Could Uber for HVAC work in Commercial Real Estate?
HVAC service is a $50 billion market that still mostly relies on individual relationships, blind trust and paper-based records.
In this video, Joe Aamidor from Aamidor Consulting explains how a different business model, an Uber-like model, could be applied to HVAC maintenance and repairs in commercial real estate assets.
If you’re interested in diving in deeper, Joe wrote an article on this topic on the CREtech blog
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Video Transcript
Hello, I’m Joe Aamidor from Aamidor Consulting. We’re product and market strategy consultants in the building IoT and smart building space, and I’m here to talk about whether an Uber-like model could work in HVAC service and HVAC repair.
Let’s start with the status quo, what is the current service market look like for HVAC?
First, it’s a massive market; you have almost $50 billion being spent on HVAC service. While that’s a lot of money being spent, you also have about a third of properties not maintaining their HVAC equipment on a regular basis. Instead, they’re doing what’s called a break-fix model, where if it breaks, they fix it, but they aren’t spending money upfront to prevent and avoid breakages. That’s a market that could be tapped with a different business model.
Additionally, the average technician is fairly old, about 52 years old, what this means is that you have an expected retirement wave coming. You will need a way to attract new talent, which could be the adoption of new technology. On the other hand, software and technology can avoid the need for as many people, so it doesn’t replace the worker, but it can supplement the work that’s being done.
Another key dynamic in this industry is the fact that the average service provider, when you look across the landscape at who is providing HVAC service, has $1 million or less in revenue and the average number of people who work for those entities is about 10. While you have very large players, you have a very long tail of small players. Those players may not have all the resources they need to do things outside of just maintaining service, from finding new clients to doing customer success. You can even argue that some of the data-driven solutions that can stream data from an HVAC system could help them quite a bit, because they could utilize that information to deliver better service. They’re simply not going to be able to develop their own tools to do this.
That’s the status quo. If we move on to what an Uber-like model would look like, it starts with making a request. For HVAC, you could make that request directly on your phone much like calling an Uber taxi. If the HVAC system is connected to the cloud, it may be able to make the request on its own, such as a system not being able to supply chilled water at the required temperature. What you’re able to access is a dynamic marketplace which means not just calling the individual you know; it will match you up with somebody who best can provide the service you need.
That matching could be based on specifically what type of system you have, is it a VRF? Is it a chiller? Is it a rooftop unit? It also gives you some ability to find who is local, who has done a good job, and what their ratings are. So, instead of calling who you know because you have that number handy, you’re being matched with somebody who can provide the service that fits.
After that, the service can occur. Somebody has received a message and when they come, they already have a lot of the information already at hand: what’s wrong, what the root cause issue is, and some data behind it that can be analyzed before they get to the site. That way, they can come prepared. Sometimes you come to a site, you learn what is wrong, and you realize you don’t have the right part on your truck, so you have to go back and return later. Some of that can be avoided if you have a connectivity layer that enables you to see what’s wrong before you get there.
You can also do simple things, like check-in when you’re there. If you’re charging for the time on site, the software itself through your phone can automatically tag when you arrive and when you leave. Finally, you can verify that you’ve done this job and put the relevant information in a digitized record. Instead of having a paper-based record of I came, here’s your bill, it’s all done through a software layer and the data can be utilize and analyzed in the future.
Finally, there’s a big feedback component. When you get out of the Uber, you can say it was a 4-star or 5-star ride, and even provide specific feedback. A building owner or operator could do the same thing through this model, which could inform matching in the future.
Additionally, some of the data can be streamed off of the equipment, such as how long before there’s another failure, or how long is the duration between service requests and maybe some of that would be dependent on the fact that the service provider did a good job. That can be used in the future by other people looking for their own service provider. Maybe they want somebody who is known for service that has longevity. Whereas in some cases, you may have an emergency and say: “I need the person who can respond quickly, I need someone who can be here in an hour.” The feedback allows you to find the right person for the right job.
So, what’s the value, why would we do all of this? Why would somebody invest the model to build this model or invest in such a technology?
First thing, you get a lot of the business tools. Just as we said, very small entities are in this space. They don’t have all the tools that they might need to do their job well. This can provide some of those back-office tools to find clients, manage their business and focus on being good HVAC technicians.
For the landlord, they get a lot more transparency. Right now, they may or may not be collecting a lot of this data digitally. There’s certainly movement to collect more data, but this gets them there in a way that fits in with their current business. If you need service, you might as well digitally capture as much data as possible. That can be very useful as they sell the building in the future or determining investments to upgrade HVAC equipment, that data will be valuable.
Of course, and most importantly, it benefits the occupants. Why do we have HVAC in the first place? It’s to make the building comfortable for the tenants and occupants. By repairing and maintaining the equipment in our building more consistently, you’ll have a better indoor environment that improves productivity and worker health and becomes an amenity that makes people want to be in that space. That of course has value to landlords because they can then lease the building for more money, get a higher occupancy rate, and then end up selling the building for more money.
In a nutshell, that’s how Uber for HVAC could work. I’ve written an article if you’d like to learn more and I appreciate you sticking with me. Thank you.
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