Reposted from the BBC website:

"The Australian city of Melbourne has beaten  Canada's Vancouver to the title of world's most liveable city for the  first time in almost a decade. Vancouver has topped the annual Global Liveability Survey since 2002, but this year fell to third behind Vienna.

Overall, Australian and Canadian cities did well, capturing seven of the top 10 spots. Harare, Port Moresby and Dhaka occupied the bottom of the table. The cities were assessed in five categories - stability, healthcare, culture and environment, education and infrastructure. Vancouver missed out on the top spot because its infrastructure score had fallen due to periodic closures of a key motorway. London was ranked 53, out of 140 cities surveyed. Honolulu, at 26, was the top US city.

The Economist Intelligence Unit, which carried out the  survey, said scores in Europe had been pushed slightly down by the  eurozone crisis, while the Arab Spring had affected ratings across the  Middle East and North Africa. "Australia, with a low population density and relatively low  crime rates, continues to supply some of the world's most liveable  cities," report editor Jon Copestake said in a statement. "Despite the rising cost of living driven by the strong  Australian dollar, these cities offer a range of factors to make them  highly attractive." Melbourne was a joint winner with Vancouver in 2002.

Mayor Robert Doyle said he was "absolutely delighted" with the news. ''For the first time in a decade we are now officially ranked  number one,'' he said. ''When you think the strong Aussie dollar  militates against this, this is even more impressive." Cities were scored out of 100 and the report noted that the top 10 cities were only separated by 1.8 percentage points."

MOST LIVEABLE CITIES 2011

1: Melbourne

2: Vienna

3: Vancouver

4: Toronto

5: Calgary

6: Sydney

7: Helsinki

8: Perth

9: Adelaide

10: Auckland

References:

- Global Liveablity Report

- BBC Website, "Melbourne edges out Vancouver to top liveable city list"

As with my previous post (Urban Electronic Nervous Systems) I spent some time gathering my thoughts on intelligent buildings, particularly on why they are needed, what they are, how to go about creating them and what sort of strategies are available for them. In doing so, I have amalgamated some of the research I have done on the knowledge industry, architectural philosophy, high-performance workplaces (expression, efficiency and effectiveness), the convergence between building services and ICT, as well as maintenance regimes. Once more, I have distilled all my thoughts in a brief presentation that hopefully will give you some starting points for creating an intelligent building yourself.

Changing Economies, Unchanged Workplaces

In  essence, our economy has changed dramatically over the last 100 years,  but the places that drive these economies (i.e. our workplace) has kept  apace and, as a result, there is now a disconnect between work and  place. This disconnect has serious implications on the effectiveness,  efficiency and expression of our workplace with surprisingly large  negative financial impacts on our economies that these places are meant  to promote and support.

It is my belief this is largely because architecture as a profession has focussed too much on the principle of space, at the expense of creating a place by at least partially ignoring the needs of those who occupy these spaces. Nevertheless, organisations also must shoulder some of the blame as they too focussed too much on the concept of space and, what is worse, sought to minimise the financial impact of expensive workspace, thereby ignoring how workspace impacts on human performance and thus has a direct impact on the bottom line. Now, as organisations change even further and collaborative and loose ways of working are becoming more the norm, workplaces need to change with it and support wholly new ways of working.

As a starting point, any designer or occupier should ask himself the question what the function of the workplace is. Should the focus be on effectiveness (e.g. increase knowledge transfer), efficiency (e.g. intensify space utilisation) or expression (e.g. enhance corporate branding)? In reality, it will be a combination of these and the weightings will differ by floor, by department or even by work-team, but it is important to make this distinction as it has major implications of the overall design of that particular workspace. Once this has been crystallised, one should consider the four pillars of a good workplace which I have defined as space (i.e. the actual three-dimensional space), systems (i.e. building services, ICT, technology, etc), climate (i.e. lighting, ambiance, noise levels, temperature, humidity, etc) and the environment (i.e. carbon-emissions, energy usage, waste output, etcetera).

Systems Integration as a Precursor to Intelligence.

Nevertheless, as is too often the case, these are viewed in isolation which creates a whole raft of issues. For example, one cannot just intensify the space utilisation, as a higher population per square metre will require different air flow rates, which requires different systems that are very likely to have a higher negative impact on the environment. They all link together through the concepts of building physics, infrastructure adaptability and building intelligence. For example, as stated before, the function of a particular space will thus impact on the space itself, the systems that reside in it and the climate that is required for it. Likewise, for a high performance workspace, the climate needs to take into account not only our basic human needs, but also the higher levels such as functional (e.g. task lighting, enclosures, etcetera) and psychological (e.g. ownership, territoriality and belonging).

And, finally, the systems (i.e. building, ICT and business systems) need to be linked together appropriately and where needed in order to support the space, climate and environment. In here, I believe that there are three levels of integration possible. Firstly one can speak of integrated building management once the building services are connected to each other so that a building management system (BMS) so that, for example, specific doors open or close in the event of a fire. Secondly, the building services can be integrated with the ICT systems through the use of a converged IP infrastructure, thereby allowing enhanced energy management, integrated software and asset tracking. Finally, all these systems can be linked into business systems such as ERP software so that, for example, the building services shut themselves down for the prescribed period when you book your holidays on the HR system, unless someone books your office whilst you are away for meetings in which case they fire themselves up automatically shortly before the meeting occurs.

By linking these three categories of systems together, one can start to establish a virtuous cycle whereby one can manage the assets, monitor their behaviour over time, maximise the performance on the basis of data and thereby mitigate or reduce risks. However, how this is put into practice may differ on the organisational culture, the purpose of the space and the overall vision of the company. An university I worked with for example, wanted system integration to automate certain processes but also preferred a large array of soft policies whereby people rather than systems manage the building as they saw it as part of a learning experience to show people how, for example opening a window during winter impacts on energy usage. On the other hand, a financial institution I spoke with wanted their people to purely focus at the task at hand with minimum disruption of the workspace, so hard policy through systems intervention was the way forward in this case.

