Analysing the adaption of energy optimization modules in HVAC systems

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Shashank Prasad Tiwari

Sumanth Potluri

SAMINT – MILI 20049

Master’s Thesis 30 Credits

September 2020

Analysing the adaption of energy

optimization modules in HVAC

systems

A case study within Sweden’s commercial

market

Master’s Programme in Industrial Management and Innovation

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Subject reader: Sofia Wagrell Supervisor: David Sköld Examiner: David Sköld SAMINT – MILI 20049

Printed by: Uppsala Universitet

Faculty of Science and Technology

Visiting address: Ångströmlaboratoriet Lägerhyddsvägen 1 House 4, Level 0 Postal address: Box 536 751 21 Uppsala Telephone: +46 (0)18 – 471 30 03 Telefax: +46 (0)18 – 471 30 00 Web page: http://www.teknik.uu.se/student-en/

Abstract

Analysing the adaption of energy optimization modules

in HVAC systems

Shashank Prasad Tiwari Sumanth Potluri

This study has been motivated by an understanding of the twin needs to reduce carbon dioxide emissions and increase the access to have complete control of the ventilation system available in the buildings. In consideration of the increasing utilization of fossil fuels, there is an extensive threat of increased global warming conditions associated. To ensure sustainable development, improvement of social welfare and wealth creation, energy is an essential factor. The consumption of electricity and energy delivered per floor area in Sweden has been considerably rising since 2014. The aim of this study is twofold where the authors have mapped and defined the specific customer needs for choosing an “add-on energy optimization module” for the existing HVAC systems in Sweden’s commercial market. Secondly, the study has also focussed to identify the acceptance of the complementary good technology from the perspective of a customer’s experience of value creation. It is a case study carried out in collaboration with a Swedish cleantech company, that will be named “Company-X” in the further part of the study. This company utilises a part of space technology to secure a healthy indoor air climate and at the same time save energy in buildings. The thesis has been carried out qualitatively. Since there is a preunderstanding of this theory where an abductive approach with semi-structured interviews has been followed to perceive the current market situation. The study further underlines the importance and need of making investments for a cleaning module combined with an optimization algorithm which can be easily mounted on current ventilation systems like Lego pieces. Under this module, the air quality is monitored, and the system adapts to current conditions concerning time. The results designate that it is possible to maintain a predefined indoor air quality to the lowest possible energy consumption by real-time monitoring with this cleaning module at facilities that are equipped with single or multiple-split HVAC systems. The best results towards attaining greater energy savings can be obtained from the association of Building energy management system and Air-handling unit with this cleaning module.

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Popular Science Summary

The expanding population and underlying trend of rising demand for energy have led to significant debates about intensifying conditions of climate change and persistent rise in global emissions. Since the world wastes a greater amount of energy than it uses, innovations in developing energy-efficient products play a vital role to cut down pollution and relieve stress on the eco-system. With the trend of rising energy costs and increased emissions associated with energy consumption, there is currently a greater focus on energy savings worldwide. According to the statistics from the Swedish energy agency, energy usage in the commercial sector of the market in Sweden accounts for almost 41 per cent of total energy use in the country. An extensive proportion of energy usage is kindred to support the process of heating, ventilation and cooling (HVAC) systems in the properties. These indoor climate management systems have a significant impact on the health of occupants inside the buildings and are also associated with energy costs.

It has been observed by world health organization (WHO) that more than 90% of the world’s population reside in habitats where the air pollution surpasses the limits. The estimation of deaths associated with Indoor and outdoor pollution together in 2012 had been accounted for 6.5 million, which amounts to 11.6% of total global deaths. The demand for total energy consumption by 2040 across the globe has been expected to escalate by 37%. The world’s guidebook “Energy technology perspective” on cleaning energy technologies marks buildings for a third of global energy consumption. Moreover, climate management inside the buildings plays a vital role for occupants and accounts for more than 20% of energy consumption.

Buildings account for a significant proportion of total energy consumed worldwide. Since buildings contribute to cleaner outdoor air, there is a greater need for the buildings to be incorporated with smart ventilation technologies which not only improve the air quality but also help in reducing the building energy consumption. In view of the ventilation process on earth, the indoor air is continuously replaced with outdoor air. The outdoor air is often dry, polluted, cold, humid or hot. This replacement solution is greatly dependent on the outdoor air quality where the technology has been associated with greater energy costs and shortcomings of delayed air circulation. In contrast, the ventilation system technology equipped in space stations monitors the quality of air with the help of sensors, treats the air to the required extent by providing optimized control and later is circulated within a closed system.

A case study has been conducted to analyse the current market situation of energy-efficient air optimization systems for the commercial sector within Sweden. Along with the above criteria, the study has been focused on mapping and defining the customer needs for an add-on energy optimization module. Since this module is a complementary product which attaches to an existing or a new HVAC system, the thesis also studies to identify the acceptance of this complimentary good.

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Acknowledgement

The study has been conducted in collaboration with a case company during spring 2020. We put forward our heartfelt thanks to the company for believing in us and providing a learning opportunity.

Having invested extensive hours on discussion with the participants and scrutinizing several research papers until we turned giddy is an appropriate description of our master’s thesis journey. This journey had further been an iterative process to move forward with enthusiasm and high inquisitiveness. No matter how far we came, the support of our parents had always been with us in every stage of life. Our love for them is immeasurable.

First and foremost, we would like to thank ourselves for not giving up considering stressful workweeks under the pressure of pandemic global health crisis COVID-19. We also acknowledge our decisions that were not so exceptional as we were leaning, evolving and contributing to the betterment of society.

Secondly, an extensive thankyou to our supervisor Sofia Wagrell to shape our thesis constructively by her guidance through the tough semester and fuelling us with the strength to take the next steps ahead. Without her expert knowledge, multiple discussions and feedback, the thesis might have not taken the shape it did.

Special thanks to our examiner David Sköld for his time, patience and guidance throughout the academic semester and for finalising the thesis part of work.

Finally, special thanks to all the participants for their contribution by sharing their experiences and knowledge in a selfless way. Considering the unforeseen global pandemic situation, all the interviewee’s involved in the study made themselves available for multiple discussions on the subject and supported the study in an impeccable way.

