Internet of Commercial Buildings: Changes at Johnson Controls

Digitization and the “Internet of Things” is driving change throughout the lifecycle of a commercial building.

Founded by the inventor of the first thermostat in 1885, Johnson Controls has grown into a $38bn diversified industrial and technology company [1]. Johnson Controls’ Buildings division provides services and products for commercial building heating, ventilation, air conditioning (HVAC) and fire and security needs [2].

Within this division, the company’s traditional business model has been focused around the lifecycle of a building [3]:


  • Plan and design – assist engineers in creating specifications for a new building’s HVAC and security systems
  • Construct – deliver and install specified products at the right time during a new building’s construction process
  • Operate and maintain – assist building operators in ensuring their HVAC and security systems run smoothly
  • Retrofit and replace – update and refresh an aging building’s HVAC and security systems

To deliver on these four elements of the company’s business model, the company’s operating model has been focused on product development, engineering services, product manufacturing, and maintenance and replacement services.

With the advent of digital technology and the adoption of low cost distributed computing, internet, cloud, and mobile platforms, Johnson Controls has adapted both its business and operating models in several ways. I will highlight one successful change – remote building monitoring and management – as well as one failed change – the cloud-based building management community platform for innovation.


Remote Building Monitoring and Management

A major innovation in the buildings industry came in the 1990s when Johnson Controls introduced the Metasys building automation system (BAS) which automated control of HVAC, security, fire, and lighting equipment based on pre-set parameters. The following decade, this same equipment were equipped with processing units that recorded performance data and linked to the BAS system, which was equipped with internet connectivity for transmission of these data [4].

This led to a variety of changes in the company’s business and operating models. Johnson Controls product engineers were now able to access performance data for critical HVAC equipment such as chillers (commercial-scale heaters and air conditioners) and could analyze these data to better understand the conditions under which the equipment operated optimally, as well as the causes of equipment failure. The company could then take these insights and feed them back into the product development process to develop longer lasting and higher efficiency products. The service arm of the company could use these insights to sell customers predictive maintenance contracts rather than preventive maintenance contracts, significantly reducing cost and unexpected system downtime [5]. In many cases, buildings operated a patchwork of HVAC equipment and building systems, and, using these performance data, Johnson Controls engineers could also teach building designers and operators how to optimize the interaction between these systems in a building [6] [7].


Platform for Innovation in Building Management

Buildings account for 40% of energy usage in the US, presenting a major opportunity for carbon footprint reduction through energy efficiency improvement [8]. In order to accelerate this, the building design, construction, and operation industries will need to increase the pace of innovation in their business models. In 2011, Johnson Controls introduced “Panoptix,” a cloud-based platform that sought to consolidate data from disparate building systems (e.g., building automation systems (BAS), smart grids, security systems) and enable applications to use that data to monitor and manage building operations. The platform was intended to be equipment OEM agnostic, be open to 3rd party developers, and include community elements for building managers and experts to interact and share knowledge. Upon its introduction, Panoptix was heralded by analysts across sectors as a radical innovation in the buildings industry [9].

By 2015, however, the platform was shut down and the offering removed from the company’s product portfolio [10], due to challenges of creating a true platform environment. Observers report the root cause to be a failure to evangelize the platform and the opportunities it generated to 3rd party application developers [11]. Another root cause may be the potential tension between the risk of Johnson Controls disintermediating their own BAS product and ceding control over customers’ buildings to 3rd party app developers. Other system OEMs may have held similar views, actively resisting the release of data from their systems to be used in the platform, thereby limiting the opportunity for network effects to expand the value of the platform.


Looking Forward

Regardless of the cause, the future of innovation for Johnson Controls Buildings division lies in this sort of platform technology and the effective cultivation of a community of application and service providers who cooperate for rapid innovation. This fact is borne out by other competitors in the industry investing in products similar to Panoptix, such as Schneider Electric’s EcoStruxure platform [12]. Effectively capitalizing on this opportunity will require Johnson Controls and other industry players to adjust their operating models to focus on building world class platforms, while mitigating risks of disintermediation in their other business models.


799 words.



[1] Johnson Controls, “About Us,” [], accessed November 2016.

[2] Johnson Controls, “Global Capabilities,” [], accessed November 2016.

[3] Johnson Controls, “Building Wide Systems Integration: Powered by Brains,” [], accessed November 2016.

[4] Johnson Controls, “Metasys Building Automation System,” [], accessed November 2016.

[5] Johnson Controls, “Smart Connected Chillers,” [], accessed November 2016.

[6] Johnson Controls, “Building Wide Systems Integration: Powered by Brains,” [], accessed November 2016.

[7] Johnson Controls, “Central Chiller Plant Optimization,” [], accessed November 2016.

[8] US Energy Information Administration, “Frequently Asked Questions,” [], accessed November 2016.

[9] Bloom, Eric, et al, “Smart Buildings: Ten Trends to Watch in 2012 and Beyond,” Pike Research, 2Q 2012.

[10] Johnson Controls, “Pioneering the Internet of Things in Buildings,” [], accessed November 2016.

