based” contracting where managers must trust contractors will perform to expectations<br />Approach gives rise to communication gaps leading to poor HVAC performance in 75% of buildings<br />In order to improve HVAC performance and in turn the overall energy efficiency of many commercial buildings in the United States<br />
  6. 6. Getting to the Right SolutionStarted by observing 45 managers and contractors<br />Unmet Needs (ZMET Photos)<br />Uncovered and Translated Unmet Needs<br />Observation, interview, and prototypingled me to uncover and translate unmet needs <br />Topping each side’s list was greater “transparency” and “accountability”<br />Verified Findings <br />Qualitative and quantitative methods subsequently helped me to verify these findings<br /><ul><li>e.g. surveys, regression, etc.</li></ul>Discovered that greater TRANSPARENCY and ACCOUNTABILITY iswhat they would most value in their HVAC interactions<br />
  7. 7. How Much They Would Value ThisWas what we sought to understand next through experiments<br />Hidden Aspirations (ZMET Photos)<br />Predictability<br />Managers and contractors would like to be able to predict HVAC system problems ahead of time<br />Scalability<br />Contractors would like take back relationship with manager from contractor’s own technician <br />This would allow contractors to scale and tangibly value their business for first time ever<br />PREDICTABILITY and SCALABILITY led us to the answer<br />
  8. 8. Getting Us to the Right Idea …Like US Postal Service, bridge the last mile of communication<br />HVAC System Operations<br />Safety and Diagnostics<br />Repair and Maintenance<br />Equipment Tracking<br />Comprehensively and Down to Device Level<br />Unlocks highest levels of transparency and accountability in interactions and enables unprecedented scalability and predictability<br />
  9. 9. … and Our First Design ChoicesFraming our solution <br />In order to give managers and contractorswhat they value the most<br />
  10. 10. Our Proposed SolutionBreakthrough HVAC monitoring system<br />ActionableInformation<br />Data Server<br />Utility<br />Internet<br /><ul><li>Monitoring and Management
  11. 11. Performance Optimization
  12. 12. Safety/Diagnostics
  13. 13. Service / Maintenance Predictability
  14. 14. ROI/Payback Analysis</li></ul>HVAC<br />Monitor<br />System<br />Equipment<br />Offers actionable information as powerful motivator towards implementation<br />
  15. 15. Brining Us to Ask How best to deliver this product and service solution<br />Customer Segments<br />Key Partners<br />Key Activities<br />Value Propositions<br />Customer Relationships<br />Channels<br />Key Resources<br />Cost Structure<br />Revenue Streams<br />We mapped different business models to achieve resonance between what is meaningful to people and what is profitable for business<br />
  16. 16. Leading Us to Business Model InnovationWe selected a subscription based revenue model to test with customers<br />SaaS with hardware - standardize NewCo as the Premise Network<br />Transactions - connect 3rd party ecosystem with qualified customers<br />Informatics – aggregate/sell information to manufacturers, utilities and others<br />INITIAL FOCUS<br />Demand Response<br />Commercial<br />Utilities<br />3rd Party Service<br />Education: <br />Labs/Dorms<br />Manufacturers<br />New Company(NewCo)<br />Multi-unit <br />Residential <br />Wholesalers<br />Energy Service Co.<br />Government<br />
  17. 17. Question Then BecameWhat is best way to execute on model to achieve profitability in business<br />Answer depended upon outcomes of this trade-off analysis<br />
  18. 18. Super Small<br />Small to Medium<br />Small<br />Results of Trade Off AnalysisMedium-size buildings is where to first strike resonance in the business<br />Charge For<br />Medium<br />Data Collection Equipment<br />Give Away<br />Charge %Upfront Payment<br />Bill as We Go<br />Actionable Information Services<br />Meeting criteria for business profitability(LTV > 3x CAC and months to recover CAC < 12 Months)<br />
  19. 19. Resulting Business Developing prototype and signing up beta users<br />Focused on Retrofit Market (Medium-Size Buildings)<br /><ul><li>Fewer decision makers (VP Ops, COO, facilities manager)
  20. 20. Existing pain (managers writing checks with no ability to manage costs)
  21. 21. Leverage existing electrical channels for installation</li></ul>Targeting Indirect Sales Model Initially (Vertically Integrated)<br /><ul><li>Target contractors/ESCOs with multiple buildings
  22. 22. Coordinate all electrical installation work
  23. 23. Supply and charge for hardware directly (bypass distribution)</li></ul>Seeking to Build Revenue and Transition to Distribution Model <br /><ul><li>Leverage hardware partners (device, building automation, panel)