Shashank Prasad Tiwari & Sumanth Potluri,

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In this following chapter, an introduction and background to the subject of the thesis has been presented. After the background section, a problematization will follow where the emphasized problem is discussed. The approach towards the purpose and research question has been described and defined briefly and the discussion further springs to limitations along with the brief structure of the study.

1.1 Background

Buildings account for more than one-third of global energy use with an equal share of greenhouse gases due to electric equipment, leak of refrigerants, carbon from building construction material (Thibaut Abergel, 2017). Time spent by individuals in both private and indoor public environments has been estimated to be about 90%, where 92% of the earth’s population breathe bad air (Alessandra Cincinelli, 2017). Due to urbanization, population density has rapidly increased in several cities, and this has consequently resulted in severe indoor pollution. As a result of these trends, the difficulty in a healthy indoor atmosphere has received increasing attention where the ambient pollutants such as smoke, pollen, dust, various pollutants of gases, dander particulate matter of animals, several VOC’s, sound pressure and humidity has significantly resulted to have potential effects on health (Fox, 1994).

Past few decades, Indoor Air Quality (IAQ) had been gaining significant importance towards the improvement of health, wellbeing, and comfort of the occupants from both Environmental governances agencies and International scientific community. Indoor air quality is an important constraint not only for the residential buildings but also for commercial/public places such as corporate offices, stores, gym hospitals, etc. which usually require high quality of indoor air for many people. As per the reports on public health hazards, indoor air contaminants play a vital role in sick building syndrome where indoor building materials such as adhesives, burning fuel, wood, and paints result in harm to individuals in the form of allergies and diseases (Medical Advisory Secretariat, 2005). The pollutants involved in the indoor environments are also associated with industrial and road traffic activities which enter inside building the through ventilation system (Fox, 1994).

As humans spend most of their time indoors, there has been a trade-off observed between energy consumptions of the ventilation systems and the indoor air quality (EPA.Gov, n.d.). Using statistical approaches, the study by Vilˇceková, et al (2017) proved dependences between chemical-physical measurements (relative humidity, temperature) and characteristics of the building (Year of construction, renovation, electronic equipment). Since the outdoor air infiltrates indoor, Alessandra Cincinelli (2017) highlights the geometry design of housing and its occupant’s behaviour to be a crucial modifier of air pollution. Size of the building and the indoor pollution is mutually associated to each other where the degree of indoor pollution is significantly 3.5 times worse and is more polluted than the outside air (Alessandra Cincinelli, 2017).

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Several monitoring plans along with IAQ policies, standards and regulations have been brought up understanding an underlying increase in the levels of emissions. Moreover, variation in climatic changes from past had resulted for increase in demand for electrical heating systems and cooling systems in both winter and summer respectively (Global Footprint Network, Annual Report, 2010). This change in climate simultaneously affects the buildings energy consumption while influencing humidity and temperature conditions along with air-conditioning loads.

In 1992, Heat Ventilation And Cooling (HVAC) technology to control indoor temperature and air-quality fluctuations in buildings was introduced at the New York stock exchange by Alfredd Wolf (Swenson, 1995). HVAC refers to a technology used for circulating air between indoor and outdoor areas, along with heating and cooling for both residential and commercial buildings (Arsha Viswambharan, 2014). These systems play a vital role for maintaining indoor air quality by providing heating or cooling, along with removal of excess humidity and controlling airborne contaminants (Swenson, 1995).

The components of a basic HVAC system when introduced included a fan, heating and cooling elements, filter racks, dampers, and sound attenuators. This air handling unit not only filters but also conditions and circulates the air by inhaling the outside air and thereby supplying fresh air inside the same building. This conditioned air is supplied into the building with the help of a ductwork system which is connected to air handlers (Swenson, 1995). Building these climate control systems (HVAC) also brings in outside air which further requires controlling the effect of indoor emissions such as bio effluents emitted by the people living or working in the building (EPA.Gov, n.d.). Considering the indoor time spent by individuals, where comfort and well-being is one of the critical factors, there lies a greater possibility of this demand for HVAC systems to rise with time.

The construction industry has witnessed a gradual rise in the income across significant economies (urban and rural residents) around the globe, and as a result, the demand for HVAC systems has been substantially increasing. Many countries today face challenges towards rising temperatures which is followed by unpredictable climatic conditions that directly or indirectly affect the quality of Indoor air (EPA.Gov, n.d.). In a specific experimental study by Orecchio (2017) to monitor indoor air quality, it has been observed that the sources such as coffee roasting, landfills, incense, tobacco, candles, electronic equipment’s, moisture and humidification devices also contribute to the emissions in the indoor environment. Children and the elderly are among the most vulnerable groups regards to health risks. Some of these health risks associated with air pollution include chronic respiratory, pneumonia, influenza and cardiovascular diseases (Piers MacNaughton, 2015). With time, society has witnessed an increasing demand for HVAC systems was it helps maintain the ambient room temperature, thus providing a pleasant environment by adjusting the air-conditioning elements such as airflow, humidity, temperature and cleanliness.

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been a significant demand for the HVAC systems and their appliances offering energy efficiency solutions.

1.2 Problematization

Due to intense development and a rise in urbanization, companies in the non-residential sector had been anticipated to enrol the most elevated average annual growth for their investments over the forecast period for the next five years (Alam, 2018). Here on earth, climate control is about replacing indoor air with outdoor air continuously. However, outdoor air could be too warm, cold, dry, humid or even dirty. To provide satisfactory levels of indoor air quality and towards achieving the user’s thermal comfort, many commercial and residential buildings incorporate various climate control technologies. Considering an increase in energy consumption patterns for the buildings, there lies a large potential for savings with the implementation of measures for energy efficiency in the country.

