Envelope For Service
Exploring The Innovative Business Model
Presented on October 13, 2022 at Facade Tectonics 2022 World Congress
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Overview
Abstract
Envelope-for-Service (E4S) is a novel business model developed with the aim of converting the building façade from a traditionally traded good to a combined good plus service agreement scheme. This transformation, duly supported by appropriate business models, is expected to support the evolution of the construction market from linear to circular, engaging several actors along the façade value chain. In E4S actors take responsibility against what happens to the building façade, even many years after they have conceived it, designed it, manufactured it or installed it. This visionary research has been developed jointly between two parties: a globally acknowledged design firm and an applied research institution focusing on energy efficiency. The co-creation process has been developed based on mutual exchanges on project development experiences of the two parties and greatly benefitted from expert interviews, openly sharing perspectives on both strong points and development opportunities along the current façade construction projects value chain. Based on the state-of-the-art, a proposal for the value-chain evolution has been articulated by analyzing the gap between the current façade market, which is strongly trade based, and the most well known as-a-service business models worldwide. As a result, this research detected that a new figure is missing in the value-chain to enable E4S and circularity in facades. This new stakeholder would make profit by exploiting the performance of the façade (energy and comfort wise) during the operational phase, while valorizing second life of façade components. To enable this novel exploitation of façade benefits, a set of performance-based key performance indicators (KPIs) has been defined to support the creation of client service agreements, to build client trust on the process and allow project promoters and financers to measure façade performance and establish pricing based on factual information. KPIs’ definition is still an in-progress work, which will require further investigation to determine analytical processes to allow exact quantification of the façade impact on buildings global energy and non-energy performance.
Authors
Annalisa Andaloro
EURAC Research
annalisa.andaloro@eurac.edu
Miren Juaristi
EURAC Research
miren.juaristigutierrez@eurac.edu
Stefano Avesani
EURAC Research
stefano.avesani@eurac.edu
Giulia Santoro
Arup US, Inc.
giulia.santoro@arup.com
Matteo Orlandi
Arup US, Inc.
matteo.orlandi@arup.com
Keywords
Introduction
The construction industry is undergoing radical transformation, so traditional business models based on trade and transfer of technical responsibility, with little or no attention to construction end-of-life are deemed to stop existing because environmental concerns raised by the current climate crisis are pushing the construction industry, among others, to embrace circular economy models. The research presented in this paper assesses the opportunity of creating a product-service scheme business in the building industry, with a focus on the façade sector. Designers, architects and engineers, as well as façade system manufacturers, facility mangers and real estate developers should be reading this and reflect on the potentially disruptive business model evolution that circular economy activation could bring about in the industry. The application of a product-service scheme to the façade sector (E4S) may allow for the implementation of circular economy business models, so creating value both for end clients and all actors along the façade construction value chain. The topic is in line with FTI’s aim and scope, recognizing the role of facades as means to foster resilience, sustainability and durability in buildings. It also builds a framework for collaborative value-chains in the sector, trying to fill technical knowledge gaps, with a special focus on performance guarantees, maintenance and end-of-life.
The current linearity of construction processes has revealed to be unsustainable in the long term. For this reason, it is crucial to provide the community of technical professionals with increased awareness on how the product-service schemes applied to the façade industry (E4S) can provide improved and integrated business opportunities. Reflections presented in this research are contextualized through the use of value-chain schematic representation and can be immediately applied to the business, given designers and other actors engaged in discussion to define details of the process that are too geography related to be summarized in the method (e.g. contractual agreements, procurement regulations, etc.). To date, direct commercial interests have not been identified yet. However, the set of interviews carried out with façade manufacturing firms, construction companies and energy service companies (ESCOs), affirms the interest of a quota of such actors of the value-chain in deepening the analysis, and possibly engaging in real projects to test feasibility of the assumptions based on market conditions.
The work builds upon experiences of other research groups in the field of façade-as-a-service, as well as takes steps from the many existing literature sources on circular economy business models, in and out of the façade sector. The narrative of this research embeds methodologies spanning from market benchmarking to business model creation and validation, to Strengths-Weaknesses-Opportunities and Threats (SWOT) analysis. The KPIs used to evaluate performance level of the façade build upon building physics and the framework of the so-called non-performance or non-energy related benefits.
The definition of the E4S business model allows the façade professional, despite own background, to (i) get acquainted with the value proposition of a circular business model applied to the façade industry, (ii) become aware of risks and opportunities laying behind the adoption of a circular business model, (iii) consider the integrated E4S approach to develop circular façade projects, based on increased knowledge of roles and responsibilities assigned to actors along the value-chain.
Background
The transition from Linear economy to Circular Economy requires innovative business models that enable the speed and scale of Circular Economy. In 2015, Accenture defined five key business models: Circular
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Method
The exploration of the innovative business model started with the market analysis of current façade business model: the façade value chain was studied and current knowledge areas involved in the
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Research Outcomes
Façade Value Chain for Envelope for Service and Circular Economy
With the Envelope as a Service business model, the façade is transitioning from being considered a construction product to become
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Conclusion and Future Work
This project explored the opportunity of creating a product-service business in the façade and building industry. Despite applications are not yet available on the market as project references, the unique
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Acknowledgements
Authors kindly acknowledge ARUP for funding this research through own funding. All images by the authors.
Rights and Permissions
Accenture Strategy “Circular Advantage. Innovative Business Models and Technologies to Create Value in a Wold without Limits to Grow” (2015). https://www.accenture.com/t20150523t053139__w__/us-en/_acnmedia/accenture/conversion-assets/dotcom/documents/global/pdf/strategy_6/accenture-circular-advantage-innovative-business-models-technologies-value-growth.pdf (accessed November 16, 2021)
Azcarate-Aguerre Juan Francisco. “Façades as a Product-Service System: The potential of new business-to-client relations in the facade industry” (2014). https://repository.tudelft.nl/islandora/object/uuid:0aca38e7-81ae-4ca7-9b1f-ffcf0f2e33fc?collection=education (accessed November 16, 2021)
Azcarate-Aguerre Juan Francisco, Den Heijer Alexandra Cornelia, Klein Tilman. “Integrated Facades as a Product-Service System: Business process innovation to accelerate integral product implementation”. Journal of Façade Design and Engineering 6(1) (2018) 41-56
Bates Ken, Bates Hilary, and Johnston Robert. "Linking service to profit: the business case for service excellence." International Journal of Service Industry Management 14 (2) (2003): 173-183
Ellen MacArthur Foundation. “Towards the Circular Economy” (2013). https://www.werktrends.nl/app/uploads/2015/06/Rapport_McKinsey-Towards_A_Circular_Economy.pdf (accessed November 16, 2021)
Fischer Aglaia et al. “The Circular Facade. Building a sustainable financial reality with Façade-as-a-Service”. (2020) https://knowledge-hub.circle-lab.com/article/8285?n=The-Circular-Facade-Building-a-sustainable-financial-reality-with-Facades-as-a-Service (accessed November 16, 2021)
Rothenber Sandra. “Sustainability through servizing” 48(2) (2007) 83-91