  24. 24. Begin adding new construction (market to engineers, architects, builders)</li></li></ul><li>End ResultDisruptive solution and model focused on always controlling data<br />Reduce Hardware Cost to Enter Small Buildings<br /><ul><li>Get down manufacturing cost curve
  25. 25. Graduated pricing based on customer needs (complete coverage vs. critical loads)
  26. 26. Sell hardware at low markup (60% Hardware, 30% Labor)</li></ul>Focus on Subscription Services <br /><ul><li>Create ongoing revenue stream associated with software and services
  27. 27. Packaged pricing based on customer needs and value
  28. 28. Up-sell into higher value/margin contracts/services</li></ul>Always Control Data<br /><ul><li>Leverage opportunities for monetizing data with building owners, utilities, and manufacturers
  29. 29. Share partial data with building automation systems
  30. 30. Sell aggregated data to 3rd party ecosystem</li></ul>Essential to reframing other high-value relationshipsthat resonate with managers, contractors, and profitability alike<br />
  31. 31. Contact<br />Drew (Andrew) McInnes<br />andrew.mcinnes@sloan.mit.edu<br />(408) 455 1090 (mobile)<br />
  32. 32. Subscription Based Revenue ModelOffered shortest time to revenue, and more importantly …<br />What is always important to me in designing new businesses is applying systems thinking<br />Applying systems thinking allows me to map out several alternative business models <br />Each model gives me ideas about how a business could behave over time and in different scenarios<br />Plotting this behavior enables me to map path to higher levels of customer and business resonance<br />Defining and prioritize relevant criteria about which model to test first through customer contact<br />How I Organized My Thinking<br />Why I Selected this Model<br /><ul><li>Excellent first stepping stone towards achieving higher levels of customer and business resonance
  33. 33. By first delivering proprietary access to high value data that cannot be collected effectively today
  34. 34. Subsequently enabling higher-margin businesses (transactions and informatics)
  35. 35. That provide managers and contractors with more actionable information beyond HVAC system
  36. 36. Bridging communication gaps in other human interactions within the built environment</li></ul>… pathway to achieving high levels of resonance betweenwhat is meaningful for customers and what is profitable for business<br />
  37. 37. How We Tested My AssumptionsCreated customer advisory board to test and refine these assumptions<br />Initiated, structured, and performed financial analysis to create value based pricing model<br />Achieving buy in for my modeling from potential customers at each and every step along the way<br />Shrewdness of contractors as business people will make value based pricing terms a difficult sell<br />Only few are willing to consider pricing structures based on value solution delivers<br />Leading me to tweak strategy for getting us to transactions/informatics business sooner<br />NOT SO MUCH SO<br />Value Based Pricing<br />VALID ASSUMPTION<br />< 6 Month Sales Cycle<br /><ul><li>Learned mechanical contractors are gatekeepers to managers even in medium-size buildings
  38. 38. Meaning contractors are our customers, and partners in selling to building managers
  39. 39. Contractors typically take 2-4 months to gain comfort with new solutions like ours’
  40. 40. Before buying from people like us and turning around and helping us to also sell to manager
  41. 41. 25+ interviews validated this advisory board thinking and a 3-5 month sales cycle</li></ul>Giving us free access to leading thought leaders in building-management and mechanical-contracting worlds<br />
  42. 42. Assuming We Were Right AboutSales cycle of 6 months or less <br />< 6 Month Sales Cycle<br />Underpinning all of my financial analysis of the business was how fast we could acquire customers<br />Customers that took more than 6 months to acquire would become financial drags on the business<br />In that it would be difficult to recover customer acquisition costs (CAC) in 12 months or less<br />No matter how I “sliced and diced” the numbers, I could not get around this 12 month constraint<br />Value Based Pricing, Not Cost Plus Margin<br />Bookending this challenge in my design was another one called long term customer value (LTV)<br />We would need to achieve a multiple of LTV in excess of 3x CAC to achieve acceptable margins<br />Value based pricing would allow us to do so, but cost plus margin pricing not so much so <br />Cost plus margin is what managers and contractors know – so would they accept value pricing<br />Customers accept value based pricing terms<br />

×