Fraunhofer et al. (2009) states that the energy efficiency can be increased by 30% with the development of building energy management systems. These building energy management systems are computer-based automated systems that control all the energy-related systems entire across the buildings. Towards achieving this energy efficiency potential, “Directive on the energy performance of buildings” has introduced the concept of “Nearly zero-energy buildings” for both new and existing buildings (The European Parliament and the Council of the European Union, 2010). The buildings incorporating the “Nearly zero energy technology” hold the potential for significantly high energy performance with the most amount of energy utilised from renewable sources.

Comparing Sweden to other European counties on the figures of energy delivered per floor area, the consumption of electricity in Sweden recorded a significant increase since 2014. The country’s total energy consumption per capita in 2018 was marked for 4.9 TOE (Tonnes of oil equivalent), which was 56% above the standard European average (Enerdata, 2018). From the data accounted by Swedish Energy Agency (2018), more than 80% of energy is being used by the service sector and residential sector for electricity and district heating. The most common energy carrier in the non-residential facilities in Sweden is found to be by district heating (Swedish Energy Agency, 2018). As per the estimations of Gallachóir (2017), retrofitting the existing stock has the potential for greater energy efficiency. Thus, the opportunity for improving and optimizing the energy efficiency of existing buildings hold more significant potential in Sweden. This improvement would further lead towards reduced GHG emissions, energy prices and well-being of people.

Fossil fuels today are being utilised for heating and cooling buildings, as well as improving the air quality. In this process, fossil fuels are being burnt in various buildings in the forms of coal, heating oils and natural gas (Technavio, 2018). Unlike the HVAC units used for residential purposes, commercial HVAC units require a larger room space, and these are usually installed on the building rooftops. As the filter installed in this commercial HVAC unit is used over time, it becomes fouled and polluted. This demands towards a frequent replacement of air-filters and these polluted filters lead to efficiency declination resulting in greater energy consumption (Karami, 2015).

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involvement in the operation of the HVAC systems. The increasing population and higher energy consumption contribute about one-quarter of greenhouse gases (GHG) emissions. Cost-effective and energy-efficient technologies have been obligatory in all the member states of the European Union considering the high-level renewable target which aims towards reducing energy consumption in the next ten years by 20%. Explicit enactments with regards to energy efficiency directive and energy performance of buildings directive are being executed in buildings across Europe. Following the act, the restorations are required to be performed every three years by the building owners as per renovation regulations (Market Research Future , June 2016). The Market size of HVAC systems has been estimated to grow USD 136.5 billion by 2024, advancing at a CAGR of 3.9% (Anon., 2015). Although the energy consumption intensities concerning the non-residential buildings have considerably been improving for a decade (Technavio, 2018), there is still a foresight of increasing energy demand considering the extent of increasing urbanization.

1.3 Purpose

From the given information in the background & problematization, a purpose for this thesis has been developed. The aim of this study is twofold: First, to “map and define the specific customer needs” for an add-on energy optimization module developed for the commercial HVAC systems in Sweden (B2B). Second, to “identify the acceptance of the complementary good technology” with the integrated framework of “Theory of planned behaviour and technology acceptance model” from the perspective of customer’s experience of value creation.

1.4 Research Questions:

1. What are the rationales for deploying energy optimization technology (Technology-X) for the HVAC systems in the building sector by property owners?

• Corresponding sub-question:

Which need factors/characteristics create the most significant incentives to invest in Technology-X, and which factors constitute the most substantial barriers?

1.5 Structure of thesis

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2. Literature Review

This section explores and examines the literature in the fields of value creation process in a B2B environment and how the complementary goods create value to an organisation. The structure of decision-making unit in an organisation is also detailed as various actors are involved associated with the development of technology and it’s purchase process

2.1 Value Creation

Tantalo and Priem (2016) define value creation as a process that creates greater outputs for a firm and holds the basis for productivity and efficiency. The successful business entities understand how the aim of any business is ultimately generating profits for its employees, investors, and customers (Chemmanur, 2014). As the interest of all three groups is interlinked, it is not possible to create sustainable benefits for one specific group, unless created for all of them. The preliminary focus of any organization’s need is towards leveraging benefits for its customer by developing solutions for the existing problems; Moreover, Chemmanur (2014) highlights that the achievement of value for a firm is not possible unless attractive returns are received by investors consistently in this process. Value creation has been traditionally addressed as a major business objective by different researchers of business. Also, several authors state how the company should create benefits for the shareholders; however, few insist that the benefits should be created not only for the shareholders of the firm but also for all the stakeholders (Tantalo, 2016).

Creating and managing the financial aspects of a business can be a cornerstone of an organization’s business strategy. As the firm processes the resources into end products, it had traditionally been labelled as the creator of value (Tantalo, 2016). Value creation entails consistent product development and the service of the existing developed products. More recently, it has indulged a step away from a firm-driven perspective where the Industrial Marketing and Purchasing Group (IMP) defines the process to be emphasizing on interaction and relationship between industrial buying and selling groups (Hakansson, 1982). IMP logic asserts the offerings on the combinations of services, logistics and de-emphasis the importance of the physical product. Moreover, studies by Kroeger and Weber (2014) on social value creation find the need for organizations to be ambidextrous and further explain towards developing a balanced view of explorations and exploitations if they intend to survive and prosper. Their study further highlights how creating and managing customer value can be a cornerstone of an organization’s business strategy.

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Anker et al (2015) refers to the creation of value as delivering greater returns for the investors on their capital consistently, which usually requires a strong growth of revenue and attractive profit margins from the firm’s output. In turn, the achievement of the activities leveraging benefits to the firm can be possible if an organization delivers sustained value for the customers. As the purpose of any business is to generate profits, it follows that the company’s mission needs to be well-defined in the respect of its primary value-adding activities (Anker, 2015). For instance, McDonald’s showcases itself to provide meals or food at a consistent quality all through the world in a friendly and clean atmosphere.

Figure 1 - Value theory categorization

2.2 Firm Value Creation

The firm acts as a business actor and also as a legal entity. It is a client for the supplier’s input for the development of a product/technology and also a supplier for its customer’s output (Ambrosini, 2007). A firm can obtain a sustainable competitive edge in the market by exploiting the strategic resources using the managerial framework of research-based view (RBV) by Barney (1991). The framework of RBV highlights the sustainability of competitive edge to be contingent on the resources which hold the possibility to be substituted or imitated. Besides, several theories by Barney (1991), Wernerfelt (1994), Porter’s competitive analysis framework, and value networks by Fjelstad (1998) describe value creation at the business level considering the research-based view. These theories also examine how companies create a sustainable competitive edge by generating economic gains for customers by investing in strategies which identify the core competencies and organisational learning to maintain the available resources.

