The opportunities for smart building technology companies are unprecedented, but few will take advantage of them without the help of partners to help them improve reach, interoperability and functionality.

The core components of the connected building—HVAC, utilities, security, maintenance, tenant experience, and the technologies that drive them—have primarily been siloed systems based on their primary function. But the pandemic raised the stakes on expectations, showing us that these systems need to work together in order to more flexibly reduce costs across labor, maintenance and utilities while creating a safe and comfortable environment for tenants.

And while these systems have become increasingly more tech-first, connected and critical, so have their consumers themselves. End users are demanding greater ease of use, interoperability and intelligence from the systems controlling their environments.

Those parallel pressures are transforming the landscape for technology systems and providers in the space. In this post, I’ll unpack some of the leading trends shaping the smart building industry and focus on one of the business decisions that will have the greatest impact on a technology company’s ability to stay relevant and competitive:

As security, operations/maintenance and tenant experience converge, companies will either need to build their own capabilities, acquire them or forge partnerships in order to deliver a true end-to-end experience.

How Smart Building Technology is Breaking New Ground

In a few short years—spurred on by dramatic societal changes and technology enhancements—the smart building concept has evolved, becoming more sophisticated, responsive and interconnected. These trends are key drivers.

Horizontal solutions. Johnson Controls, Carrier, Honeywell, Siemens and other big names are replacing point solutions with a horizontal approach that platforms integrated solutions. Megatechs like Microsoft and Google are pioneering Digital Twin technology that standardizes the programming language to create new levels of interoperability between systems as diverse as visitor management and water management. Latch and Smartrent are utilizing a special purpose acquisition company (SPAC) to unlock hundreds of millions in capital to put their vision of being a building operating system for the built environment into action.

Within LLR’s portfolio, workplace platform Appspace, which delivers employee communications and space management in one place, is an example of an effective platform option for organizations creating unified workplace and employee experiences for their team.

Connected building technology has evolved far beyond a cottage industry and is now being shaped by major players with significant resources—and these innovations are raising expectations across the market.

Shifting perimeters. The pandemic expanded the work environment beyond the four walls of a building to include remote employees and their devices, whether the phones they use to communicate or the computers they use to run financial reports. This shift has brought the benefits of cloud architecture into sharper focus as the standard for supporting a secure and consistent working environment across multiple locations. For example, the Appspace platform is able to push employee messaging to personal mobile devices, no matter their location, something that wasn’t a communications priority before.

We have entered a new era where the physical way we interact with our buildings will impact employee engagement and NPS scores.

Personalized experiences. Access control systems are not just there to keep the wrong people out of the buildings anymore—they’re there to let the right people in. Elevated expectations from the consumers of smart building technology are setting the bar higher and requiring companies to deliver personalized, seamless experiences.

We have entered a new era where the physical way we interact with our buildings will impact employee engagement and NPS scores. All it takes is the CEO being mistakenly barred from their office once or twice for the building owner or manager to rip and replace a security system.

Dynamic systems. Traditional building technology relied on a static understanding of premises and people. For example, an admin would load a set of permissions on an access card and issue it to a worker to give him or her access to specific areas and amenities. But today’s use cases require a smarter system capable of evolving and adapting to a broad range of real-time environmental, system and user inputs. Building access may need to be modified based on situational awareness, density and environmental impacts. This will require new capabilities and integrations as well as the ability to extend control of and access to technology interfaces and outputs by not only admins but end users at the edge.

New sales models. Even before COVID-19, customers were sidestepping the channel to educate themselves and evaluate their options independently. The pandemic accelerated the trend toward self-guided sales journeys by disrupting the in-person meetings that channel partners rely on. Buyers are increasingly turning toward webinars and other marketing content to research solutions, and the companies that sell to them need to focus on producing content that addresses their needs. The introduction of corporate influencers online is new, interesting and disruptive.

Companies need to manage a partnership like a product, with resources allocated to it, a development roadmap to guide it, KPIs to measure it and someone to own the relationship and be accountable.

Partnerships Emerge as a Key Strategy

As smart building solutions become more horizontal and broaden beyond traditional silos, technology companies will need to embrace “coopetition” and strategic partnerships as a way to embed and enhance their offerings. Collaborating, integrating or co-marketing with other best-of-breed solutions or platforms will help these companies to stay relevant and gain exposure to new markets.

It is also becoming very important to create unique value propositions based on what companies deliver together through a partnership. It is no longer OK to just integrate.

5 ways to foster successful partnerships in the smart building ecosystem:

1. Cultivate clarity. High emotional intelligence and self-awareness is a critical capability. Before forging partnerships, know your strengths and weaknesses so that you can seek out counterparts who complement your capabilities. Be clear on what’s negotiable and what’s sacred in your organization. Know your values and your limits so that you can approach each partnership with clear and honest communication.

2. Prioritize “must-haves.” There are a lot of exciting consumer trends in connected building technology, but the biggest opportunities will center on the essential (and unsexy) elements such as utilities, security and building maintenance. This was true before the pandemic, but it is especially true as the workplace acclimates to the new normal. Being able to order a latte on demand is definitely cool, but utilities are what drive daily engagement of applications. Look for partnership opportunities that reinforce your position as an essential service or capability.

3. Understand the partnership types. Be clear on the type of partnership you want to pursue and the value it will deliver. Are you looking to add nice-to-have functionality? Do you want to generate exponential value? Or do you want a strategic partner to collaborate on the development of a unique solution? Knowing what role you want the partner to play will help you screen out partnerships that won’t drive you forward.

4. Treat partnership like a product. Stop treating partnerships as a marketing exercise. If partnerships aren’t made measurable and accountable, they won’t generate a return on investment. Companies need to manage the partnership like a product, with resources allocated to it, a development roadmap to guide it, KPIs to measure it and someone to own the relationship and be accountable. Otherwise, it will never be seen as (and will never become) a core part of the company’s success strategy.

5. Align the partnership lifecycle. The partnership doesn’t end when the product is built. Both parties need to plan beyond the product to ensure they are aligned throughout the lifecycle. What will co-selling look like? Who will own the account? Who is accountable when something goes wrong with the system? How will you work collaboratively to fix it? How will commission structures align between the two partner companies?

Here’s the bottom line.

New technology innovations, new requirements created by the pandemic and new players in the shape of major multinationals—these factors are transforming the expectations and the possibilities for smart, connected building technology. It’s creating unprecedented opportunities for technology companies in the space, but few will be able to take advantage of them without the help of strategic partnerships to help them improve market reach, interoperability and functionality.

Learn more about the LLR team, relevant portfolio companies and our focus on investing in the Building Automation sector.