How can Blockchain Improve Facilities Management?
What is PropTech?
Blockchain is the technology behind the explosion of Bitcoin. Whilst Blockchain has been used for tracking Bitcoin's financial transactions it has significant potential to drive transparency, efficiency, and cost savings for building owners and occupiers. Blockchain has the capability to remove many of the existing inefficiencies in key workplace and facilities management processes.
The application of technology in our Workplaces has been the subject of thousands of column inches. Along with this blog post 'Can Proptech Improve the Workplace Experience' we have seen a plethora of articles on the Internet of Things (IoT), the use of drones, 3-D laser scanning, sensor technology along with the application of machine learning, robotics and artificial intelligence.
However, up until now, not much has been written around Blockchain and its application in the management of our facilities. Yet it has a unique ability to address some of the inefficiencies and issues that plague the current deployment of facilities and workplace management.
What is Blockchain?
This time last year we were riding the rollercoaster wave of Bitcoin. Millennial's, in particular, keen to invest in the cryptocurrency drove the price of a Bitcoin up to its peak in December 2017 of $19,650. In February this year, it was idling at around $3360.
As in any investment gold rush, those that made money became folk legends and those that lost their shirts will never admit to it.
Satoshi Nakamoto invented Bitcoin in 2009 and it has had a turbulent existence ever since. There are other cryptocurrencies, but most have appeared and faded away. What, remains constant is the technology that sits behind these controversial trading units.
Whatever your experience with Bitcoin do not allow yourself to be biased against the technology. Blockchain has a wide range of applications in its ability to streamline and simplify facilities and workplace management.
Why Consider Block Chain?
As with all financial systems, the recording of the transactions is done in a ledger. What makes cryptocurrencies so interesting is the use of Distributed Ledger Technology (DLT) more commonly referred to as Blockchain technology.
The value proposition that Blockchain technology offers is clear even though its widescale adoption outside currency and financial transactions is still in its infancy. The pace that the technology will be adopted is likely to accelerate once we all understand the benefits that will be realised.
Blockchain is a cloud-based permanent digital distributed ledger of activities between agreed parties. But it is the permanency and the encrypted nature of this letter that makes the technology so interesting.
Whilst this has initially been used for tracking accounting and financial transactions, the technology is not isolated to the finance industry. Blockchain is a machine validated recording process that allows for recording any transaction in the DLT. All transactions are stored chronologically either publicly or privately and are permanent.
What makes this so interesting is that not only is it highly encrypted it is also fully transparent to those with the right security clearance. This means there is no margin for error with accountability throughout the entire process.
Applications in Facilities and Workplace Management
Deloitte in the United States published a report entitled 'Blockchain in commercial real estate: the future is here'. The report sets out how Blockchain-based smart contracts could revolutionise commercial real estate. Disappointingly, Deloitte reports that the corporate real estate sector seems to be lagging behind with a "wait and see approach”
The report goes a long way to describe how technology can enable greater transparency and efficiency in complex real estate transactions. However, it stops short of explaining the benefits of its application in the management of real estate.
Blockchain has the potential to improve a number of applications in the facilities and workplace management sphere. The generation of digitally secure ledgers means that it can add value in the complexities of contract management, work order processing and tracking, the processing of payments. All issues at the heart of workplace and facilities management.
We are all familiar with the encroachment of IoT into the facilities space, but it is important to understand that Blockchain has potential to be the driver behind business decisions, not just a technology that collects data upon which business decisions are made.
We need to know and understand this technology to prepare ourselves for the future to ensure that we are not threatened by the fear of the unknown. This article takes a look at some of its applications in the hope that it will encourage a wider debate in the adoption of technology.
Adopting technology for the sake of technology is not a recipe for success. As Steve Jobs pointedly said, “you’ve got to start with the customer experience and work back towards the technology-not the other way around”.
It is essential that we consider the customer experience before engaging in chasing the Blockchain dragon.
Facilities Management is a panoramically wide and varied discipline. FM involves not only the assets of the organisation but the services delivered to the end users or employees.
Before we can harness the benefits of any emerging technology, we need to understand how and why our organisations collect data and how this can be used to enhance the workplace experience. Our buildings and the services delivered to them generate a deluge of data. With the advent of increasing numbers of sensors and the Internet of Things, this data tsunami will only continue to grow.
The experience differentiator will be the ability to retrieve this information quickly, managing and recording changes, turning that data into information and knowledge that can then be applied to improve the workplace experience.
Blockchain requires a standardised approach to the collection distribution and management of information that populates the ledger that drives decision-making. The prescriptive nature of the process enables Blockchain to be the single source of truth.
Achievement of this Holy Grail of information may require some uncomfortable change in the breaking down of silos common in many organisations.
Contracting and contract management are one of the most important aspects of any industry yet the technology behind them has remained stagnant for decades.
Contractual disputes in the construction industry, are the single biggest reason for its sluggish growth. Disputes are time-consuming, expensive and suck the lifeblood of productivity.
