Selling Outcomes, Not Software — Questions and Experiments
For: Cadence leadership · Status: Pre-retreat draft for Tuesday. Not a recommendation.
This memo frames what we need to learn before deciding how far to move from selling software toward selling outcomes. It lays out the model options, the open questions, and a triaged set of experiments. It does not pick an answer.
The multi-billion dollar market opening that is J-51 will be live by Q1 2027, maybe sooner. We saw it coming earlier than anyone. Now everyone else is waking up to it too — and shame on us if we're not ready when it hits.Once it opens, deals get developed — by us or by someone else. A model that shows up after deals are already being structured is worthless. There is no prize for the best strategy if it lands late.
And the clock is already running in all the major markets. With every passing day, owners start talking to OEMs and service providers about their projects. They make investments in those relationships — switching costs, sunk effort, and feelings to manage all accrue. Every day we don't have a model, we make our own future work harder, because we're prying owners loose from commitments instead of shaping them from the start.
So this is not a call for more study. It is the opposite: find the fewest decisions and experiments that matter, and be running them by year end — refining against real deals as the window opens, not still arguing frameworks. Everything here favors tests we can start now, on buildings already in front of us, that pay off in weeks.
The question that matters: what can we have in-market and generating signal by December 2026, so that when the J-51 floodgates open we are sharpening a working motion instead of inventing one?
The four canonical delivery methods (Construction Management Association of America, Owner's Guide), ordered by how much design control the owner keeps and how much risk shifts to the builder — not a ranking. The question for each is what role Cadence would play in it.
Design-Bid-Build (DBB). Owner hires a designer, then separately bids the finished design to contractors. Owner holds design risk; sequential and slower; prone to disputes when field conditions differ from the drawings. — Does DBB fit sub-$20k/DU retrofits at all, or is its soft cost and speed exactly the problem we exist to fix?
Construction Management at Risk (CMAR). A construction manager advises during design, then converts to an at-risk builder at a guaranteed price (often a GMP). Our 321-type performance spec is compatible here too — serving as the design basis, with the detailed "true design" pushed down to the installing subcontractor. — Would we ever be the at-risk party — and when is that attractive, financeable, insurable, and operable for us?
Design-Build (DB). One entity owns both design and construction, so design risk shifts to it. The kind of performance spec we piloted in 321 bidding and that Jason spent a decade refining could serve as the design basis: it sets the requirements while the detailed "true design" — means and methods — is pushed down to the installing subcontractor. — Does authoring the performance spec make us the designer-of-record, or does pushing means and methods to the sub keep that risk off us? How much risk comes with each version?
Integrated Project Delivery (IPD). Owner, designer, and builder share risk and reward under one multiparty contract. — High-trust and largely legally untested; is it even relevant to us near-term?
"Myth of Third-Party Design" (Jason): the engineer's "design" is mostly the equipment schedule; the real detail happens in contractor submittals — pointing to a performance-spec-plus-referee setup.
"Buying a Transformation": frames the owner risk stack (below) and says turnkey comes closest to covering owner risks but "is hard to scale." That scaling claim is an assumption — test it.
"Earning the Position": proposes a staged path to a market-maker role. Worth debating, not adopting.
Whatever model we pick, its job is to take these off the owner's plate:
Before yes:Pathway (too many options), Narrative (selling a cautious board), Financing (a real way to pay), Supply (a credible installer at a fair price).
After yes:Change orders (field surprises), Schedule (permits, interconnection, resident access), Coordination + accountability (who holds it together and who's liable when something breaks).
What does "selling outcomes" mean, and what's the first product? A confident pathway, a quoteable project, a financing plan, a bid-ready package, an equipment reservation, a managed procurement, an accountable delivery, or a finished project?
What does "buy through Momentum" actually promise? Which version is Bomee picturing — and which is legal, doable, and sellable in 2026?