In any case, some level of systems integration is required between the building, ICT and business systems. But what is more, systems integration is a means to an end and should not become an end in itself. One should identify the prime drivers of the organisation that occupies the space and ask oneself what the key benefits are that systems integration could unlock in order to support these prime drivers. With that in mind it also should be determined who walks away with the profit. There is no use integrating systems when in reality it is the M&E contractor that walks away with the profit, whilst the ultimate client sees little benefit.

Towards a High Performance Workplace

At the end of the day, there are no hard and fast rules for a high-performance workplace as each organisation is unique and thus has different requirements for their office. What is clear is that an intelligent building is at the heart of this as it provides a workplace infrastructure that empowers employees through self-regulation, engages employees through collaboration and communication, promotes a strong environmental ethic and sustains organisational agility, all of which are enabled through the adoption and implementation of new technology platforms.

I hope that you will find the attached presentation (please see  "attachments" at the bottom of this post) of use and look forward to any  comments that you may have.

I have been gathering my thoughts recently on the topic of smart and connected communities (S+CC) and given that my mind works best with graphical representations and in a structured manner, I tend to distil this into a presentational format and then start stripping out elements until I arrive at something that is clear, concise and can be understood by even a layman. In design and other aspects of life I have always been a firm believer of “less is more”, as with a clear baseline or framework you can over time start adding elements back in order to create additional levels of complexity for when the need arises.

As a result, the attached is what I arrived at. Please note that this by no means covers all the aspects of S+CC as it is such a vast and far-reaching topic that it will be impossible to cover all aspects sufficiently in a succinct presentation. As such, it is more intended for people who are new to the concept of smart and connected communities, or those who wish to explain it to such an audience.

I have attached notes to the slides, but in essence the core of the presentation is that our economies are shifting from manufacturing to knowledge-based industries and that cities, as the driving engines of such industries, need to change with it and have done so historically. However, we are now at an inflection point where counter-intuitively cities are in many respects the most sustainable living areas, but concurrently have major adverse effects on social, economic and environmental levels. In order to change this, we can “instrumentalise” cities and in doing so sense what they are feeling, hearing or thinking, relay this data and relate it contextually so we can act on it and improve its performance.

However, in order to do so we need to connect the different systems that comprise a system and create a “system of systems” fork work, leisure and services by utilising intelligent infrastructures that include pervasive sensing, the cloud, service orientated architecture, mobilised user-centric services and social networks. In doing so we can create a business model that is beneficial to the public and private sectors, as well as the citizens and knowledge workers that occupy a world-leading city. In order to achieve this, one can target various levels of implementation starting with creating the required networking infrastructure, which can lead to enhanced content and communications, improved building intelligence and thus performance, and finally revolutionising the the way public services are delivered.

Before a city can embark on this journey they need to decide what they want to be, adopt policies for knowledge growth, optimise around the citizens of the city and, finally, apply ICT to improve core city systems. In doing so, they may very well find that some of their services no longer fall within their vision and need to be shed, or that some core competences for their new vision are missing and need to be created or acquired. Partnering with the private sector is crucial in this, but the private sector will need to create an eco-system itself as well as no single company can deliver a smart and connected community as a single entity. With such partnerships in place, a city will need to look at its policies and regulations to ensure that they allow the vision to materialise, create the technology infrastructure to support it and ensure long-term adoption of the new technologies and services amongst its constituents. In doing so, a city can promote the environment, foster a social city and boost economic growth, all at the same time without being mutually exclusive.

I hope that you will find the attached presentation (please see "attachments" at the bottom of this post) of use and look forward to any comments that you may have.

That the internet has garnered an explosion of data generation and sharing that has been unprecedented in the history of mankind is a well known fact. If anything, this growth rate will only accelerate in years to come according to the latest visual networking index by Cisco¹, which forecasts that we will enter the Zettabyte era by 2015 driven by a proliferation of mobile-ready devices, widespread video consumption and an increase in devices connected to the IP network.

Mobile, Video and non-PC devices

According to Cisco, traffic from wireless devices will exceed traffic from wired devices by 2015 as mobile data traffic will increase 26 times between 2010 and 2015 with a staggering compounded average growth rate of 92 percent. Indeed, it is forecast that global mobile data traffic will grow three times faster than fixed IP traffic from 2010 to 2015, reaching a total of 8 percent of total IP traffic in 2015.

Internet video is now 40 percent of consumer internet traffic and will reach 61 percent by the end 2015, not including the amount of video exchanged through P2P sharing. To put this in perspective, it would take 5 years to watch the amount of video that will cross global IP networks every second in 2015. Mobile video is projected by the study to represent 66 percent of all mobile data traffic by 2014, increasing 66-fold from 2009 to 2014-the highest growth rate of any mobile data application tracked in the Cisco VNI Global Mobile Data Forecast.

The number of devices connected to IP networks will be twice as high as the global population in 2015. Because of this increase in devices, plus the enhanced capabilities of such devices, IP traffic per capita will reach 11 gigabytes in 2015, up from 3 gigabytes per capita in 2010. What is more, a growing amount of internet traffic is originating from so-called non-PC devices: Annual global IP traffic will reach the zettabyte threshold (966 exabytes or nearly 1 zettabyte) by the end of 2015. In 2015, global IP traffic will reach 966 exabytes per year or 80.5 exabytes per month. By 2014, there could be over 5 billion personal devices connecting to mobile networks – and billions more machine-to-machine nodes.

Traffic vs Revenues

The result of this growth in the number of devices and the generated traffic is not only that we are running out of IPv4 addresses and that the adoption of IPv6 is going to be vital, it also places excruciating pressures on the internet infrastructure. Of all stakeholder groups, mobile operators are more aware than anyone else of this threat which they generally refer to as “the Scissor Effect” given the forecast interplay between costs and revenues.