The value chain activities carried out by the firm disintegrates it with its competitors in the market and illustrate the process of attaining a value outcome (Porter, 1985). Day (1994) points out that Porter’s competitive forces framework discusses how industry-specific competition impacts the potential for profit (Day, 1994). Moreover, the resource-based view (RBV) of value by Barney (1991) states towards developing a long-term competitive advantage. This greatly depends on the scarcity and value of resources used in operations and knowledge on choosing, using and combining these resources (Priem, 2001). As a consequence, RBV highlights value creation primarily as a method of leveraging ingoing resources, and Day (1994) finds the capabilities, i.e. "complex bundles of skills and accumulated knowledge" to help to make the most of the company's resources tangible.

Additionally, Hunt (1995) specifies an aspect of market positioning as a link between resources and financial performance. The author further suggests that a combination of superior customer value and relative resource expenditure would provide competitive advantages to a firm. Few of the authors have

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also identified key business processes that lead to the creation of superior customer value. For instance, Srivastava (1999) points product creation, supply chain management and relationship management as key processes. His ideology correlates with Treacy (1993) where the author marks product leadership, organizational excellence, and customer engagement for a superior value creation process. In turn, the value shop model conceptualized by Thompson (1967) states to adapts the activities, and resources employed to the problem before at hand. Fjeldstad (1998) further correlates value creation to problem- solving by shifting the customer from "an existing state to a more desirable state."

When data imbalance is high between the customer and the company, value shops are the appropriate value creation logic. Moreover, this method is iterative, and the tasks include problem finding, problem-solving by choosing the right solution, execution, and monitoring. Value networks in turn involve providing a networking service to the customers, thus enabling customer interrelationships. The key activities include a promotion, maintenance of networks, delivery of services along with the development of network infrastructure (Fjeldstad, 1998). Conclusively, firm value creation focuses on the activities carried out by an organization towards creating a super customer value

2.3 Value Co-creation in a Business-to-Business environment.

Manufacture of goods and production services are established for the sole purpose of user consumption. The term “Business-to-Business market” refers to the transaction of a service or a product between two companies (Mark S. Glynn, 2012). For instance, the transaction between “wholesaler-retailer”, and “manufacturer-wholesaler”. With the globalization of markets and a high degree of specialization, the days of people consuming self-produced goods are long gone. Various market stages distinguish modern economies of today. These different stages are characterized by divisions of labour and engaged under the category of manufactures/producers, retailers, service providers, processors (Pawłowski, 2016). The changes in the buying and selling behaviour of the goods over the past decade have been due to several factors such as the development of new technologies, market globalization, internet proliferation, ease of communication followed by the increasing mobility of the workforce (Churchill JR & al., Aug, 1985). Understanding the decision-making dynamics and the behavioural pattern of an organisation in the B2B market holds critical criteria for customer integration and value creation for its future sale of products.

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for improving organisational performance have failed to capture the thorough observations, and empirical evidence (Hadjikhani, 2012 ). It has also been observed that market ethics (an effort by an organisation to gain competitive advantage and achieve greater benefits) variably coincide with the principle of providing the best quality products at lower prices for the customers. In this process, most of the organisations aim to capture value rather than creating value (Miller, 2015).

Traditionally, value creation had been linked to tangible goods which sighted towards increasing the well-being of customers to achieve a goal. In this traditional process, there isn’t a specific role for customers towards value creation (Vargo, 2004). This traditional microeconomic model of value creation has been challenged by service logic while reverse thinking towards intangible and resource-based exchange views (Prahalad, 2004). Grönroos (2000) states that the digital environment has changed marketing practices and has now allowed an opportunity for the consumers to participate in the role of value creation rather than just being a recipient of the firm’s output.

In the global B2B environment to gain marketplace advantage and create value, the firm’s being market-oriented is not enough. Along with superior performance value, Prahalad & Ramaswamy (2000) suggests that encouraging value-creating activities by building relationships and collaborating with the business customers and stakeholders can help the organisation towards better understanding and identifying the customer’s needs. For mutual benefits, the B2B market has been witnessing an increase in a collaborative business relationships between suppliers and buyers (Aspara, 2013).

Cassia (2015), in her studies, highlights that most of the research today focuses on B2C (Business-to-Consumer) markets and less towards B2B markets. The author further mentions that emerging countries are initiating a vast range of opportunities for B2B relationships and reinforcing customer-driven sales process. These processes represent an opportunity towards understanding the dynamics of relationships and adding value to the firms with the help of existing customers.

As an opportunity to improve and intensify the firm’s process of competitiveness, studies conducted by Corsaro (2012) helps to understand these dynamics of relationships by being customer-driven. Corsaro (2012) highlights that being customer-driven would therefore contribute towards a wider range of opportunities for value creation at a firm. In the effort to create superior value, the firms commercialize their value offerings with superior product innovation and marketing techniques. However, this can lead to inferior capabilities if the firms lack control towards understanding the above functions and can weaken their ability in the market for the creation of superior value when compared to rivals (Lindgreen, 2005).

In the process of delivering customer value in the B2B markets, organisations today encounter issues deciding on competitive means towards achieving superiority. The studies by Lindgreen (2012) analyse on value perceiving process of the buyer companies in three phases: All the three mentioned phases collectively help to achieve competitive advantage while creating super value for customers.

• Value analysis- Structuring activities such as acquiring, divesting and accumulating resources • Value creation- Integrating resources to create, extend and improve the firm’s capabilities. • Value delivery- Capitalizing upon capabilities by pioneering, stabilizing and exploiting market

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Figure 2: Essential Value creating capabilities Source: (Aron O'CassLie, 2012)

Aron O'CassLie (2012) further addresses the theory of essential value-creating capabilities by collectively adopting the above three specific capabilities from figure 2. In light of an increasingly competitive business environment to develop new solutions, a firm’s ‘product innovation’ capability has been identified to play a crucial role in value co-creation and satisfying the customer’s needs. The activities involved in the product innovation includes areas such as improving product quality, developing new products, improving product ranges and production facilities based on the feedback and active involvement of customers (Adler, 1990).

