Estelle Monod is Senior Vice President, Building Segments and Digital Energy Strategy, with a passion for driving customer engagement, advancing the sustainability agenda in our day-to-day lives — particularly in the buildings we live in. She began her career as an investment banker with Goldman Sachs in Paris and London, followed by a career in private equity in the consumer/retail space, working closely with management teams on transformation plans. She joined Schneider Electric in 2016, initially as part of the M&A team in London. While there, she spearheaded Corporate Strategy for the Group and Energy Management Strategy out of Hong Kong.
D&S: Estelle, let’s start with a brief introduction about your position at Schneider Electric.
Estelle Monod: At Schneider Electric, I head up what we call Building Segments, which is one of our eight global sector specializations. In Building Segments, we promote the buildings of the future, a decarbonized building agenda, through the construction industry and with the various partners. Partners may be customers we see as partners because we’re acting as their strategic advisor and technology partner, but they can also be a large part of our system integrator community and many of the specialists who work with and implement our solutions onsite on behalf of our customers. We have created a number of specialties within Building Segments. We focus on commercial real estate, which involves a lot of work with asset owners, asset managers, as well as service providers to that industry. Over the last 2 – 3 years, we have also worked with design consultants because we see them as critical influencers within the construction value chain that we need to work with so that we can start influencing the future of the construction industry from early in the design stage.
D&S: What about cities and city authorities? Are they part of the target group?
Our team has a very strong involvement in the various Schneider locations. We have started to run what we call a ‘Top City Program’ inside the Schneider organization. We have carefully selected a handful of cities where we saw the need to be better organized and where the cities had interesting regulatory elements that were promoting the sustainability agenda in the building industry. We thought we needed to be organized very differently both to tackle those opportunities and to continue influential work at the city level, and to cultivate the right ecosystem of partners to tackle those opportunities. The Top City Program was started by my team because we saw it as a push for thoughtful leadership innovation and project leadership inside those specific clusters where we see business as very strong.
D&S: We come from a slowly changing environment, so spearheading innovation is a crucial aspect. How do you do it, and what is your vision for change in the real estate industry?
Estelle Monod: I agree with you that the industry is not moving fast enough. For me, that is the biggest challenge and obstacle we’re facing in this industry. It’s also still extremely fragmented in the way it thinks about the assets that are delivered through that industry. What I would like to see is that the people who are commissioning buildings and who will occupy them take control of what they want and of what gets built or renovated for them. We’re starting to see that. On some of the most progressive projects we’ve worked on, you realize that the ingredients are always the same: Generally, we have a customer who is very clear about the things they want to see in their building and what they want their building to do for them, and there is also clarity of vision on the tenant side.
The end user and the tenant in such projects have been very careful in choosing the design firm they’re working with because they want somebody to work to their specs and who helps them with their vision. They also give a very clear mandate to the design firm to make sure that this gets implemented throughout the design and the project management phase. The third element we’ve always noticed is that there is early involvement of the technology partner. In this case, it is often us. When these three elements start coming together – that’s when you deliver change. My wish is for the industry to start functioning like this in general, and not just in the case of iconic projects. I would like this to become the norm, and then I think we would start to see a change. But, as we know, such change takes time.
D&S: And you’re still in the investor’s dilemma.
Estelle Monod: Yes and no. I don’t see a discrepancy between doing the right thing and having a return on your investment. I think you see it less and less. This is also helped by the fact that particularly in the U.S., in New York, in the major cities, they have started to put penalties in place. In my view, doing the right thing already made sense just by the virtue of the ROI you get on the technologies that need to be implemented. Now it’s becoming even more the case because if you don’t do the right thing, then you have to pay hefty fines and penalties. Regulation is helping us marry the ‘do the right thing’ intent with getting a good ROI on technologies.
D&S: Is that the business case for green? That the regulations now intervene, so good things will happen. Or is the business case positive anyway?
Estelle Monod: For me, the business case was always positive, but we were timid in presenting it that way. We’ve never really presented a detailed study on ROI that says if you put a building management system in place, this is what it’s going to do to your energy bill and therefore you get your money back in less than four years. By any investment standard, getting your money back in less than three or four years is very good in the real estate industry. Some technologies enable you to have even shorter ROIs. So the industry – and that includes us – has been reticent in explaining the benefits of the technologies we have from an ROI point of view. That’s also because we were operating in a phase where the project was already in the hands of contractors or where lots have already been established, and you’re just being asked to pitch and position yourself on a very small portion of the entire set of technologies that need to go into a building. For example, electrical work or the building management system. At that point, the contractor is not asking you to bid on an ROI basis, but just on price.
This is how the industry has functioned historically. We are now starting to move more towards an approach to buildings as holistic assets, where many systems need to interoperate to deliver what a building owner or tenant wants. Then you’re starting to move the conversation much more into ROI territory – and ROI across the board, because it’s no longer a question of quoting the lowest price on a specific lot defined by the contractor. We have a big job to do as technology providers to articulate the benefits of our technologies on ROI. We haven’t been spearheading that dialog strongly and clearly enough, but we know the business case makes sense. On top of that, we are now seeing regulations being put in place, which is making the case even stronger.