Standard economic theory informs us that if costs rise faster than revenues, eventually profits will turn into a loss. When charted this creates a "scissor-effect" whereby the line drawn for costs overtakes that for revenues, creating a loss-making situation. This inflection point is predominantly determined by a paradigm shift whereby mobile broadband becomes dominant at the expense of voice, with the former being one of the aforementioned primer drivers for the traffic growth forecasts.

Fact or Fiction?

Because it is an undeniable fact that total traffic volumes will grow over time, which will place significant financial pressures on operators who need to upscale and update their networks, the scissor graph has almost been taken as the gospel by the telecommunications industry. However, will this effect actually materialise? After all, in order for the traffic curve to bend upwards and the revenue curve to flatten out, two prime assumptions are being made: that average traffic per subscriber will always increase and that average revenue per user (ARPU) will always decrease.

Nevertheless, there are organisations – such as Ericsson² – that are stating that the scissor effect is a myth. According to them, there is evidence that price levels can and will stabilise and that the revenue curve will thus more or less follow the shape of the subscriber growth curve. Indeed, average data volumes per user will flatten out in due course according to them as, firstly, at a certain growth rate new subscribers added to the network will consume less than the average user and, secondly, operators have learned and started to use various traffic management methods to limit usage. Provided that there is a certain growth rate, mobile broadband begins to attract more “normal” and “low” users, which will go hand in hand with a drop in average traffic per subscriber.

Furthermore, in deviance of the scissor graph, Ericsson believes that traffic does not equal cost. In reality, the cost will keep going down as network utilisation increases and so the cost per GB goes down hand-in-hand as traffic volumes increase. Network utilisation will therefore become a key requirement for mobile operators, which is driven by strategic choices regarding peak rates and coverage. According to calculations done by Ericsson, capacity is not a major issue though as they state that capacity can be doubled at a cost per GB of EUR 0.1 to 0.2.

To summarise: “We have already shown that with strong subscriber growth, we do not necessarily see a gap between subscriber and traffic growth. We also see that if ARPU is stabilising, traffic and revenue grow at an equal pace, and the cost per GB goes down. This means that at least for the earlier phases of mobile broadband, where subscribers are still added, we can easily survive or rather profit from the current traffic growth.”²

Mitigation Strategies

Nevertheless, on the longer term there will be a point that mobile operators’ costs will exceed revenues. Juniper Research forecasts that point will happen within the next four years.³ Currently, mobile operators are already struggling to place themselves favourably in a market that is dominated by handset vendors and operating system providers, but their margins will be under dramatic pressure if they do not take actions to address data traffic costs and if their lack of planning results in inefficient networks with low utilisation rates.

Nevertheless, it is not all doom and gloom as every crisis also offers opportunities. Mobile operators can indeed employ a number of strategies that will mitigate the aforementioned trends.

Firstly, as stated before, network efficiency will be absolutely key as it allows CAPEX to be used most efficiently in order to alleviate OPEX increases related with boosting network capacity, buying additional spectrum, and rolling out new infrastructure to meet the rocketing demand for mobile data. Another supply-side mechanism that can be employed can be consumption caps or deep-packet inspection to throttle certain unwanted services that place a disproportionately large burden on the network such as P2P file-sharing.

Obviously, the question that arises is whether these approaches are customer-friendly, and whether they will attract the strong subscriber growth and subsequent network utilisation rates that are required to survive in this new climate. An alternative approach could be based on intelligence, whereby services are tailored to different customer types using different scenarios. What is required for this is the establishment of a network intelligence infrastructure that can provide the data, in real-time, that is required to make this a reality.

On this basis different tariff plans can be created, which may or may not include unlimited usage packages. A basic premise of the scissor effect is flat rates will not be sustainable and that users will have to pay per GB, however, according to the Telecoms Europe website: “Some operators, with the newest, most efficient networks, have found that flat-rate "unlimited" tariffs are profitable. However, many operators are attempting different models to support the revenue part of the profitability equation.”

Now, how mobile operators will bring their services to market – or if they will be even supplanted by over-the-top providers, handheld manufacturers or other new entrants – matters to smart + connected communities as ubiquitous internet access is a fundamental principle for such communities. It is my firm belief that mobile broadband will be the growth platform for the future and that business mechanics will follow suit, although it is too early to tell in exactly what shape or form.

References:

1. “Visual Networking Index”, Cisco, 2011
2. “Mobile Broadband – Busting the Myth of the Scissor Effect”, Ericsson Business Review #2, 2010
3. Wood, N. “Mobile Operator Costs to Exceed Revenues in Four Years”, Total Telecom, 2011

In my two previous posts on environmental sustainability (“Sustainability and the Built Environment” and “Doing Well by Doing Good”) I touched upon the topics of what it entails, what drives it, what costs are involved and what value the various stakeholder groups can derive from it. Of course, the question that still lingers in the back of the head of many is if sustainability is actually here to stay – in spite of the overwhelming evidence that supports this notion – and, if so, what sort of strategies companies can adopt in order to not only be a good corporate citizen but also benefit from a positive stance towards the environment.

Fad or Reality?

Over the last years the economic pressures on the construction industry have increased. It is during these periods that inefficiencies in business processes and practises are cruelly exposed. The last decade has been a boom time for the industry in most industrialised countries and as a result there is still a culture where change is not accepted; “We have always done it this way and it seems to work fine”.

Already there are signs that support this notion with regards to sustainability. The National Federation of Builders reported recently that over half of projects tendered did not put in place conditions with regards to sustainable development. As such, during times of recession it becomes a very real danger that contractors are being asked to do the minimum possible to achieve the standards as set out by legislation.

It is evident that in a recession immediate cheapness will win out, even if that is slightly irrational. In spite of this, sustainability will remain high on the agenda for many clients. After all, some sustainability measures have no or a short payback period. For instance, the right thermal envelope for a typical office building can save money on heating and cooling costs very quickly, and may even cost less than a traditional glass curtain wall. This is immediately attractive. Other measures are required by planners: the recession will not change this. As a result, there will be a keen search for green measures that provide clear payback in a limited period, and where that payback can be easily channelled to the party taking the green decision. This will mostly affect specification, rather than contract terms.