The language test. At what point does each phrase start implying real construction liability: "helps you buy the project" → "manages the process" → "manages delivery" → "stands behind the project" → "one throat to choke" → "sells the installed project"? This is where liability creeps in — through the words sales uses.
Procurement spread vs. construction spread. Carrying equipment/working-capital risk (where we may have an edge) is a different animal from carrying change-order/schedule/GMP risk (where we don't, until we have data). Separable? Do one first?
Is the procurement spread even worth building around?"It's Not About the Volume with OEMs" suggests it's low single digits and dwarfed by the price differences between OEMs. Real lever or distraction?
What owners want vs. what we can do — kept separate
Which risks do owners most want gone? (pathway, board narrative, price, contractor choice, change orders, schedule, resident access, warranty, performance, savings, financing, operations)
Which can we credibly handle now? For each risk: reduce it with process / price it with judgment / price it with data / hand it to a partner / insure it / contract around it / avoid it for now.
Scope and gate
The minimum quoteability gate. Before any firm price or reservation, what must we know — and for each input, is it mandatory, sampled, unit-priced, or an allowance? (HP count, apartment mix, window fit, existing outlets, panel and service capacity, demand data, backgrounds, resident access, J-51/incentive eligibility, OEM lead time, contractor availability, warranty.)
Does writing a performance spec make us the designer? Owner's-requirements doc (low liability) or designer-of-record (high)? Legal input needed.
The unit-price true-up problem. Worked for countable scopes (radiators) in the Article 321 bidding pilot; but blew up on hard-to-estimate ones (pipe insulation) on small jobs — and we had no paid role to settle disputes. What structure makes unit pricing safe, and how do we get paid to referee it?
Market and partners
What do OEMs want us to be? Direct demand, channel protection, forecastable demand, early payment, fewer bid cycles, performance data — and would they discount for our demand or fear channel conflict? (Differs by OEM — see "It's Not About the Volume with OEMs".)
What do contractors want us to be? Will they bid from our spec; what do they need to price firm; what will they unit-price, cap, or exclude; will they accept our change-order governance; would steady pipeline lower their price?
Engineers and consultants who do the annual BEPS filing and believe they "own" the owner — channel, delivery partner, or competitor? Give the good ones a bounded, non-judgment scope (commissioning, M&V, filing) so they help rather than block.
Which segment do we test first — for best learning, not easiest sale? And how do we spot early whether an owner wants to own accountability (the Related/Rudin tell)?
Financing — the pain we keep hearing and haven't answered
Is financing the actual product? The Roosevelt Island owner's core pain wasn't technology — it was how to pay for it. Across owners, is "a viable way to pay" the risk they most want removed, and could financing be the wedge rather than a bolt-on?
Do we fold financing into the delivery model? The CMAA guide names the method where the delivery entity also brings the capital: Public-Private Partnership (P3), in its fullest form Design-Build-Finance-Operate-Maintain (DBFOM) — a private party fronts some or all of the capital and is repaid from the revenue (or avoided cost) the finished project generates. It's framed there as a public-sector, revenue-stream tool, so it's a conceptual reference, not a literal template for private multifamily — but the question is real: do we (or a partner consortium) ever fold financing into what we deliver, repaid against energy savings + the J-51 abatement, or do we keep financing arm's-length and just make the building financeable?
What is our role in the J-51 timing bridge? J-51 delivers a tax abatement over time, but the work needs capital up front. Someone has to bridge future abatement value to present cost. Do we originate that bridge, structure it, broker it to a lender, or just make a building "financeable" and hand it off?
Do we ever need credit enhancement, and from whom? Bomee has floated that we may need credit-enhancement support (e.g., from NYSERDA) down the road. When would we need it, what would it de-risk (owner default? our own commitments?), and which parties (NYSERDA, utilities, green banks, lenders) could provide it?
How does financing interact with the delivery models above? Does carrying or arranging financing pull us toward a principal position, or can we stay an arranger/matcher? Does it change what "buy through Momentum" can promise?