D&S: Are the designers ready for this kind of change? What is your experience in the market?
Estelle Monod: They are extremely eager for this kind of change. That’s why 2 – 3 years ago we decided to set up a practice working specifically with design consultants. They understand the technology, but they’re not the ones creating it. Not knowing enough about the technology is a problem for them today. Often, they feel that they’re not delivering what their customers want because of a lack of technology benefits from a business case point of view. From an ROI point of view, from a sustainability point of view, they wonder how implementing this or that technology will help their decarbonization plan. The reality is that with much higher electrical loads coming into the building, with much more integration needed between the electrical backbone and the building automation and control backbone, with much more digital technology coming into the picture, you simply can’t afford to know every aspect of the technology providers’ products. A lot of our design firm partners are telling us that they don’t have the luxury of time to learn about all these technologies. The design firm feels more comfortable recommending something to a client if they’ve already put those technologies into projects and know they work. We are almost at a tipping point in the industry, where marrying all the different systems into delivering a holistic view of buildings as assets is forcing end users, design firms and technology providers to adjust and work hand in hand.
D&S: You have a global view of the market. You see the change worldwide. How do you see the situation in Europe? Who’s leading the change?
Estelle Monod: In the building industry, I see Europe as a leader of change. Much more Western Europe. If I look at the decarbonization journey and where that has been most prominent, we’ve seen that a lot in the Nordic countries and Belgium. We’ve also seen that a lot in key cities like London and Paris, and to a large extent in Frankfurt. I would say it’s more about ‘top cities’ than top countries. We set up the ‘Top City Program’ because the change is coming from the top cities in Europe. New York and some major cities have embraced a pretty strong sustainability agenda, together with regulation and penalties. But I have found that Europe overall has been spearheading that effort much more for a number of reasons. One is that European cities don’t have the space to build. They can only renovate.
London is probably a bit of an exception because it’s very good at reinventing whole parts of the city on a regular basis. Victoria Station and St. Pancras and the whole area around it, for example. Paris, Frankfurt, Milan, and even some of the Nordic cities can’t do that. You can’t afford to build something completely new 50 or 100 miles out and expect that to be good enough – it’s not. Also, a large number of sophisticated end users and, in particular, corporate headquarters, have driven the sustainability agenda. In the U.S., many corporations are embracing the sustainability agenda, but from a compliance angle. In Europe, there’s the compliance element, but the other stakeholders, your investors, and your employees want this. Your suppliers want to do business with somebody who embraces a much broader sustainability agenda. The market forces have been coming from a much more diverse and holistic angle compared to the U.S., which is much more compliance driven. It’s no surprise that in the U.S. you see some of the heftiest penalties through regulation because that’s the way the U.S. has been driving and implementing a lot of the sustainability agenda. In Europe, they have been pushing the digitization agenda further: access to data coming out of systems in buildings, the need for convergence of that data. Even for some of our customers who have a strong base in the U.S., we find that the projects they work on in Europe are more sophisticated with regard to the data element and the whole electric vision. I think Europe is still leading in terms of being at the forefront of what needs to happen in the building industry. But obviously, the U.S. will follow.
D&S: And China and Asia?
Estelle Monod: You find it in certain pockets, such as Australia. For them, sustainability has been taken to a completely different level. They are also the market where we see some of the most sophisticated requests coming out of the data layer inside the building. The rest of Asia is still very patchy. They will get there eventually, but I don’t see China as being a very sophisticated market in that regard yet. If you look at what’s coming out of East Asia, Japan, and Singapore, you have a few cases of sophisticated buildings. For me, the most sophisticated markets in the building industry generally would be Australia, the U.K., France, Germany, and then the U.S.
D&S: In Europe, there has been a lot of discussion about the lack of space. We have found different solutions regarding how to develop new districts. What is your view on high rises? What are the biggest obstacles?
Estelle Monod: I don’t have a crystal ball, but I’m looking at statistics of population growth and where that population will live. It’s pretty obvious that the vast majority of the population will live in urban areas. In Europe, some cities have been protecting the skyline as much as they can. London is a very clear example of that. That has had a big role in shaping its skyline. Even today, you find a lot of projects are getting rejected at the approval stage because they are changing the skyline too much.
But even in London you have more towers being built. The city has already expanded a lot, commuters already spend hours on public transport, you almost have no other choice than to densify certain areas, and densification means taller buildings. I don’t see that trend stopping. For us collectively, it’s really about if we can make a mark in those high rises to ensure that the floors added on top of existing buildings follow the sustainability and decarbonization agenda because we have to. We have no choice.
D&S: You were talking about sophisticated headquarters spearheading the market and leading the way. How do we scale that down to average developments?