In spite of this short-term pressure on sustainable development, as the economy picks up, so will a desire for ‘green’ buildings. Firstly, there has been a growing consensus globally that financial stimuli in the economy should contain a green element, including funding for making buildings more energy efficiently, tax breaks for renewable energy firms, etcetera. Secondly, governments globally are continuing to legislate to reduce carbon emissions. Thirdly, as rating systems, certification and other benchmarking becomes more commonplace, there is a growing amount of research which supports the business case for sustainable property and many clients are already starting to understand these benefits, as outlined previously.

At the end of the day, climate change is a much bigger, longer-term issue than the recession. Governments have treaty commitments to reduce carbon emissions. Despite the recession, it is expected that further sustainability and climate-change regulations will affect buildings. The question is the timescale, not the political will. Those companies that use the recession as an opportunity to re-positioning themselves as movers and shakers for the sustainability agenda are more likely to emerge from the recession in a position of strength in terms of competitive advantage.

Me-too or market leader?

Whilst the recession has certainly put a brake on some aspects of sustainability, all the signs are pointing towards a future where sustainability will become the norm in everything that we do as individuals, organisations and communities.

This will most certainly also shape how sustainability is perceived by for-profit organisations. Traditionally, it was thought that environmental legislation brought about a balancing of the negative environmental impact of markets at a cost to business. This meant that any attempt by a business to improve environmental performance was a cost to the business and, therefore, a reduction in profitability.

However, more recently management thinkers like Porter and van der Linde started to argue that environmental management could create competitive advantage in the market place. They concluded that legislation provides an incentive to companies to invest in research and development, which provides ‘innovation offsets’ by creating new products or greater efficiencies, lowering the cost of meeting legislation and leading to enhanced competitiveness. Moreover, companies can gain a first mover advantage in markets and obtain supernatural profits by creating barriers to entry through industry standards.

In particular, being in a relatively "dirty" industry such as construction, service providers will gain competitive advantage through a strong emphasis on environmental performance. The opportunity to gain competitive advantage is even further increased when there is uncertainty in the general business environment, complexity in the issue and rivalry in the market place. Sustainability in the construction industry certainly meets these criteria, yet most companies focus on the low hanging fruits in order to achieve the threshold competency in the market and thus exceeding legislation could become a differentiator or even a core competence creating sustainable competitive advantage either through enhanced reputation (external perspective) or waste minimisation (internal perspective).

In order to optimise the economic returns on investments and subsequently transform them into sources of competitive advantage, five generic strategies have been identified:

The Eco-efficiency strategy is basically doing more with less and thereby lowering the environmental impact. Eco-Efficiency implies the complete elimination of waste in corporate processes. By optimizing the overall use of resources, such as the reduction of energy consumption and waste, companies can also reduce the costs associated with them and, consequently, become more competitive. Eco-efficiency is based on lowering costs in internal operations and has inherent risks as the efficient management of costs and risks is really a part of operational effectiveness, not strategy. Everyone will soon be doing it, so it becomes a license to operate rather than a longer term source of value.

Beyond Compliance Leadership requires that companies go above and beyond what their competitors are doing. Such strategies can allow companies to spin their investments in greening internal processes into external reputational advantage, for example by joining Green Clubs. In doing so, firms can reap value in terms of brand and reputation, as well as influencing standards and regulations, though the primary value is defensive, in deflecting criticism and antagonistic campaigns, and deterring regulation.

Eco-branding involves finding a point of differentiation based on the ecological characteristics of certain products. It is based on differentiation in the final product market through various types of eco-labels, such as the FSC labels on wood products or carbon labels, though there are significant methodological problems in developing reliable and meaningful labels, and consumers are confused or indifferent.

In contrast, Environmental Cost Leadership entails selling products with good environmental performance but with an equally attractive price proposition. If one has to sell products with good environmental performance and can only compete on a price-basis, a company not only has to rethink the way it designs a product but also change the way it sells and the way the product is consumed, which requires a substantial amount of innovation.

Finally, Sustainable Value Innovation (SVI) entails re-shaping the industry through the creation of differential value for costumers and contribution to society in both reduced costs and environmental impact. The aim of this strategy is not to out-perform the competition in an existing industry but to create a new market space, thereby making the competition irrelevant by giving the consumer more value per product/service at lower costs.

Which one of these strategies your organisation should adopt depends on a whole set of circumstances that are specific to your organisation such as the industry you work in, the pressure that this industry is under, the demands that customers are placing on you, in how far legislation is driving you to adopt an environmentally friendly approach, the scope for differentiation, the level of impact that your organisation has on the environment, etcetera. One size does not fit all and although sustainable value innovation is in a way the holy grail, it will not be attainable for all organisations, nor should – at least on the short term – every organisation aspire to achieve this.

The skyscrapers, shopping centres and architectural masterpieces that were once a symbol of this country’s progress are in danger of becoming symbols of waste and overconsumption. But this level of consumption is not sustainable, and several factors are fuelling a search for alternatives among organizations that operate buildings and building portfolios.

There is now very strong scientific evidence to suggest that climate change – and the lesser well-known crisis of a speeding up in the extinction of species – is man-made, and the construction industry has a foremost role to play in countering it as it has a disproportionally large negative impact on the environment.

The ‘eco footprint’ of the built environment is indeed considerable as around 50% of all global resources go into the construction industry. Buildings account for approximately 44% of total carbon dioxide emissions, whilst around 45% of energy generated is used to power and maintain buildings. What is more, the industry itself is wasteful as well in its practice as in the region of 13 million tonnes of the construction and demolition waste produced every year in the United Kingdom is made up of materials delivered to site but never used.

It is in this light that the industry needs to decide how it wants to position itself. Stakeholders are becoming more knowledgeable about sustainable development, legislation is becoming more extensive and taxes are starting to affect the value propositions of businesses. Nevertheless, the response of the industry has been characteristically slow and, for example, only 7% of new built offices are BREEAM (the UK equivalent of LEED) rated as ‘good’ or above.

What is it all about?