What can we do now vs. later? Which financing help is available immediately (rebate/incentive stacking, J-51 paperwork, matching owners to existing loan products) vs. what requires partners, capital, or structure we don't yet have?
Economics and product
Which models are real businesses once we price our own effort — revenue/project, margin, labor, working capital, legal/insurance, broken-deal cost, risk carried, repeatability, data captured?
What must Momentum become, and what's essential for the first experiment vs. later?
Owner interviews. A handful of owners across type: which risks block their yes, what they'd pay to remove them, whether fee-crediting and J-51 timing move them, which message lands. → what owners actually buy.
OEM term-sheet requests. Gradient, Innova, Midea: separate and stack volume, lead time, and prepayment, plus warranty, cancellation, substitution, freight, milestones, price-lock. → the real procurement spread + a price-book template.
Contractor interviews. What they need to price firm; what they'll unit-price, cap, or exclude; warranty handling; whether they'll work under our procurement and governance; whether steady pipeline lowers price. → a contractor risk matrix.
Turnkey reality check. I've assumed "turnkey design-build doesn't scale" — but that's unproven. How do today's turnkey players (Carlton, Nova1, VRF Solutions, BES) actually scale or fail: geography, labor, capital, or demand? → facts to replace the assumption.
This quarter — needs a live project or build time #
500-unit test building site visit (tomorrow's visit). What we can collect fast, what stays unknown, and classifying every risk as fixed / unit-price / allowance / exclusion / trigger — separating equipment cost from balance-of-system risk. → a draft quoteability report and first unit-price schedule with true-up rules.
Cross-OEM selection engine (v0). All-in comparison (equipment + install + balance-of-system + performance data) across all three OEMs for the 500-unit complex. → proof we can pick neutrally in a way an owner can't do alone.
"Buy" definitions + reservation prototype. Sketch the "buy through Momentum" versions side by side with their risk levels. One version worth prototyping: a verified equipment reservation — the hypothesis that, once a project clears the quoteability gate, an owner would commit to an equipment package (locked price, quantity, lead time, terms, warranty, cancellation) before full construction is bid, giving us and the OEM early certainty. Draft its term sheet: what's verified first, who holds funds, cancellation, site-change handling, freight/damage, reseller exposure. → clear buy definitions + a mock reservation term sheet.
Legal / insurance / licensing review. Where advisory becomes CM becomes contractor; whether we can earn an equipment spread without being a reseller; insurance per model; language to avoid; a contract that starts risk-free with a later GMP toggle. → a boundary memo + draft contract skeletons.
Board narrative test. A board package for one building: pathway, rejected options, what it physically looks like, "why now / why not wait / why this contractor / what after approval" — and whether someone other than Marc can deliver it (the founder-heroics test). → a narrative prototype.
Financing role scoping. On a live building (e.g., Roosevelt Island) map the actual path from "want to do this" to "capital in hand": what a J-51 abatement-to-upfront-cost bridge would require, which existing products fit, where a gap needs credit enhancement, and who (NYSERDA, green banks, lenders) could fill it. → a first view of what financing role is real for us now vs. later, and whether it's a wedge or a bolt-on.
Lender interviews. Talk to the actual capital sources. In past cycles, traditional first-mortgage and other lenders offered J-51 bridge products — will they now? Probe: which lenders will bridge future J-51 abatements to upfront cost, and on what terms; will an existing mortgage holder extend a co-terminous line or refi for this (the Roosevelt Island owner's Valley Bank question); what makes a retrofit "financeable" to them (savings underwriting, equipment track record, our spec/verification); would credit enhancement from NYSERDA or a green bank change their appetite or pricing; and would they want Cadence as an origination channel or see us as noise. → a map of who will actually fund this, on what terms, and where the gaps are that a partner or enhancement must close.