Aron O'CassLie (2012) highlights the tendency of customers to seek new products where the markets is characterized by dramatic changes in their personal preferences, short product life cycles, and innovation capability. The prime strategy of any organisation is to offer services and products which capture the needs of the market while suitably meeting the demand. Product innovations have been found to help the establishment of a customer base for the firms, which in return creates value for the organisation (Aron O'CassLie, 2012). While striving towards achieving superior performance with product development, successful firms simultaneously conduct marketing activities (Adler, 1990). The second capability mentioned by Aron O'CassLie (2012) entails for ‘marketing the offerings’ with effective techniques by an organisation. These techniques further help to build the company’s reputation and protect their existing customer base. For successful marketing, the firms engage in various marketing activities in areas such as pricing, selling, product distribution, market communication & planning. Towards the execution of these actions, a unique strategy for marketing is developed by combining skills and marketing knowledge (Vargo, 2004). If the organisations incorporate marketing capabilities in an idiosyncratic and distinct way, it becomes difficult for the competitors to imitate, thus helping the firm towards achieving superior performance and co-creation values.

The third capability to achieve superior value creation involves ‘market sensing’ which leverages the first two capabilities “product innovation and marketing (Aron O'CassLie, 2012). Day (1994) states that market orientation helps the firms with market sensing capabilities while deploying value-creating activities for the customers, which helps them to obtain a significant competitive advantage. The concept of market orientation is the foundation and philosophy towards identifying the customer needs and satisfying them to attain objectives at the company much efficiently (Ostrom, 2010). While designing the value offering, Day and Wensley (1988, p.2) state that the contributions of market orientation help the firms to achieve an inimitable knowledge base, which is rare and valuable. Aron O'CassLie (2012) argues that co-creation of value requires a shift to customer-centric behaviour and points that firms need to embrace co-creation and build relationships while customizing the offerings accordingly in the B2B market.

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A customer may draw up evaluation after the purchase process to deliberate towards the decision of purchase (Robinson, 1967). For instance, there might be a situation arising where the customer might have a perception of an alternative technological solution being offered in the market to be much efficient than the existing purchased one. This concept relates to the theory of Cognitive dissonance, where the dissonance strikes through the unique attributes being offered in the market. As stated by the principles of cognitive dissonance by Festinger (1959), individuals hold an inner drive towards behaviour and attitude in harmony.

Robinson (1967) highlights how an inconsistency between behaviour and attitudes can eliminate the dissonance. Findings from Festinger (1959) further point that forced compilation behaviour (when someone is forced to act), decision making (choosing between alternatives), and effort (valuing goals which require more significant effort to achieve) are the three factors responsible towards the cause of Cognitive dissonance. However, Festinger (1959) suggests that this mode of dissonance can be resolved through adding new beliefs, changing the existing beliefs, reducing the importance of beliefs, and encouraging the customers towards their decision criteria through sources of marketing or exploring the development opportunities considering the already existing product.

2.4 Customer Value Creation

Processes and practices are the two main ways of viewing customer value creation (Korkman, 2006). The idea of creating superior value for the customer is not as new as expected. Wikstrom (1996) argued that "when consumption is seen as a productive process, consumers themselves carry out the final and crucial activities in the process of value creation". Whereas Heinonen (2010) states that approaching customer value creation means focusing on what customers do and how these can be developed by providing services (Heinonen, 2010).

In the processes of customer value creation, customers create value in a series of activities carried to achieve a specific goal (Payne, 2008). Grönroos (2006) explains customer value creation as the type of action that tends to be objective-oriented and instrumental, suggesting humans are logical goal-seekers. However, the definitions may be somewhat misguided, as Payne (2008) continues to discuss customer processes in terms of emotional, cognitive, and behavioral relationship experiences. Payne (2008) suggests that processes for creating customer value are often non-linear and unconscious. Alderson (1957) points out the importance of behavioral intention of the customers, since it offers direct satisfaction, and intention towards using the product/technology and the form of congenial behaviour is an end in itself and is related to perceived utility.

Customers are widely associated with being exposed to different firm activities at different points in time, where the processes for generating customer value address the value outcomes (Grönroos, 2006). Grönroos (2006) further states that mutual value can be generated if customer processes and business (or activities) coincide. Within the customer-firm relationship, the firm should support customer processes with a unique set of resources (Grönroos, 2006). Also, social interactions that include contact with the user and value practices extend marketing to areas of life that have previously been explicitly excluded from the domain of marketing.

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with things. However, Schau (2009) states from his studies that shared community practice create value. Engagement in these practices is indirectly an act of value creation if the participation of an individual is voluntary. This part of voluntary engagement may not create value for the consumer but may be beneficial to the immediate lifeworld of the consumer (Whittington, 2002). The Blueprinting of customer activities may help to understand customer processes, although this method is usually used to investigate the service instead of the customer.

2.5 Complementary goods: Creating and sharing value

Complimentary goods are the products or services which are utilized in combination with each other. To derive positive utility, customers are required to purchase multiple products. These purchased products are highly complementary to each other as their joint consumption results in the best outcome. With this utilization, lowering/raising the cost of one product results in an increase in sales of another good. The initial analysis of interaction among the producers of complementary goods was carried out by Cournot (1838). This analysis modelled the two firms producing Zinc and copper, which were further combined to produce brass (a composite product). Few of the examples of complementary goods include cars and tiers, printer and ink cartridges etc. The significance of a primary product is limited when utilized alone, but the utility of this product significantly increases when used with its complementary product. Thus, Cournot (1838) highlights that regardless of differences in marginal cost, the profit is equally shared between the firms.