Sustainability took centre-stage on the international podium after Gro Harlem Brundtland’s speech in 1987 when she promoted the concept of ‘sustainable development’ in the UN report ‘Our Common Future’ as: ‘Development that meets the needs of the present without compromising the ability of future generations to meet their own needs’.

Subsequently, the drive to balance the inherent tensions between economic growth and environmental and social impacts also led to what is often referred to as the ‘Triple Bottom Line’ approach to sustainable development, which attempts to rationalise the development that leads economic growth, whilst maintaining social inclusion and minimising environmental impact.

Translating both these definitions into the construction setting has been proven to be somewhat problematic. In fact, there are numerous definitions of ‘sustainable’ and ‘green’ buildings, but little agreement on the terms. One possible definition of ‘sustainable buildings’ is provided by the UK Green Building Council as:

Buildings which:

• Are resource efficient (physical resources, energy, water, etcetera);
  
• Have zero or very low emissions, (CO₂, other greenhouse gases, etcetera);
• Contribute positively to societal development and well being, and;
  
• Contribute positively to the economic performance of their owners and/or beneficiaries and to national economic development more generally.

The carrot or the stick?

With the rise of globalisation and the communication revolution that arose from it, people increasingly started to question the current patterns of consumption, thereby putting pressure on the international community to place sustainability at the top of their agenda.

It is then no wonder that over the last decade or so, sustainability has been driven forward into our industry predominantly through legislation: building regulations are continuing to change to meet ever more stringent energy efficiency and low-carbon standards, planning policy now requires sustainable construction to be considered in new developments, many clients require green design to be an integral part of their buildings and contracts are increasingly rewarded on the basis of environmental management policies.

Legislation will remain to be a dominant force in decades to come as a short selection of upcoming commitments and recommendations within the United Kingdom underlines:

• 2010:       Carbon Reduction Commitment (CRC) came into force;
• 2012:       25% of construction products to be procured from responsible suppliers (Strategy for Sustainable Construction);
• 2016:       All new build homes to be carbon-neutral (Code for Sustainable Homes);
• 2016:       All new schools to be carbon-neutral (Budget Speech, 2008);
• 2018:       All new public buildings to be carbon-neutral (Budget Speech, 2008);
• 2019:       All new non-domestic buildings to be carbon-neutral (Budget Speech, 2008);
• 2020:       Reduce CO₂ by 30% and water by 25% on the central government office estate (Government Sustainable Procurement Action Plan);
• 2020:       Reduce UK CO₂ emissions by 20% from 1990 (Climate Change Committee);
• 2050:       Reduce UK CO₂ emissions by 60% from 1990 (Queens Speech, 2009)    .

It is then not surprising that in a survey of the construction industry (executed by the law-firm Taylor Wessings) over 70% of total respondents considered the sustainability agenda to be very or highly important to the industry as a whole. Furthermore, the most important driver for the sustainability agenda was deemed to be legislation, followed by rising energy costs and potential commercial or brand damage. However, contractors did not find potential brand damage a concern, but instead are more concerned about ‘the risk of being left behind’, which clearly indicates that most contractors adopt a me-too approach.

On the flip side, when the same respondents were asked what form of government strategy would be most effective in driving the sustainability agenda forward, tax relief was the most popular response (40%), though regulatory control followed closely behind (39%), and a significant proportion (17%) believe that grants or aid will be most effective.

Furthermore, it was felt that regulatory change is the most effective approach for new developments, whilst for existing stock addressing the rising cost of energy and security of energy supply will be more important in driving change.

These results suggest that although the 'stick' of regulatory sanction is acknowledged to have its place, a clear majority believe that the 'carrot' of financial incentive will be the most effective strategy for driving real behavioural change. After all, regulation is slow and it tends to stifle innovation in a lot of ways because people just try to meet the regulation, even more so as impediments exist that prevent them from going beyond minimum compliance.

Does it cost the earth?

In the ‘Never Waste a Good Crisis’ report by Constructing Excellence, four blockers were identified that historically stifled change within the construction industry and still exist today: business and economic models, capability, delivery model and industry structure. With regards to sustainable development, these blockers exist as well, but are further exacerbated within the private sector because of their emphasis on financial business drivers.

It was argued in ‘A Report to California’s Sustainable Building Task Force’ that governments see the benefits of sustainable buildings more through social and environmental benefits with some regard to financial. On the other hand the private sector may be less likely to care about health and environmental impacts and hence might perceive lower financial benefits of building ‘green’.

However, while best-in-class performers achieve impressive results – from cost reductions and improved efficiencies to new customer acquisition – companies still cite budget challenges or the difficulty of demonstrating ROI as the main blockers to sustainable development. But does sustainable development really cost the earth financially?

The typical assumption is that the build costs associated with the delivery of new and refurbished ‘green’ buildings (ie. BREEAM ‘excellent’ standard) carry an unviable premium. However, there is an increasing body of evidence emerging that contradicts this long-held sustainability construction myth. For example, a cost analysis carried out by Cyril Sweet, identified that capital costs associated with reaching the ‘Very Good’ and ‘Excellent’ levels of sustainability performance in the BREEAM were in the range of a few percent. Davis Langdon, the California Sustainable Building Task Force and the US General Services Administration came to similar conclusions in the United States of America.

Crucially, if suitable consideration is made in the planning, commissioning and design phase prior to office construction, it is quite possible for no build cost premium to exist at all, provided there is a multi-disciplinary approach between relevant stakeholders in the procurement, design and sustainable construction processes, and practices are embraced from the start as a key performance requirement.  Evidently, this is not the norm within the industry. On the contrary, because of the aforementioned blockers, currently there exists a circle of blame between the four stakeholder groups (investors, developers, occupiers and constructors) blaming each other for a lack of progress.

Investors often have a short investment timeframe, typically holding real estate assets for up to five years and thereby discouraging them from making investments with a longer payback periods. There are also problems around ‘split incentives’, where those who make the initial investment (i.e. landlords) are not the ones (i.e. occupiers) who reap the long-term benefits. Furthermore, the long-standing practice of competitive bidding and the appeal of lower costs in standard construction provide a deterrent to green buildings.