[11] Van Alstyne, Marshall W., et al, “6 Reasons Platforms Fail,” Harvard Business Review, March 31, 2016, [], accessed November 2016.

[12] Schneider Electric, “The EcoStruxture Platform,” [], accessed November 2016.


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Student comments on Internet of Commercial Buildings: Changes at Johnson Controls

  1. An interesting tension that arises out of JCI’s digitization of its Building Efficiency business is the relationship between physical security and digitization. I can see how better, real-time information from systems allows for the more efficient use of energy, but what about the security considerations of this increased data being able to be accessed remotely? This is especially pertinent given JCI as a provider of facilities services to government buildings [1] – how will JCI ensure the provision of security services that this increase in data demands? Will it differ for different client’s security requirements? What are the cost implications of this? I am interested to see how the organization responds to these concerns.


  2. Doug – thanks for this great post!

    As a real estate investor, I’ve certainly been interested in seeing how technological advancements can drive operational efficiency throughout a building’s life cycle. As I was reading about the rise and fall of Panoptix, I was reminded of a company that I think it somewhat similar. BuilDATAnalytics uses a cloud-based software platform that allows construction stakeholders (owners, contractors and construction managers, etc) to have access, from anywhere in the world, to the same real-time information about inventory received, completed construction activities and contracting dollars earned [1]. The idea here is to equip construction stakeholders with the transparency needed to maximize efficiency at construction sites. When considering the root causes of the downfall of Panoptix, I wonder if revamping it so that the social/community component is removed would increase viability. Perhaps its value proposition could, similar to BuilDATAnalytics, just focus on offering users access to building operations information on their own respective projects, rather than the consolidation of various project information.


    1. Kamoy –

      I am the founder of BuilDATAnalytics and inventory of our SAAS solution, CTBIM. You accurately recognized one of our many value propositions, but since you are an investor in real estate, I thought you may be interested in learning how it would be of value to you from a tax and facilities management perspective as well. Not only do we provide real-time feedback on construction activities before during and after construction, but we also provide the kind of contemporaneous records auditors look for when evaluating owners’ claims for accelerated depreciation of components of buildings in cost segregation studies. We help owners realize millions of dollars of tax savings much earlier than the 39 year life cycle of buildings. From an operational standpoint, once a building has been constructed, owners are left with a virtual, portable file cabinet of building data for that structure. If you think of peeling back the layers of an onion, our data allows owners to see, say 5 years down the road, what’s behind a wall if there is condensation. Rather than guess where the wall should be knocked out to address an issue, facilities managers are empowered to make more informed decisions on how to deal with repair and maintenance needs. All of the rough-in and finished photos are stored in the cloud as well as maintenance, warranty, installer, cost information etc. related to the particular asset that is the cause of the problem. Happy to know we’re on your radar.

  3. Great post Doug!

    We hear a lot about Nest and other residential building control systems in bringing innovation to building controls, but not much about the significant improvements and opportunities for innovation in larger buildings. It is great to read about this here. As Kamoy noted, real estate investors are certainly evaluating projects based on the efficiencies made possible through these technologies and, I assume, the ability for an investment property to be retrofitted to take advantage of building control technologies. I see a big opportunity for Johnson Controls to expand its presence in retrofitting, especially as new technologies enter the market and compete with existing software that may or may not properly integrate with existing systems. Do you think Johnson Controls is the best player to manage the platform for these innovations, or should they instead focus on its services business, staying on top of external trends and innovations to serve its clients? There 5 million commercial buildings in the United States with 72 billion square feet of floor space. Urban Land magazine claims that 80% have good potential for retrofitting, meaning plenty of customers for Johnson Controls to serve in the future.


  4. Doug – great post.

    Panoptix seemed like the next logical step in building automation technolgy and I’m interested to find out more about why it failed to gain traction. Data ownership, as you pointed out, seems to be the key sticking point. Tenants, building managers, BAS operators, third-party developers and even upstream providers like utility companies will need to come to some kind of agreement as to who has access to what data and for what reasons. Industrial control firms seem to rely on a vertically integrated structure to grow and remain competitive. What’s different about Schneider’s EcoStruxure? And do you think it’ll be able to succeed where Panoptix failed?

    It wasn’t mentioned in your post, but I’d be curious to know how much interaction there is between companies like Johnson Controls and public sector leadership. It seems like there’d be some natural synergies there to be unlocked – especially as cities increasingly transition to “smart” grids. Rather than reinventing the wheel to understand where power demand is located geographically and temporally, grid designers could leverage and integrate existing systems like those provided by JCI to improve operating efficiency and reduce environmental impacts.

  5. Great post Doug!

    I worked with Johnson controls to ‘retro-fit’ a Building Management System (BMS) in one of our existing HVAC units in the factory. One of the biggest challenges here was that retrofitting sensors and modifying equipment to cater to a connected BMS is extremely expensive. Moreover, as HVAC systems tend to have a minimum life of 10 years, it is imperative that Johnson controls innovates in not only building new connected platforms, but also modular platforms that can connect with older equipment. This will help improve the slow adoption rates of IoT in the existing HVAC market.

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