But what if there was such a thing as an unbreakable contract? That is the promise the Blockchain technology brings.
The migration of data into the cloud is already changing the way we process contracts. Paper contracts are being replaced with dynamic, smart agreements.
The term stagnant'smart contract' was first coined in 1994 by one of Bitcoin's alleged creators, stagnantNick Szabo, and referred to self-automated computer programs that can carry out the terms of any contract.
Contracts are meant to assist governance between parties. With Blockchain, this often-unachievable goal can become a reality.
Blockchain takes the process of contracting to a whole new level. Not only are these contracts watertight, as every process is recorded in real time. Automation is also a reality with the capability of self-executing workflows.
That means once all parties have agreed, the digital contract will track every detail, ensuring every process has been met. Then it will be automatically signed off, saving time, money and preventing disputes.
These smart contracts are self-automating computer programs that will unquestionably carry out any terms of a contract, whether these be performance related, financial payments or indeed compliance issues. Perceptions around the level of performance will be confined to history. This deals with reality rather perception and avoids any duplicity by either party.
Parties to a facilities management contract will be able to lower the cost of administration and adjudication of contractual terms. Best of all these contracts will be unbreakable, the need for expensive disputes a thing of the past.
With no human intervention and the assurance of binary responses to the execution of Smart contracts to release payments once work has been verified to be completed can be developed to handling records transactions and the work involved.
Speaking of verification this highlights another issue that Blockchain can revolutionise.
Proof of delivery
A single entity is rarely responsible for execution end to end facility management. Rather a chain of order-givers, approvers and order-takers, are involved in a supply chain process. This ultimately culminates in the service being delivered.
The problem with this system is that if one of these components fails, the service provider needs to accept the likely resultant penalty.
Currently one of the biggest problems for a facilities management service provider is providing proof to the client that the service was actually executed let alone assuring the quality of the service delivered.
This is particularly so when work is undertaken on remote sites with no one other than the supplier in attendance. Providing proof of delivery is problematical. The industry has gravitated to a workaround system of before and after photographs. Clearly, this is open to abuse. Even if this process can be trusted, it does not satisfy any agreeable form of quality assurance of the service provided.
Using Blockchain technology would proactively provide digitally permanent and auditable records that show the stakeholders the state of the product or service at each value-added step.
As a result service quality will change as well as the way in which quality assurance is undertaken.
As our workplaces become more and more complex, the expertise to deliver FM resides outside of most organisations. Accordingly, facilities and workplace management are increasingly being delivered by outsourced providers.
Traditionally these outsourced suppliers provide the complex systems and platforms through which their performance is managed, measured and reported. This calls for a high degree of trust in the Client/Supplier relationship. Particularly so, when falling below satisfactory performance levels can have significant financial consequences for the outsourced provider.
Unfortunately, trust in the modern world is an increasingly rare commodity. With so much riding on performance measurement, customers are becoming increasingly concerned that the outsource provider is both player and referee in the adjudication over Service Level Agreements.
I can think of two very large facilities management contracts where Clients have re-insourced the Computer Aided Facilities Management (CAFM) system from their long-time suppliers. This level of distrust comes at a huge expense for the customer in maintaining dual systems, just so they can internally verify the performance of the outsourced operator.
This is where Blockchain can provide so much value. Blockchain technology is based on cryptographic proof. This allows any two parties to transact directly with each other without the need for either internal verification or employing a trusted and independent third party. It creates trust in what has become increasingly a trust-less environment.
Most modern facilities plant and equipment come with the option of on-board smart interfaces, sensors and controls. These sensors can be used to verify that periodic maintenance and servicing work have been completed.
Changes to the Blockchain occur in real time and in plain view of all participants, improving transparency and security.
Using onboard sensors can be used to monitor equipment performance for the purposes of warranty. This increases the ability to ensure that equipment is performing as expected. Using a private Blockchain to keep track of regular maintenance and service visits from contractors would provide traceability and accountability. Consequently, holding manufacturers accountable for the equipment's performance to OEM standards is far easier.
In addition, the maintenance register and history can be updated all without the need for human intervention.
Blockchain solutions are already used as an enabler of financial without the need for any third-party verification. Using a private Blockchain to keep track of regular maintenance and service visits from contractors would provide unmatched traceability and accountability.
The execution of a smart contract enables the automated release of near-instant payments and cash flow management once work has been verified to be completed and record transactions and the work involved.
This reduces the frictional, transaction cost between parties to remove the administration aspects of payments and contracts.
Blockchain technology has significant potential to drive transparency, efficiency, and cost savings for building owners and occupier by removing many of the existing inefficiencies in key processes.
Workplace and FM companies and industry participants evaluating an upgrade or overhaul of their current systems should have Blockchain on their radar as its demonstrated usefulness has the ability to bring significant value to the industry.
Author: Andrew Mason
The article was originally published here.
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