Therefore, although sustainable development should not be more expensive than standard construction, until the tensions between the various stakeholder groups are resolved, one should assume that typically building ‘green’ will have some build cost premium. Nevertheless, if a longer term perspective is taken, for each stakeholder group this initial additional cost will pale into comparison to generated future benefits.

The history of the workplace can be boiled down in three simplified types of offices, each reminiscent of the period that they were conceived. The first type is referred to as a ‘Taylorist’ office which is based on the principles of Scientific Management, which aimed to develop superior methods and machines by standardising the tools and environments of work around the turn of the 20^th century. The ‘Social Democratic’ office came about as the consequence of post Second World War and economic reconstruction, and constituted purpose built and highly specific buildings with a view of long-term ownership and socially driven design. The third type, the ‘Networked’ office, was made possible by robust, reliable and ubiquitous 21^st century information technology, with the aim of being responsive to customer demand through output driven processes.¹

In spite of these three categories, the ‘Taylorist’ office still remains the de facto paradigm for office design even though our requirements from offices and understanding of productive environments have changed dramatically ever since. The results are as staggering as unfortunate. Gensler² estimates that Inefficient offices cost British business £135bn per annum and a better designed workplace could improve productivity by 19%. The economic loss to the US of poor indoor environmental quality alone was worth approximately $60bn in 1989 and the average productivity loss for all workers in the US due to poor internal working environments equates to approximately 3% for all white collar workers. The self-reported productivity loss for UK workers in a survey of office workers was, on average, 3%³.

Perhaps this is not surprising given that workspace is in a constant state of change. These changes can be small-scale (e.g., adding new desks or offices for new employees) or large-scale (e.g. moving the entire company into a new building) and anywhere in between. Indeed, the 1999 CIBSE survey found that 30% of organisations have experienced churn rates of over 50% over the three-year survey period⁴. Not to mention that the workforce itself is in constant change, and the OGC⁵ estimates that when annual leave, training and a diverse pattern is taken into consideration desk occupancy levels rarely exceed 60%.

Form, Function & Human Needs

These levels of inefficiencies and wastage are quite simply mind-blowing, even more so since there is a stark realisation that something is wrong. According to the architects Gensler⁶ nine out of ten believe that workplace quality affects their attitude, job satisfaction, and productivity, and also makes a company more competitive. There is a striking discrepancy, however, between this high valuation of workplace design and workers’ perceptions of how it is undervalued by their own companies. Close to half of office workers—46 percent—feel that their employers do not see providing a high-performance workplace as a priority, and two-thirds see minimizing costs or maintaining the status quo as the main goal behind the design of their own office.

Obviously, there are other facts that impact on staff productivity, performance and satisfaction. According to CABE⁷, in assessing staff satisfaction, organisational factors (hierarchy, culture, reward systems, leadership) have the largest influence, followed by individual factors (such as aspiration, reward, loyalty, self-motivation, aptitude, experience and training). The extent to which office infrastructure contributes to these factors is difficult to quantify, but claims have been made that the workplace is responsible for 24 per cent of job satisfaction and that this can affect staff performance by 5 per cent for individuals and (because of the benefits of improved interaction) by 11 per cent for teams. To put this in context, it has also been estimated that a 2–5 per cent increase in staff performance can cover the total cost of providing their accommodation.

Indeed, designing for human interaction should be the central role of office space. People are the users of the workplace, and the purpose of a workplace is to facilitate the business processes used in achieving their goals. Even if a workplace development initiative is primarily driven by financial, technological, or productivity objectives, people’s reactions to the workplace can have significant ramifications that control whether these objectives are achieved. Clements-Croome⁸ concurs with this and states: “What needs to be recognised in the building design process is that there are three key attributes which interact. The type of building, the facilities provided for environment and utilities, and the use of the building are three inter-related facets. In practice these issues are often considered separately but their interaction is ignored. In other words form, function and human needs are the foundation for deriving architecture which not only contributes to the well-being of the individuals occupying the building but also makes a significant impact on the business organisation.”

Efficiency or Effectiveness?

The problem with current offices is that many of the decisions in the design, construction and facilities management processes are led by capital cost arguments which often give rise to low cost but also low quality buildings. As a result, the overriding design criterium has been efficiency, which essentially equates to landlord efficiency (i.e. the proportion of gross floor area which is rent-earning), density of occupation (i.e. the amount of net lettable space allocated to each desk space) and utilisation rates (i.e. the number of people allocated to each desk space)⁷.

However, the cost of providing accommodation for office workers in terms of both capital (construction) costs and building running costs is dwarfed by the costs of their salaries and benefits. In the words of Lomonaco⁹: “If the design and operation of the building (a low-cost component) affects the productivity of the office workers (the highest-cost component), a substantial economic leverage effect can be expected through carefully conceived building design and operation. In other words, improving the office environment could be a highly cost-effective strategy if it enhanced the performance and satisfaction of the occupants.” To put this in perspective, the OGP¹⁰ estimates that over the typical 20-year life of a facility, 90 percent of its cost can be attributed to the salaries of the people working there, while only 5 percent is initial construction costs and another 5 percent is operation and maintenance costs. Similar numbers are quoted by Thompson¹¹, WDBG¹² and CABE⁸.

It, therefore, makes perfect financial sense to instigate a shift in focus from efficiency to effectiveness in office design. According to Heerwagen¹³ a building can have both positive and negative effects on performance. Negative effects are frequently associated with discomforts, distractions or health risks that interfere with peoples’ ability to do their work or that reduce their motivation to work. However, he states that: “... the mere absence of discomforts and problems may not by itself produce high states of well being and performance. Realization of well-being and performance benefits may depend upon the degree to which a building directly or indirectly affects psychological and cognitive functioning and physical health.”