Due to the characteristics of joint consumption, there is a greater interdependence on the quality of the product and its available complement. For instance, the capability of handling the complexity of the programming code activity for the development of a software solution depends upon the advancement of the operating system. Hence the criteria of quality interdependence is crucial for such products. Considering the demand patterns, a shift in the demand for the primary good positively affects the demand for the complementary one (secondary good). However, the demand for the other good gradually declines if there strikes an increase in the price of the first good (Stephanos, 2015). The percentage change in the cost of one good to a percentage change quantity demand of its significant-good is termed as cross-price elasticity of demand. A significant-good is signified to be complimentary when its cross-price elasticity of demand is negative. Nevertheless, if the output result is positive, it is signified to be a substitute good. Stephanos (2015) in his studies of complementary products examined that If the products are strong complementary goods, then a negative cross-price elasticity of demand is witnessed.

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Graph 1: Price & Demand, complementary goods X-axis: Price Y-axis: Demand

Source: (Suri, 2006)

Stephanos (2015) states that the introduced complements may not be as attractive as the primary or a base good, and there lies a probability of change in complements in the industry over time. The cost of managing the development of both the base product and complementary product can be internalized by the same firm where the possibility of customers gaining the product at an efficient price is high. In this process of joint production of both primary and it’s complimentary good, the firm can generate greater value in the process by setting fair price.

As a competitive strategy for Monopolists, Whinston (1990) highlights that Bundling and tying of complementary goods could help to gain significant market power. For instance, IBM in the past tying its tabulating machines along with tabulating cards and latestly tying mainframe machines along with it’s operating systems. Thus by restricting the entry of various complementors, a firm can enhance its product profitability.

Understanding and analysing an organisations purchase process of a complementary good is a dynamic and complex process as it involves the interaction between purchasing professionals, and these professionals hold the criteria to influence on what is being purchased. Hence if not studied, there are more significant risks associated with the acceptance of the product/technology in the market. From the findings on the factors affecting the buying centre in an organisation by Robinson (1967) and Wind (1992), an integrated framework model of Organisations buying behaviour (OBB) was published by Johnoston (1996). Lancaster (2009) further subclassifies OBB into three elements-

1. Structure: “Who” are the Participant’s involved in the decision-making process.

2. Process: “How” is the idea of information received, analysed and evaluated towards the stage of decision making.

3. Content: “What” are the factors and choice criteria being considered by the decision-making unit

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Figure 3: Roles in the structure of Decision-making Unit (Buying centre) Source: (Robinson, 1967)

The first role in the business centre is identified as Initiator. The request towards the needs that meet the customer requirement is commenced by initiators, and they hold responsible for beginning the purchase process. Product requirements are defined by the users as they are the end customers who would use the product. Analysing the product requirements and suppliers is carried out by deciders as they hold the authority (Robinson, 1967).

Influencers and technical personnel play a crucial role as they help in defining the specifications and providing alternatives to the users while adding the criteria of decision making throughout the process, which shall affect the buying decision. Kotler (2009) states that gatekeepers are essentially a lock door between the buying and selling firms where they hold power for delivering and transferring the information between the organisations while filtering the flow information. The next significant role is identified by a buyer who holds the responsibility towards being in contact with the selling organizations, setting up the purchasing terms and negotiations. (Robinson, 1967).

The supplier proposals are evaluated by a decision-making unit where the choice criteria used by these members of the organisation is determined by themselves (Lancaster, 2009). For instance, the criteria’s used by purchase manager towards purchasing a product is different when compared to criteria’s of production engineer. The first role evaluates in a cost-conscious way, whereas the latter evaluate considering the efficiencies from a technical perspective. Secondly, the primary consideration for machinery could be a return on investment and alternatively could also hold the criteria of cost savings, reliability, durability, quality and technical assistance.

When the product offerings by the supplier’s in the market are similar, the decision may depend on the relationship and liking of the supplier’s salesperson. Thus, psychological factors also play an essential role along with economic criteria’s in the buying process (Robinson, 1967). The below table:1 by (Lancaster, 2009) indicates a list of both the economic and emotional factors that act as a choice criteria for an organisations purchase process.

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Economic

Emotional

Price Prestige

Delivery Personal risk reduction

Productivity- Cost vs Revenues Office politics

Life-cycle costs Quite life

Reliability Pleasure

Durability Reciprocity

Upgradability Confidence

Technical assistance Convenience

Commercial assistance

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3. Theoretical framework

This chapter of theoretical frameworks is on the basis of Technology Acceptance Model – TAM by Fred Davis, where an additional focus is set on integrating the “Theory of planned behaviour” with the Technology Acceptance Model. With this integration of models, the study further details the value outcome determination while examining how the customers enable the value assessment associated with the technology

3.1 Technology acceptance model

Over the decades, a variety of technologies influenced user behaviour. Likewise, user behaviour did also significantly influence the efficiency of technology use. To predict the user’s behaviour towards using and adapting a specific technological innovation, Davis (1989) proposed the “Technological acceptance model” (TAM). This model is a generalised extension of IcekAjzen (1967) “Theory of Reasoned Action” (TRA) which aims at determining the connections between the different components. These components include intentions, behaviour, beliefs and attitudes.

TAM traces the influence and impact of external factors on intention and attitude. Several studies in viewpoint from various technologies have examined the reliability and flexibility of TAM and found it to be a valid model for explaining and predicting the behaviour of human towards adoption and acceptance of technology (Doll, 1998). This model withstands on two primary independent variables Perceived Usefulness (PU), perceived ease-of-use (PEOU) and an independent variable “Attitude” towards using it (AT) (Davis, 1989). The basis for determining the impact of external variables on attitudes, intention and beliefs is briefed by TAM.

“Organisational performance cannot be improved if computer systems are avoided. Towards understanding the user acceptance and why people reject or accept computers, we need to understand the user acceptance and why people reject or accept computers (Davis et al. (1989, p.982)”

Figure 4: Technological acceptance model Source: (Davis, 1989) Perceived Usefulness External Variables Perceived ease of use

Attitude Behavioural _{intention to} use

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Perceived Usefulness (PU)- PU is defined as an extent to which the user believes that using a particular system will enhance their job performance (Davis, 1989). People usually prefer products that would help them in simplifying work performance while reducing their working hours and increasing work efficiency (Davis, 1989). People’s perception of using a product may decline with regards to the opinion of technology being hard, thus requiring more significant efforts and time. Hence, we could correlate that PEOU has a positive impact and influence on PU.