Delivery-model economics. One simple comparison across the models: revenue, margin, labor, risk, working capital, data, repeatability, scale limits. → a table that separates a real business from one that only looks good unpriced.
Not a finished strategy — a way to decide, on the J-51 clock:
Which §4 questions must be answered before Q1 2027, and which can wait.
A ranked shortlist of §5 experiments, each with an owner and a date, weighted toward December signal.
Draft calls to prepare: working definition of "buy through Momentum"; risks we won't take yet; revenue model; required Momentum changes.
The question isn't "should Cadence become a market maker?" It's: what must we learn, build, prove, and risk before we can credibly sell outcomes — and how much of it can we test before the end of the year, when the J-51 floodgates really open?
Strategy Notebook
Selling Outcomes, Not Software — Questions and Experiments
For: Cadence leadership · Status: Pre-retreat draft for Tuesday. Not a recommendation.
This memo frames what we need to learn before deciding how far to move from selling software toward selling outcomes. It lays out the model options, the open questions, and a triaged set of experiments. It does not pick an answer.
1. Why This Cannot Wait #
The multi-billion dollar market opening that is J-51 will be live by Q1 2027, maybe sooner. We saw it coming earlier than anyone. Now everyone else is waking up to it too — and shame on us if we're not ready when it hits.Once it opens, deals get developed — by us or by someone else. A model that shows up after deals are already being structured is worthless. There is no prize for the best strategy if it lands late.
And the clock is already running in all the major markets. With every passing day, owners start talking to OEMs and service providers about their projects. They make investments in those relationships — switching costs, sunk effort, and feelings to manage all accrue. Every day we don't have a model, we make our own future work harder, because we're prying owners loose from commitments instead of shaping them from the start.
So this is not a call for more study. It is the opposite: find the fewest decisions and experiments that matter, and be running them by year end — refining against real deals as the window opens, not still arguing frameworks. Everything here favors tests we can start now, on buildings already in front of us, that pay off in weeks.
The question that matters: what can we have in-market and generating signal by December 2026, so that when the J-51 floodgates open we are sharpening a working motion instead of inventing one?
2. The Delivery Models #
The four canonical delivery methods (Construction Management Association of America, Owner's Guide), ordered by how much design control the owner keeps and how much risk shifts to the builder — not a ranking. The question for each is what role Cadence would play in it.
Design-Bid-Build (DBB). Owner hires a designer, then separately bids the finished design to contractors. Owner holds design risk; sequential and slower; prone to disputes when field conditions differ from the drawings. — Does DBB fit sub-$20k/DU retrofits at all, or is its soft cost and speed exactly the problem we exist to fix?
Construction Management at Risk (CMAR). A construction manager advises during design, then converts to an at-risk builder at a guaranteed price (often a GMP). Our 321-type performance spec is compatible here too — serving as the design basis, with the detailed "true design" pushed down to the installing subcontractor. — Would we ever be the at-risk party — and when is that attractive, financeable, insurable, and operable for us?
Design-Build (DB). One entity owns both design and construction, so design risk shifts to it. The kind of performance spec we piloted in 321 bidding and that Jason spent a decade refining could serve as the design basis: it sets the requirements while the detailed "true design" — means and methods — is pushed down to the installing subcontractor. — Does authoring the performance spec make us the designer-of-record, or does pushing means and methods to the sub keep that risk off us? How much risk comes with each version?
Integrated Project Delivery (IPD). Owner, designer, and builder share risk and reward under one multiparty contract. — High-trust and largely legally untested; is it even relevant to us near-term?
Internal docs (inputs, not consensus) #
3. The Owner Risk Stack #
Whatever model we pick, its job is to take these off the owner's plate:
4. Open Questions #
Identity, language, and risk
What owners want vs. what we can do — kept separate
Scope and gate
Market and partners
Financing — the pain we keep hearing and haven't answered
Economics and product
5. Experiments — Ranked by Speed to Signal #
The test for every one: can it produce signal before J-51 opens? The "start now" set has no dependencies and can begin immediately.