A Lack of Understanding

The problem is that too few organisations get beyond merely reducing the annoyances associated with work environments. To do otherwise, management must regard its prime asset, the workforce, as a collection of individuals with a unique set of needs and motivations, something that a lot of companies struggle to get to terms with. This is not helped by the fact that the correlation between work environments and staff productivity are well researched, yet most of it has remained inconclusive. As of yet, there are no hard and fast rules for a perfect work environment. As a result, in spite of a growing need for, and exposure to, workspace design decision making, managers still tend to see “space” as peripheral to their core activities and, indeed, to the mission of their companies.

This is not helped by the way the construction industry provides its services. One of the differences between construction and other industries is that the customer’s decision to ‘buy’ a product in construction is usually based on the ‘concept’ of the final product rather than on the demonstrated finished product. However, this concept is then defined by the people who are often cut off from the wider and more important strategic business considerations and they are rewarded primarily, and sometimes exclusively, for cost cutting: corporate real estate and facilities managers. In practice, the goals of most corporate property teams boil down to three things: reducing the cost of real estate as much as possible, helping the business use real estate to achieve as much profit in the business as possible, and reducing any possible risks to the company’s reputation. All of these cater to efficiency, but are anathema to effectiveness.

Indeed, as CABE⁷ puts it: “... a company’s most natural response to that same force of competition is to seek to drive down its costs – and premises represent a cost that is both readily identified and readily comprehended. As in so many facets of life, however, a preoccupation with cost may actually destroy value: but the ways in which office accommodation can create value for a business, not just through economy but also through improving the effectiveness of its people and broadcasting positive messages about its values, are inadequately understood.”

Moving Beyond Efficiency

As the economy is changing towards a knowledge economy, so should offices change. Already many companies are moving to distributed organisational architectures so that they can bring the right people together to make decisions. Behind the shift is the need for improved collaboration – not just across companies, but also with their partners, suppliers and customers. One way that companies are fostering this is to break down the scale of the workplace and tailor it more closely to the way people really collaborate. Workplace flexibility is a key component of this as fixed physical assets cannot be reconfigured to meet changing business needs as quickly as organisational processes and structures. They may act more as a brake than as a springboard for change, given the significant shift between past and future patterns of accommodation need.

I find the concept of an integrated workplace strategy, as introduced by MIT¹⁰, a useful one to define what it is that organisations should be aiming for: “[an integrated workplace] ... is a system that creatively combines wisdom about the nature of physical settings (where the work is conducted); the information technologies used in the performance of work (how data, opinions, and ideas are accessed, processed, and communicated); the nature of work patterns and processes (when and how tasks must be performed to achieve business objectives); and finally, organizational culture and management (the formal and informal values, expectations, policies, and behaviors that influence all the other factors).”

McGregor¹⁴ breaks this down further into five key attributes that buildings need to possess in order to be able to meet users’ needs through time:

1. Adaptability – Ensuring the workspace can be configured and re-configured to suit different building users, their changing needs, work processes and layouts;
2. Capability – Providing the potential to introduce, replace and change building elements, services and systems throughout any user’s occupancy of the workspace and the building’s life;
3. Compatibility – Ensuring that all aspects of the building are wholly co-ordinated and integrated, and none selected or installed without its impact upon, and the influences from, all other elements being considered;
4. Controllability – Providing users with the means to maximise their use and operation of the workspace, its services and facilities, while minimising the conflicts between corporate values and individual values;
5. Sustainability – To ensure that the workspace and its facilities are operated and maintained to enhance individual and corporate productivity, and their health and wellbeing at all times, in an environmentally responsible manner throughout the entire life of the building(s).

Creating such an office is not an easy task as it means different things to different organisation. Dependant on their dominant work mode, culture and business some may value a need for distraction-free work whereas otheres may thrive on collaboration and a certain level of chaos. In spite of this, the benefits are clear. In a survey executed by Gensler⁶ managers reported employee productivity increases of up to 19% once a workplace was improved, whilst an increase of a mere 1% would be sufficient to cover the cost of necessary infrastructure improvements to enhance most working environments⁸.

References:

¹ Duffy, Frank “The Shape of the Post Recession Workplace”, presentation at the NLA conference, 2009.

² “These Four Walls – The Real British Office”, Gensler: United Kingdom, 2005

³ Raw, G. et al (1989). Further Findings from the Office Environment Survey: Part 1. BRE, BRE/109/1/9.

⁴ Brittain, James; Jaunzens, Denice; Davies, Hywel “Designing for Flexible Building Services in Office Based Environments”, ABS Consulting: United Kingdom, 2000

⁵ “Flexible Workspace in the DTI – Working Space Harder”, OGC: United Kingdom, 2007

⁶ “These Four Walls – The Real British Office”, Gensler: United Kingdom, 2005

⁷ “The Impact of Office Design on Business Performance”, CABE: United Kingdom, 2008

⁸ Clements-Croome, Derek J. “Environmental Quality and the Productive Workplace”, University of Reading: United Kingdom, 2003

⁹ Lomonaco, Carol; Miller, Dennis “Environmental Satisfaction, Personal Control and the Positive Correlation to Increased Productivity”, Johnson Controls: United States of America, 2007

¹⁰ “The Integrated Workplace”, OGP: United States of America, 1999

¹¹ Thomspon, Brian, “Property in the Economy”, Drivers Jonas: United Kingdom, 2008

¹² ”Productive”, WDBG: United Kingdom, 2008

¹³ Heerwagen, Judith; Johnson, Jeffrey A. Et al “Energy Effectiveness and the Ecology of Work: Links to Productivity and Well-Being”, 1998

¹⁴ McGregor, W R. 1994: Designing a ‘Learning Building’. Facilities Vol 12 No 3, 9-13.

We intuitively understand that cities have a major impact on the economies that they reside in, but what is a less well-known fact is that this impact is disproportionally large. In other words: the dominant parts of the world’s economies are locked up in their cities. For example, McKinsey¹ states that although half of the world’s population lives in cities, they actually generate approximately 80% of global GDP. However, they continue by stating that the urban economic story is even more concentrated than this suggests as the top 600 urban centres – with only a fifth of the world’s population – actually generate 60 percent of global GDP.