Perceived ease-of-use (PEOU)- Likewise, the degree to which an individual expects about the belief that using a specific system would be free of effort and convenient, along with being simple is termed as PEOU (Davis, 1989). If the product feels effortless during their process of task executing, a user shall require it more.

Behaviour Intention (BI)- Fishbein and Ajzen (1975) state that BI is a crucial factor and a pre-step for forecasting the intention before individual displays the behaviour. Liu et al (2005) further states that BI is a function of subjective norm, perceived behavioural control and individual’s attitude. However, studies by McCort (2001) argue that market researcher’s find BI to be a major concern for prompting a more effective and desirable understanding of customers

External Variables- The two factors PU and PEOU are also influenced by external variables which hold to be the crucial determinants towards actual system use. These external variables tend to be cultural factors, social factors and political factors. Social factors mainly concern with skills, facilitating conditions such as social situations, social settings and language. Political factors include the impact of the prevailing political crisis and the potential outcomes with involving technology (Davis, 1989).

Attitude(A)- The specific behaviour and desirability of the user’s feeling (Positive or negative) towards using a new technology relate to attitude (Venkatesh, 1996). Aspects like attraction, the general attitude towards the technology/product, brand image and brand loyalty summarise the concept of attitude. Fishbein and Ajzen (1975) state that attitude is a predominant tendency which influences the behaviour of people. Davis(1989) highlights that the actions of individuals are based on human intention, which is further influenced by the individual’s attitude.

TAM has been used worldwide by researchers in the studies for evaluating the acceptance of e-learning systems, online shopping behaviour, acceptance of e-commerce and evaluating perceived risk from new variables, evaluating acceptance of online banking in Finland, understanding acceptance of radio frequency identification. This model is closely related to the user’s acceptance of a system.

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3.2 Integrating “Theory of planned behaviour” & “Technological acceptance model

To improve and advance the predictive power of the theory of reasoned action by IcekAjzen (1967), Fishbein & Ajzen (1975) proposed the “Theory of planned behaviour (TPB)” adapting from “Theory of Reasoned Action” (TRA). This theory puts forward a concept of shaping an individual’s behavioural intention combining it with subjective norms, attitude and perceived behavioural control as all these factors jointly determine the behavioural intention. TAM has been used worldwide and had been applied in a wide range of studies for understanding the behavioural pattern of individuals in various situations.

For instance, online consuming behaviour, forecasting of individual consumption (Liu, 2008). To advance the furtherance of Cloud-based energy-efficiency HVAC systems, the thesis shall indulge deeper to figure out the factors which influence the Non-residential sector users towards accepting and purchasing intentions of this technology. For a better understanding of customers purchasing intentions and behaviours, we combine both “Theory of planned behaviour (TPB) and Technological acceptance model” (TAM)” and integrate the framework.

Figure 5: Theory of planned behaviour Source: (Ajzen, 1980)

According to “Theory of reasoned action” by IcekAjzen (1967), the best predictor towards an individual’s behaviour is their intention behind the action. Thus, it is a central factor in the framework. More definite the intention to engage, likely is the performance. The three constructs that determine the intention are “attitude towards a specific behaviour, perceived behavioural control and subjective norms”. Armitage & Conner (1999) from their assessments, also points that PBC influences intentions while stating that “more favourable the attitude and subjective norm, greater are the perceived behavioural control and intentions.”

Attitude (A)- The outcomes of performing the behaviour are primarily entailed with attitude as it is the degree to which an individual holds favourable or unfavourable evaluation of interests (Ajzen, 1980). The factors such as PU, PEU and SN have a significant impact on attitude (Fishbein & Ajzen, 1980.). As per different decisions towards the evaluation of an individual’s behaviour, attitude deals with evaluating the possible consequences and is henceforth associated with deciding and judging the possible consequences of behavioural performance. As a result, leading to various decisions towards evaluation of the behaviour.

Attitude

Subjective Norm

Perceived behavioural control

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Subjective Norms (SN)- This alludes to individual’s perception and awareness with regards to external stress (Mostly from individuals who have more considerable influence and matter a lot) over whether to perform a specific behaviour. Thus, opinions and external comments from relatives, neighbours and prestigious people have a significant influence towards evaluation (Fishbein & Ajzen, 1980.). Understanding from “Theory of reasoned action (TRA)” social conduct holds an impact on people in the form of expectations and pressure towards a general and a social behavioural standard. Judgement from society and encountering pressure can be experienced by individuals when deciding on choosing actions and expressing views, thus leading to social stress. Eventually, subjective norms hold a more significant influence on purchasing intentions of customers.

Perceived behavioural control (PBC) – “According to Ajzen (1980)”, judgements are made by an individual based on the degree of difficulty of executing the specific action. Certain factors such as effort, purchasing time, economic cost influence an individual. PBC is further dimensioned into “Controllability” by Armitage & Conner (1999). Here, controllability refers to the perception of buyers if they can restrict and take control over their purchasing behaviour considering their available resources and opportunities. For instance, an individual firm possessing a greater number of necessary resources shall have a higher degree of controllability and eventually, performing an action can be much easy.

The extension of this model will be considered where the external factors include compatibility and technology complexity. It has been demonstrated in several cases by Chou (2014) and Pai (2011) that the user’s efficiency on the utilization of the system is affected by both perceived ease of use (PEU) and perceived usefulness of technology applications (PU). From the understanding of the above mentioned two journal articles, the user’s intention towards using the technology is also greatly influenced by these external variables. With this integration of both the models, there is a comprehensible understanding on the beliefs and behaviour of how the users tend to understand, use and accept a specific technology launched in the market.

Figure 6: “Integrated Model: Theory of planned behaviour” & “Technological acceptance model Source: (Fishbein & Ajzen, 1975)

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4. Methodology

This section provides an overall understanding of the methodological criteria brought forth to address our thesis while describing the general plan of how we performed our work, research methodology, data collection, and review of the techniques.

