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Dr. Rick Huijbregts' Blog Posts

Killing Progress with Financial ROI's (and Spreadsheets)

Blast from the past: in a conversation today over Cisco Spark with the General Manager of our Cisco Innovation Centre in Toronto, we were discussing how easy it is to still stifle innovation with spreadsheets and slow down progress because of "analysis paralysis".

It made me think of a blog I wrote in 2011_____

If I received a buck for each time that someone asked me: “Show me the ROI?” – I’d be rich by now. If by “ROI” one would mean “holistic economic sustainability” then it wouldn’t be all that bad. Unfortunately, more often than not, “ROI” just means “lowest first cost, with obvious pay-back times”. By that definition, I wonder if Nikola Tesla and his friends (commercial electricity in 19th Century) would have had the same experience that I have daily; or if Willis Haviland Carrier (electrical air conditioning in 1902) and Elisha Graves Otis (elevators in 1852) would have sold any of their expensive and unproven innovations.

In those transformative instances, it was often other drivers that pushed for the innovation. Things like comfort; demand and expectations; or the aspiration of doing things differently and pursuing new adjacent opportunities triggered some of the most exciting inventions in the construction and real estate industry. Of course, I am not promoting to forget about financial ROI’s and ignore the importance of economic sound decision-making. All I am asking is that we take on the entrepreneurial attitude of 100 years ago where one was willing to take a leap of faith in accepting new and unproven technologies and methodologies.

How many of us out there still don’t believe that the Internet and the underlying Networks become instrumental for the performance of our built environment. How many of us still don’t believe that our children and their children will expect connectivity, wireless, and access to a personalized environment when the set foot in a home or building. Home many of us still don’t think that mobility, “cloud computing”, and virtualized compute power will change the landscape of the built environment and everything that we do in it, as we know it.

Funnily enough: it is all happening – Corporate real estate professionals decide on new leasing space by the number of bars they receive on their mobile phones. Students will come home irritated from their first week in college if it so appeared that there wasn’t any wireless. Building systems in high-end North American properties are monitored and operated from world-class operations centers in India and the Middle East. And oh yes, the ROI has proven to be there – it is cheaper to build a building with one converged building-grade network as opposed to installing multiple silo-ed networks for silo-ed applications.

Technology in buildings can simply not be “value-engineered” out of construction anymore in exchange for prettier marble in the lobby areas. Technology in buildings has become the right thing to do; and a critical asset to next generation infrastructure.

To keep the conversation meaningful, we have to redirect our attention from pure financial ROI’s to the balance of economic, environmental, and social ROI’s. And that means that “soft” factors will end up weighing as much into the equation as those financial metrics that we have become so comfortable with. The financial pro-forma’s need to change to reflect the true value and return of 21st Century infrastructure assets. If we had Excel 100 years ago, we would still be analyzing spreadsheets and be debating with Willis over the financial returns for electrical air conditioning.

Thus now: let’s just do it.

_____now, I stand by this blog from nearly six years ago. However, my argument at the time may also have been a little influenced by the fact that we actually couldn't demonstrate hard returns (yet). I am happy to report that times have changed.

The Internet of Things or Digital Transformation is having bottom-line impact and positive returns on investment. For instance, our smart and connected office (powered by a Cisco network with full convergence and integration of lighting, security, mobility, collaboration, blinds, signage) that we occupied in Toronto was built for $0.60 per square foot less than a traditional construction approach. More importantly, it is reducing our operating cost by nearly 10% per square feet because of cost reduction for moves-adds-and-changes, improved energy management and control, and simplified building operations.

There are ample proof points like these--in construction, but also any other business that is going through a digital transformation.

If you are being told by your engineer or consultant that smart and connected buildings (with IP networks and Power-over-Ethernet converged systems) or the Internet of Things aren't necessary or will be costly, then please tell them that they are wrong and need to join us in the 21st Century. Have them give Cisco or one of our many partners a call.

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