Start now — weeks, no dependencies #
Owner interviews. A handful of owners across type: which risks block their yes, what they'd pay to remove them, whether fee-crediting and J-51 timing move them, which message lands. → what owners actually buy.
OEM term-sheet requests. Gradient, Innova, Midea: separate and stack volume, lead time, and prepayment, plus warranty, cancellation, substitution, freight, milestones, price-lock. → the real procurement spread + a price-book template.
Contractor interviews. What they need to price firm; what they'll unit-price, cap, or exclude; warranty handling; whether they'll work under our procurement and governance; whether steady pipeline lowers price. → a contractor risk matrix.
Turnkey reality check. I've assumed "turnkey design-build doesn't scale" — but that's unproven. How do today's turnkey players (Carlton, Nova1, VRF Solutions, BES) actually scale or fail: geography, labor, capital, or demand? → facts to replace the assumption.
This quarter — needs a live project or build time #
500-unit test building site visit (tomorrow's visit). What we can collect fast, what stays unknown, and classifying every risk as fixed / unit-price / allowance / exclusion / trigger — separating equipment cost from balance-of-system risk. → a draft quoteability report and first unit-price schedule with true-up rules.
Cross-OEM selection engine (v0). All-in comparison (equipment + install + balance-of-system + performance data) across all three OEMs for the 500-unit complex. → proof we can pick neutrally in a way an owner can't do alone.
"Buy" definitions + reservation prototype. Sketch the "buy through Momentum" versions side by side with their risk levels. One version worth prototyping: a verified equipment reservation — the hypothesis that, once a project clears the quoteability gate, an owner would commit to an equipment package (locked price, quantity, lead time, terms, warranty, cancellation) before full construction is bid, giving us and the OEM early certainty. Draft its term sheet: what's verified first, who holds funds, cancellation, site-change handling, freight/damage, reseller exposure. → clear buy definitions + a mock reservation term sheet.
Legal / insurance / licensing review. Where advisory becomes CM becomes contractor; whether we can earn an equipment spread without being a reseller; insurance per model; language to avoid; a contract that starts risk-free with a later GMP toggle. → a boundary memo + draft contract skeletons.
Board narrative test. A board package for one building: pathway, rejected options, what it physically looks like, "why now / why not wait / why this contractor / what after approval" — and whether someone other than Marc can deliver it (the founder-heroics test). → a narrative prototype.
Financing role scoping. On a live building (e.g., Roosevelt Island) map the actual path from "want to do this" to "capital in hand": what a J-51 abatement-to-upfront-cost bridge would require, which existing products fit, where a gap needs credit enhancement, and who (NYSERDA, green banks, lenders) could fill it. → a first view of what financing role is real for us now vs. later, and whether it's a wedge or a bolt-on.
Lender interviews. Talk to the actual capital sources. In past cycles, traditional first-mortgage and other lenders offered J-51 bridge products — will they now? Probe: which lenders will bridge future J-51 abatements to upfront cost, and on what terms; will an existing mortgage holder extend a co-terminous line or refi for this (the Roosevelt Island owner's Valley Bank question); what makes a retrofit "financeable" to them (savings underwriting, equipment track record, our spec/verification); would credit enhancement from NYSERDA or a green bank change their appetite or pricing; and would they want Cadence as an origination channel or see us as noise. → a map of who will actually fund this, on what terms, and where the gaps are that a partner or enhancement must close.
Delivery-model economics. One simple comparison across the models: revenue, margin, labor, risk, working capital, data, repeatability, scale limits. → a table that separates a real business from one that only looks good unpriced.
6. What a Good Retreat Produces #
Not a finished strategy — a way to decide, on the J-51 clock:
The question isn't "should Cadence become a market maker?" It's: what must we learn, build, prove, and risk before we can credibly sell outcomes — and how much of it can we test before the end of the year, when the J-51 floodgates really open?