And this applies even more so to primate cities (see my previous post: “A Brief History of Cities”), Tokyo accounts for 28% of the Japanese population, but 40% of the country’s GDP. Paris is home to 16% of the French population, but is responsible for 30% of its GDP. In the developing world, Lagos is home to 8% of Nigeria’s population but contributes 30% of the country’s output.² And there is no sign of abating when it comes to this skewed effect as the top 100 cities ranked by their contribution to global GDP growth in the next 15 years will contribute around 35 percent of GDP growth to 2025.¹

Global, yet Local

Indeed, in OECD countries, most metropolitan regions have a higher GDP per capita than their national average, higher labour productivity levels, and many of them tend to have faster growth rates than their countries. So the question arises, why this is case? First and foremost, the natures of economies have changed dramatically over the last decennia. Whilst the developed world was industrialised and the developing world was largely focussed on rural life, we now witness dramatic shifts whereby in the case of the former service provision has supplanted production as the primary economic activity and the latter are either rapidly industrialising or in some instances even leapfrogging directly into services.

In her explanation of the emergence of global cities, Sassen³ points to the opposing geographical trends of dispersal and centralization that accompany globalization. The global dispersal of economic activities, helped by both space-shrinking technologies and deregulation measures, creates a huge demand for expanded central management functions. These functions include corporate headquarters and advanced business services, such as accounting, advertising, consulting, and financial and legal services. These services, according to Sassen, tend to concentrate disproportionately in large global cities, such as London, New York and Tokyo, where their operation can benefit from “territorialized business networks” – in other terms, institutional thickness and territorial embeddedness. In short: a globally integrated, services-based world economy means that business will locate activities where capital – both human and physical – is concentrated, i.e., cities

Skills Matter

According to Hutton⁴, the reason for this is that both the knowledge economy and globalisation happen in places, albeit unevenly, and that cities and regions often provide the nodal points where these processes interact. In his view there are two main reasons why cities and city-regions matter in the knowledge economy and in the globalised economy. Firstly, “...because they offer productivity benefits, including access to markets and a variety of external economies of scale, including access to large and specialised labour pools (particularly of high skill workers).”

This is important because three-fifths of businesses list availability of qualified staff (human capital) and quality of telecommunications (physical capital) as absolutely essential.⁵ A stakeholder research sponsored by Siemens⁶ also states that unemployment and underemployment emerge as the predominant economic challenge in the survey (cited by 20% of respondents overall). It is the top economic challenge according to respondents in emerging and transitional cities, and comes second only to economic development as a concern in mature cities. The next most commonly cited issues are economic development and the rising cost of living (both 14%).

Hutton⁴ continues by stating that “... cities and city-regions also offer proximity to other knowledge workers, enabling tacit knowledge to be shared; the knowledge that cannot be easily codified and is best exchanged and developed through face-to-face contact and trust-based relationships. They offer a critical mass of firms, who interact through staff moves, networking and personal relationships. In other words, firms can benefit from spill-over effects from other firms’ innovative activity. These spill-over effects are particularly important in the knowledge economy as they can significantly contribute to companies’ ability to respond innovatively to changing markets.” This is underlined by Dirks⁵ who shows that cities hold a stronger capacity for innovation as more than 81 percent of Organization of Economic Cooperation and Development (OECD) patents are produced in urban regions.

The second reason, in the eyes of Hutton⁴, that cities and city-regions matter in the knowledge economy is consumption benefits: access to a rich variety of goods, services, cultural facilities and social opportunities. Research suggests that the benefits of living in a city or city-region may be particularly attractive for the most talented and entrepreneurial workers – in other words, the workers that drive the knowledge economy. This can in turn mean that knowledge workers gain access to a range of employment options, giving them the incentives to develop specialised skills. Clustering consumption services together also supports further innovation, as well as enabling providers to better understand their markets. Interestingly enough, whilst cities are attractive to educated workers, such workers also disproportionally contribute to the future growth of cities. De La Garza⁷ estimates that a decadal increase of 10 per cent in the share of the adult population with a college degree translates into a rise of between 3 and up to 5 per cent in the population growth rate during the same period.

Masters of their own Destinies

In such an urbanising world cities will be the driving forces of economic growth and thus will gain greater power, freedom and clout within their national economies. We will not see a return to city-states as during the time of Ancient Greece, but cities will gain greater control over their own development, both economically and politically. Economically, they are becoming the hubs of a globally integrated, services-based society. Politically, they are in the midst of a realignment of power – with greater influence, but also greater responsibility as it is no longer enough that a national government is doing the right things to attract investment.

Indeed, as Cohen⁸, senior advisor to the world bank, stated: “Importantly, we can conclude that the productive contribution of urbanisation to national welfare may change as a result of global economic processes, but its overall role in providing more than half of GDP and much more in some countries will continue and increase in importance. The economic future of countries will depend to an increasing degree on the productivity of urban based economic activities.”¹⁴

References

¹ “Mapping the Economic Power of Cities”, McKinsey: United States of America, 2009

² “Megacity Challenges – A Stakeholder Perspective”, Siemens AG: Germany,  2007

³ Sassen, Saskia, ed., 2002, Global Networks, Linked Cities, New York: Routledge.

⁴ Hutton, Will “Building Successful Cities in the Knowledge Economy: The Role of Soft Policy Instruments”, the Work Foundation: 2008

⁵ Dirks, Susanne and Keeling, Mary “A Vision of Smarter Cities” IBM: United States of America, 2010

⁶ “Megacity Challenges – A Stakeholder Perspective”, Siemens AG: Germany,  2007

⁷ De la Garza, Adrian G. “Do Smart Cities Grow Faster?” MPRA Paper 10811, September 2008.

⁸ Cohen, Michael A. “The Impact of the Global Economy on Cities”, The Challenges of Urban Governance, ed. Mila Freire and Richard Stren; (Washington: The World Bank, 2001), pp.5-17