Interview -October 2001
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Ken Sinclair and
 Jack Mc Gowan

John J. “Jack” Mc Gowan, CEM
is author and Vice President of Energy Control Inc., an Energy Service Company and System Integrator.  Mc Gowan has worked on numerous multi-million dollar projects in every capacity from design through financing as an end user and ESCO. He has published 5 books including “Direct Digital Control” on Fairmont Press.  The Association of Energy Engineers named him 1997 “International Energy Professional of the Year”, and he is listed in Who’s Who in Science and Engineering, Millenium edition, Marquis Press.

Selling New Automation Concepts

[an error occurred while processing this directive]Sinclair - Jack, you have expressed an interest in bringing Information on the Marketing of Building Automation to our online Magazine. Please expound.

McGowan:  I believe that there have been 3 critical stages in automation industry history. Each stage was triggered by an event that led to evolution of technology that increased the sophistication of control products. The first stage occurred in the 1960's when pneumatic controls in large buildings were tied into central panels with elaborate diagrams and status lights to allow operators for the first time to manage a building by knowing what was happening from one location. The second major stage was initiated by the energy crisis of the 1970's and led to wide spread application of Direct Digital Control as we know it today. The third stage was initiated by the demand for data communications standards and the control industry's movement toward open systems. In my mind the industry is evolving into a fourth stage that has been spurred by the convergence of automation and information technology. This stage is fundamentally changing the way that automation technology is bought and sold, and like the market frenzy created by the energy crisis of the 1970's, is introducing a dramatic number of new players into the market. In my mind this has tremendous implications for the future of building automation, and it makes sense to develop a forum for exploring how to maximize the advantages these new trends present, while avoiding the risks. So in the months to come I will ask a variety of control professionals questions such as the ones I have tried to answer here. The express intent is to educate and inform buyers and sellers, so that they can reach informed decisions in a dynamic environment.

Sinclair - Is the process of selling Direct Digital Control changing?

McGowan:  Yes, I believe that the DDC sales process is changing continuously. In some cases trends repeat themselves, for example customers are once again interested in saving energy, and that creates market demand. Yet the market environment has also presented new dynamics, such as electricity deregulation, that impact the process as well. In the end however, the key is always understand the customer. Today, more contractors are reaching the conclusion that my company arrived at more than two decades ago; it is critical to deliver quality products and services if you want to survive. Learn how to serve the customer and focus on creating long term relationships that lead to future business.

Sinclair - How can a contractor focus on quality when the market only wants the lowest price?

McGowan:  There is clearly a segment of the market that simply responds to price. However that business rarely reoccurs with the same customer and it is also a volatile business driven by economic cycles. Every industry has benefited from the long running economic expansion of the past decade, but with the recent downturn capital spending and plans are being reined in, which means that it is critical to develop a strategy the goes beyond low bid. When the amount of work available declines, the inclination of many companies will be to drop prices further, but that only drives the DDC business toward a commodity market. Even more importantly it becomes nearly impossible to deliver quality and customers become disillusioned with the product. At the same time though, there is an ever-growing number of customers who demand quality jobs and are willing to pay a premium for systems that truly bring value. Take the time to analyze and understand customers and what their needs are in your target market. Develop a quality approach to selling systems that meet the customers needs and help them to carry out their business more cost-effectively, while helping them to achieve their goals. Strive to become a consultant not a salesperson. Customers seek advice from companies that present this profile and search for ways to secure their services.

Sinclair - True or False: Negotiated DDC jobs are more expensive to sell and risky to close than submitting a bid?

McGowan:  False: Clearly submitting a bid is easier, and there is a tremendous amount of skill required to understand and effectively compete in the bid market. However everyone reading this E-zine knows the pros and cons of the bid market. It is not likely that any reader would disagree that there are more ways to loose bid work than to win it, and often making money once the job is won can be difficult. The customer certainly faces many challenges in the bid environment as well; not the least of which is getting a quality job from the lowest bidder. However, the bigger concern for most customers is determining whether they are getting the right solution. Some Market research done in the early 90's is every bit as true today. The research, conducted by Acclivus Corporation, Dallas Texas, broke down the customer buying process into 8 steps from conceptualizing a problem through analyzing the problem, arriving at a solution, designing the solution, putting it out to bid and tracking the completed project. In the marketplace today automation contractors rarely see a project before it gets to bid. Negotiated sales is about developing a relationship with the customer that allows the DDC contractor to participate in the early stages of conceptualize, analysis and design. If this is done well, there should be no reason for the customer to select anyone else to install the solution. Negotiation takes time, which costs money, but it also is based upon relationship building and establishing a bond that leads to long and successful relationships for the contractor and the customer. This means that over time negotiated projects allow the contractor to define the requirements correctly, price the projects fairly and receive the work. At the same time it is more likely that the contractor will enjoy more business from the customer over time because it is possible to become a preferred provider.

Sinclair -  Will the convergence of Building Automation with other industries change how systems are sold and justified?

McGowan:  Without question. Perhaps one of the most significant changes already has been the evolution of system integration. This industry has come to the realization that convergence and the "information sharing" that it brings offers a tremendous opportunity in the present and will be a requirement in the future. The move toward data communication is a critical step in that process, but without qualified experts to put the information from all those systems to work its promise can not be achieve. Control integration is the crucial requirement, whether it is a coordinated sequence between a smart actuator and a VAV box controller or between an online electricity procurement portal and a purchasing agent. Convergence brings a host of business opportunities as well, because the control contractor can fill a critical role as an integrator in this new market, and this can be a negotiated sale. At the same time there are many risks such as: new competitors who want to include automation with telecommunications or local area network installations and confusion on the owners part regarding the technical requirements to meet their needs. Again the key is to identify target customers and then work to develop a relationship that allows the DDC contractor to help the customer understand what is required for this technology to truly meet their needs.

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