The Impact on Building Product Manufacturers

The building developer/leasing model is in decline in the U.S. More and more of today's Fortune 500 companies are choosing to build and own the buildings in which they operate. As a result of this shift, there is renewed interest in maximizing building performance over the long haul. With performance metrics top of mind – including everything from water and energy usage and lifecycle cost, to how a building will impact employee health, welfare, and productivity – it is clear that companies are investing in high-performance buildings as an important component of a high-performance business.

This trend is known as Performance-Based Design (PBD), and it fits hand-in-hand with other popular sustainable initiatives dictated by organizations like the USGBC, the National Institute of Building Sciences and the Building Research Establishment Environmental Assessment Method (BREEAM).

For building product manufacturers, PBD presents challenges by changing how they must maneuver within the industry to successfully market and sell.

Under the declining developer/leasing model, the cost of building ownership is generally based on a compressed period of time – typically between five and fifteen years – meaning that return on investment must be realized within this short timeframe. By contrast, under the ownership model, companies assess return on investment over a much longer period of time – typically periods great than fifteen years.

For building product manufacturers, the ranking of value propositions changes dramatically under PBD. For example, in a developer/leasing model, the cost of a product is likely the most influential selling proposition because what happens to a product after a building is paid for is of little to no importance to the developer. Under the company/owner model, however, a building is a long-term investment and has a direct impact on their business, making initial product cost virtually meaningless when compared to quantifiable performance metrics that will benefit the company for decades.

In other words, the ways a product affects energy consumption, avoids or mitigates toxicity, impacts daylighting, improves the flow of fresh air, etc., become primary selling propositions – eclipsing initial cost. Moreover, when you begin to explore synergies between product types to find those that produce even higher performance metrics when used together, a close collaboration among various product manufacturers becomes even more important. For example, a specific glass curtainwall make-up combined with sensor-controlled lighting and a high-efficiency HVAC system require this kind of collaboration.

If we put a “future scope” on the building design and construction industry, the process will be driven almost solely by building performance. Today's architects, more frequently than not, lead the design process according to operational objectives, occupancy requirements, available space, and site conditions – only considering building performance after these objectives are met. In the not-so-distant future, however, performance will lead design, and both architects and contractors will very likely be contractually obligated to meet specific performance metrics. As the trend continues, it will radically change what architects, contractors, and building owners will need to know about a building product.

If you manufacture a product that has the potential to positively impact building performance, it is imperative that you take a deep dive into this topic immediately, validating the product's key performance metrics, recalibrating messaging according to its targets, and creating the marketing and sales tools needed to effectively demonstrate its contribution to building performance.

Building product manufacturers should be asking these important questions:

  • When was the last time we examined our key target audiences and reviewed the “voice of the customer”? What key value propositions impact their decisions to use or not use a product?
  • What value propositions are we currently leveraging? Do they resonate with current design and building operation trends?
  • Are there technological advancements in building operations that might impact how we deliver our products? How can we enhance our product by integrating it with new building operation technology?
  • Are we aware of other products that work in tandem with our product to meet building design and performance requirements? How knowledgable are we about these products? Are we capable of collaborating with others to provide an integrated solution?
  • Do we have tangible metrics in place for our products and services that validate and substantiate their impact on building performance?

A recent white paper entitled "Dawn of the Building Performance Era," written by Erin Grossi, Chief Economist with UL, addresses building performance and how it will impact our industry. I encourage you to read it.

Read the “Dawn of the Building Performance Era” White Paper from UL

If you are interested in speaking with us further, shoot me an email: kevin@larsonobrien.com