4.1 Research Philosophy

The market being analysed in this study is based on a subjectivist framework which means that reality exists in the minds of individuals, which differs from person to person based on the individual's beliefs. In adopting a subjectivist approach, we strive to explain the significance and expectations attached to the phenomena as opposed to the objective view that generalises that there is an only single objective truth that is independent of the personal convictions and beliefs.

4.2 Epistemological Considerations

This study is built upon an interpretive approach as it considers the external environment from an individual’s point of view, thus contributing to an in-depth understanding (Fishbein & Ajzen, 1980). This case study investigates the current market situation of energy-efficient air optimization systems in the commercial sector within Sweden, it represents the viewpoint of different actors involved in this market such as property owners, building managers, ventilation and automation firms.

In this study, we choose to adopt an interpretive approach in order to understand the various dynamics and context of the existing HVAC market. This had been achieved by interviewing a variety of individuals to analyse several realities and to expose the basic meanings.

4.3 Research Approach

We chose to conduct a qualitative study as this approach offers us the ability to indulge more in-depth into the research field with the help of interviews and documents. According to Bryman (2011), qualitative research involves more open questions, along with interpretations of words and pictures which are to be the main objectives. Bryman (2011) further highlights certain advantages of performing a qualitative research such as generating quality and detail information, creating openness while performing interviews and an interactive approach.

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fact that the technology is new and not thoroughly studied and therefore lacked significant secondary data.

Furthermore, this thesis adopts an abductive approach. Abduction means that we start with the theory and then go to empirics and then go back to the theory again (Day, 1994). We follow this approach since there is a pre-understanding of the theory and hence, we initiated the research considering the theory where the foundation for the analysis had been developed. The data from the empirics were collected, and we thus hold the flexibility for changing the theory and empiricism in order to be able to deliver the best possible results. The literature study in this thesis is concentrated and connected to Sweden’s HVAC market, indoor air quality and energy efficiency in commercial sectors. We have focussed on studying and reviewing through the research articles, reports, and government documents to assess the data on the study.

4.4 Research Strategy

The research strategy is a plan developed to address the research question (Mark NK SaundersPhilip, 2019). A case study is used as a research strategy to carry out the study. A case study is useful when the research method is qualitative, and the study objective is exploratory, also when the researcher wants to understand a phenomenon in a specific context (Alan Bryman, 2011). The study aims to carry out an in-depth investigation of a phenomenon or case within the real-time context of the current HVAC market in the Swedish commercial sector while trying to understand the market need for a new technology and its acceptance in a company.

There is a lack of market research as the technology is new. However, there are different researches related to energy efficiency and indoor air quality. The research questions have been therefore developed to explain the market situation and the customer's demand for new technology. In order to be able to carry out research and to be able to answer the research questions convincingly, a specific research design has been selected. Bryman (2011) classifies the case studies in four different categories, one organization one region, one individual and one case. The single case study method is used in the study because the empirical research is based on examining a single company, single location case study category and a single project in a company.

4.5 Data Collection

Klein (1999) and Bryman (2011) classifies the primary research methods associated with qualitative research as:

• Ethnography/participant observation • Qualitative interviewing

• Focus groups

• Language-based approaches to the collection of qualitative data

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surveying one individual per organization in order to find out about the organization.” We conducted semi-structured interviews to obtain specific data for this case.

Within the HVAC market, different types of buildings are relevant, but this study has mainly been focused on auditoriums, shopping centres and industrial buildings. A series of interviews were conducted with energy consultants, ventilation and automation companies to understand everyone’s perspective towards this technology in Sweden’s commercial HVAC market. As semi-structured interviews have a standardized interview guide to follow, where the participant holds a great deal of flexibility to choose what and how to answer (Alan Bryman, 2011), we followed this technique to collect data for the present case where the respondents were presented with open-ended questions that provided more flexibility to answer the issues in discussion while allowing them to dive deeper into the problem.

The interview guide was prepared with a series of specific questions that are related to the research questions posed above in the introduction. Interviewee’s were presented with an interview guide to include an opportunity for focusing on the procedure before the interview, thereby making the interview more effective. The sequence of the questions had varied according to answers of the respondent. Also, the survey questionnaire was not used as it was essential to maintain communication with both the above-targeted companies and customers in order to clarify the meaning of their responses. In this process, conversations were documented, and the reported data had been transcribed, and further

analysed to achieve a comprehensive understanding of the current study. The overview of data collection process is exhibited below in fig

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4.6 Sample Selection

Sampling is about what kind of individuals we are going to meet or speak to before interviews, relevant to our case study. Choosing a sample for a research study is one of the most important measures towards considering the population as a whole (Clark, 2011). The sampling technique used here is Purposive Sampling, where the people approached for the interview were based on relevance to our case study and were particularly informative. Purposive sampling is a method commonly used in qualitative analysis for the selection and collection of knowledge-rich cases for the most efficient usage of available resources (Patton, 2015). This involves identifying and choosing individuals or groups of individuals that are exceptionally knowledgeable or familiar with a trend of interest (Clark, 2011).

The population for this study will be stakeholders or companies who hold commercial properties, energy consultants, automation firms and ventilation companies. These companies were specially selected because they had a significant market share, and they could vary in needs and criteria owing to their specific preferences in various forms of properties. The selection of sample size was based on the time factor, availability of people for interviews and relevance of the data to our project. However, typically, we did sample until a saturation point was reached where we found that there was no room for new information from the interviews, and the information we got was repetitive and already known.

Although we have managed to gain high-quality data, one of the important drawbacks possible from this study is the case of “generalizability”. Due to the limited time constraint, as mentioned, the selected sample size being limited to 5 interviews, there is always a room for difference of opinions from outside the selected sample. However, from the beginning of the project, we did not have full knowledge about this sector. So as the project proceeded, henceforth as we gained more knowledge we have succeeded to target the specific people that finally were included in this study and thus maintained a good sample.

4.7 Company profiles and interview participants

Interviews