4 min read

How a horizontal architecture can drive market transformation [Nexus Newsletter #81]

Hey friends,

I've received a ton of great feedback on last week's podcast episode with Sabine Lam of Google. If you haven't given it a listen, definitely check it out (link below). If you have, let me know what you thought!

I want to key in on one aspect of the conversation that applies beyond Google's real estate footprint. It's a trend I think we'll see over and over again: the transition from a siloed, vertical architecture to a four-layered, horizontal architecture.

We talk a lot around here about this transition—we even have an entire module of the Nexus Foundations course dedicated to the different nuances of it. But we haven't talked enough about how it will drive massive change at the device layer.

Here's Sabine:

"We want to get raw data from those devices directly. And we want to make sure they're cyber secure. So we have very clear performance-based standards that are shared with the construction team that specifies what we're trying to accomplish with those systems.​They tend to send the device to us and we have qualification lab that goes through the security review, pen testing, and everything we're doing before the device is considered qualified. And there's two types of qualification: one is cyber-compliant and one is what we call Smart Ready."

If you want your device (controller, sensor, etc) installed in a Google building, you have to pass hundreds of tests for security and use case readiness.

While some might say Google is an anomaly here (they own or manage less than 1000 larger buildings worldwide), I think these sorts of smart building standards will drive widespread transformation of the supply chain.

Why? The answer lies in author and investor Nassim Taleb's "Minority Rule" concept from his book Skin in the Game.

"All it takes is a small number of intolerant virtuous people with skin in the game, in the form of courage, for society to function properly."

As Taleb says, the intolerance of the minority affects everyday things right under our noses:

"The Kosher population represents less than three tenth of a percent of the residents of the United States. Yet, it appears that almost all drinks are Kosher. Why? Simply because going full Kosher allows the producer, grocer, restaurant, to not have to distinguish between Kosher and nonkosher for liquids, with special markers, separate aisles, separate inventories, different stocking sub-facilities."

In other words, the supply chain responsible for putting devices in buildings is going to need to choose between aligning or not aligning with the horizontal, three-layered architecture. So far, in the industry's history, buildings owners haven't cared, so of course the supply chain chooses to align to their own goals. But times are changing...

What do you think?

—James

P.S. Tomorrow is our monthly Nexus Pro member gathering, where Joe Aamidor of Aamidor Consulting and I will be discussing startup fundraising, acquisitions, and partnerships from the first half of 2021. This will be a great way to understand today's trends and themes through the eyes of two neutral nerds. You can join here to get the invite immediately.


At the Nexus

Here’s everything we published this week:

🎧 #056: Sabine Lam unpacks Google's Building Operating System (BOS) programWe unpacked what the building operating system is, the goals Google has that depend on it, and what needs to change about how buildings are built in order to.enable it.

I love Sabine's practical approach that seems to be necessitated by sheer scale and just not being able to put up with a lot of the BS in our industry because of that.

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The Lens: Small Buildings Edition—In the last year, A LOT has happened in the world of small building (<50k square feet) controls and energy management. The small buildings market is quite huge AND quite pivotal to the whole climate change mitigation thing. This edition of The Lens (Pro members only) ​unpacks a few of these trends.


Signal vs. Noise

Only the best smart building resources we consumed this week…

The Digital Building Lifecycle—Microsoft's Salla Eckhardt started writing this 12-part blog series on LinkedIn almost 2 years ago. It travels the whole lifecycle of a building a provides use cases for digitization throughout. This is the last post in the series, but I recommend taking a look at all 12.

"In many cases the answers will be found from the past. Years ago, for example, the building industry used asbestos and lead-based paint, which we know today are highly toxic. The use, location, and quantities of these materials would have been key pieces of data to collect from a project."

Some of the can feel a little buzzword-laden, but remember, Microsoft is demolishing and building an entire campus right now, so they know a thing or two about this entire lifecycle.

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Extensible Energy Funding: Beyond the Press ReleaseAlthough this is a small funding round ($3.4M), it's a signal in the noise because there aren't enough software companies targeting the wholistic advanced supervisory control (ASC) capabilities required to make grid-interactive buildings a reality.

"Not a separate system for each device, but a customer-centric system that allows the customer to benefit from all the flexibility in their facilities – all while delivering the “four Cs” of Comfort, Control, Cost control, and Carbon reduction."

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Private equity’s destructive role in chasing the golden goose of the EHS software industry—This one has it all: healthy skepticism, making fun of research firms' quadrant selections and pay-to-play business models, and recurring patterns we can learn from. In this case, the current ESG-driven software market has a lot of overlap with the EHS+S market of yesterday.

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That's all for this week! Thanks for reading. 👋