Estelle Monod: I would say the good news is we have an answer. The bad news is that not everything is ready at the press of a button. When you look at that building industry, you almost have to segment it by size and project type. On the most iconic projects, the ecosystem is more or less there to deliver the vision. Then we have another way to impact that change through less iconic projects but equally important infrastructure. What we’re doing with a lot of asset managers in real estate is to work on their portfolio. Until now, the industry has been quite good at saying that you can make a change to one or two projects but now you need to start doing it on a much more systematic basis throughout your entire portfolio. This is exactly the type of work that we’re doing with some of our customers: helping them with their portfolio so that so we move away from a single building approach to a portfolio approach.
But then there’s the bottom level. If you really want to scale, you have to be able to bring those solutions and that mantra to smaller commercial buildings, like the bakery around the corner, the little supermarket at the end of your street. This is where the biggest potential is, and it’s still untapped because we’ve all been working on the top of that pyramid, technology providers included. The good news is that we know the technologies that need to be brought to that bottom of the pyramid to scale. What we’re working on right now is a set of solutions that we think can address that bottom level of the market. Otherwise we will fail the industry because we’re only working on a subset of the entire market.
D&S: Do you have good examples for these top and bottom changes? Are they taking place in London? Are they taking place in the countryside, in medium-sized cities?
Estelle Monod: The way we’ve tackled it hasn’t necessarily been through a smart city angle because the smart city angle requires you to influence local governments. This is not where we play in terms of go-to-market strategy. We’re a technology provider, so we need to talk to the people who actually have an interest in getting our technology. Where we a play is much more tackling that middle to bottom level of the construction market. We’ve started tackling it a lot through chains but of far less sophisticated buildings. Some of them are city stores, some of them are retail inventory stores. They need a simple solution so they can start tracking their energy data, their energy bill, and their carbon emissions. The way we’ve started tackling it has been through a group of chains, but chains that have buildings that are far less sophisticated and therefore need much simpler solutions. A lot of those solutions need to be data-driven. Because in order to work on your buildings, you need to know first what’s going on. If you don’t know what’s going on, you don’t know what you need to work on.
D&S: Sometimes, we get the feeling, especially with iconic buildings in Germany, that we are creating a super German building with super technology and super everything. But the average person isn’t capable of using it because it’s too complex. We always ask the question, “Are we overengineering our buildings?” And what is the right tech in the future?
Estelle Monod: I also have that feeling sometimes that we’re trying to overengineer things, and coming from a technology company, we do have a tendency to overengineer things because we love technology. I go back to this question: “Are we clear on what we’re trying to achieve inside our buildings?” The oversophistication generally occurs in situations where the person or the entity that will be using the building isn’t clear on what they want. In cases where you have an end user who is very clear on what they want their building to do, you usually avoid the overcomplexity and you know what you need to deliver on requirements. There’s always a subsequent discussion, but I’ve found that they were very clear as to what they wanted. Over time they might upgrade what goes into their building as they learn how people are using it. Our job is to spend time with them to understand what they actually want. Even though we might do a very good job at helping them identify a number of use cases, generally those projects are more at risk of oversophistication. When you let those projects take on a life of their own, you realize that this is where the overcomplexity comes from. Everybody – clients and we ourselves – gets sucked in by the ‘wouldn’t it be cool’ syndrome.
D&S: We have an energy problem right now across Europe, especially in Germany, due to the current political situation. How do you think we will succeed in the energy transition? Do you have a practical example for that?
Estelle Monod: I think the energy supply issues are going to turbocharge the renewable energy agenda in the building space. If the normal channel or channel organized at the country level does not provide an adequate supply of energy, you’re going to have to do it yourself. Increasingly, we are seeing an acceleration in renewable energy generated onsite, particularly with regard to microgrids. You can combine solar, wind, and geothermal on a microgrid, so a microgrid isn’t limited to one source of energy. An increasing number of building owners and tenants are turning to this because it’s the only way they can have a reliable and resilient source of supply. In the construction industry, the trend toward microgrids was already quite strong in the U.S. But the current energy crisis in Europe, is pushing the agenda even more. I think Europe is probably 5 – 6 years away from microgrids. In the U.S., it was already there because it was started by the education and military sectors, which have very long-term goals. For them, it made a lot of sense to have microgrids on site. It was part of the sustainability agenda but much more about resiliency and independence. Now you have, for example, counties with fleets of buses that they want to start managing and charging with energy from microgrids. In Europe, we don’t have enough rooftop space for solar panels. Every time you want to put up a windfarm somewhere, you get a lot of opposition from your neighbors because of population density. But we have to create renewable sources of energy onsite because that’s the only way you’re going to get the flexibility.
D&S: The property company on one side and the designer and technical provider on the other side? Is somebody missing from the room in this kind of dialog?
Estelle Monod: I don’t think so. Extending the scope beyond real estate assets managers would bring more color to the picture. And if you wanted to add more color, you could maybe invite a corporation, a large retailer to ask them how they’re managing their estate portfolio across Europe. Retailers are a great example. Take the Schwarz Group in Germany, for example. It’s the largest retailer in Europe. They have stores everywhere. How do they think about their real estate? We’re doing work with them, and we’re also working with Ikea and McDonald’s. So, you could add some real richness to the conversation by getting the perspective of a non-real estate commercial business that has a huge real estate portfolio.