The US smart home market has yet to take off. Quirky’s recent announcement that it was filing chapter 11 bankruptcy — and selling off its smart home business, Wink — highlights this well.
At its current state, we believe the smart home market is stuck in the ‘chasm’ of the technology adoption curve, in which it is struggling to surpass the early-adopter phase and move to the mass-market phase of adoption.
There are many barriers preventing mass-market smart home adoption: high device prices, limited consumer demand and long device replacement cycles. However, the largest barrier is the technological fragmentation of the smart home ecosystem, in which consumers need multiple networking devices, apps and more to build and run their smart home.
In a new report from BI Intelligence, we analyze current US consumer demand for the smart home and barriers to widespread adoption. We also analyze and determine areas of growth, and ways to overcome barriers.
Here are some key takeaways from the report:
Smart home devices are becoming more prevalent throughout the US. We define a smart home device as any stand-alone object found in the home that is connected to the internet, can be either monitored or controlled from a remote location, and has a noncomputing primary function. Multiple smart home devices within a single home form the basis of a smart home ecosystem.
Currently, the US smart home market as a whole is in the “chasm” of the tech adoption curve. The chasm is the crucial stage between the early-adopter phase and the mass-market phase, in which manufacturers need to prove a need for their devices.
High prices, coupled with limited consumer demand and long device replacement cycles, are three of the four top barriers preventing the smart home market from moving from the early-adopter stage to the mass-market stage. For example, mass-market consumers will likely wait until their device is broken to replace it. Then they will compare a nonconnected and connected product to see if the benefits make up for the price differential.
The largest barrier is technological fragmentation within the connected home ecosystem. Currently, there are many networks, standards, and devices being used to connect the smart home, creating interoperability problems and making it confusing for the consumer to set up and control multiple devices. Until interoperability is solved, consumers will have difficulty choosing smart home devices and systems.
“Closed ecosystems” are the short-term solution to technological fragmentation. Closed ecosystems are composed of devices that are compatible with each other and which can be controlled through a single point.
NEST’S CEO IS REPLACED: Tony Fadell is leaving his position as CEO of Nest, according to a blog post written by Fadell. He will be replaced by Marwan Fawaz, who previously led Motorola Mobility’s television set-top box business, Motorola Home. The transition has been underway since the end of 2015, and Fadell will remain involved with Alphabet (Nest’s parent company) as an advisor.
Nest and Fadell have faced a lot of criticism over the last few months.
Nest failed to meet revenue expectations. When Alphabet (formerly Google) acquired Nest in 2014 for $3.2 billion, Alphabet set Nest’s revenue target at $300 million annually. But Nest has failed to meet that revenue on its own and has only surpassed the target because of revenue from Dropcam, which it acquired for $555 million six months after Nest was acquired by Alphabet.
Nest is being pressured by Alphabet to release a smart home security system, but hasn’t yet. Nest is reportedly working on three devices — Flintstone, Pinna, and Keshi — that would work in tandem to create a smart home security system. Nest has not released a successful product since the launch of its signature smart thermostat in 2011.
Nest shut down service to the Revolv hub. In April, Nest announced it was shutting down service to Revolv smart home hubs, which were used to control smart lights, locks, thermostats, and other smart home devices. Revolv was acquired by Nest in 2014. Shutting down the Revolv hubs led to a major public backlash against Nest.
Fadell pointed the finger at Dropcam’s CEO Greg Duffy for many of Nest’s problems in an interview withThe Information. Duffy publicly responded saying that if Dropcam’s revenue was released, it would make Nest “not look good in comparison” to Dropcam.
Nest isn’t the only company struggling in the smart home market though. There are very few success stories among smart home products right now, as they tend to be expensive, gimmicky, and often don’t add enough value for the consumer. For example, the $250 price tag for the Nest Learning Thermostat is not affordable to the mass market and doesn’t add enough value to justify the cost difference compared to a $30 unconnected thermostat. Over time, the price of smart home products will drop, making them more affordable for the average consumer.
Dubai – MENA Herald: Schneider Electric, the global specialist in energy management and automation, recently unveiled its IoT 2020 Business Report, outlining the company’s predictions for how large organizations will leverage Internet of Things technologies as a serious business tool by 2020.
The GCC region has been steadily investing in enhancing IT capabilities and digital readiness and has been known for its widespread adoption of cloud technologies. Similarly, the region’s forward-looking governments have been quick on jump to the IoT bandwagon to help its industries, cities and people live a better connected, safer and greener life. According to International Data Corporation (IDC), the total IoT spending in the Middle East will reach $1.8 billion in 2016 and then increase to $3.2 billion by 2019, with manufacturing, transportation, and utilities accounting for up to 50% of this total. Vendors and solution providers must be quick to adapt their offerings to be compatible with the IoT, as it provides visibility to ensure proactive management of assets and can propel the region’s vision to design intelligent and eco-friendly cities.
“We’re past the point of questioning whether IoT will deliver value. Businesses now need to make informed decisions to position themselves to maximize IoT’s value in their organization,” said Dr. Prith Banerjee, Chief Technology Officer, Schneider Electric. “Our IoT 2020 Business Report is designed to serve as a guide for IoT implementation and innovation to help customers reap its benefits as the market evolves over the next five years. It reflects our commitment in delivering technologies that ensure Life Is On everywhere, for everyone, at every moment.”
Based on a recent global IoT survey of 3,000 business leaders in 12 countries, in addition to Schneider Electric’s expertise with IoT solutions and feedback from its customers and partners, the predictions showcase the immediate value for both the public and private sector.
Dr. Banerjee added: “The Internet of Things has been at the top of the hype curve for some time, but the findings of this survey demonstrate that IoT technologies can and will continue to drive real business value across industries and geographies.”
The following predictions serve as a guide for what business leaders can expect as the market evolves:
1. The next wave of digital transformation. IoT will trigger the next wave of enterprise digital transformation, unifying the worlds of OT and IT and fueling a mobile and digitally enabled workforce: As more companies both expand and deepen their digitization programs enterprise- wide, IoT will increasingly take center stage. This new wave of transformation will be enabled by more affordable “connected” sensors, embedded intelligence and control, faster and more ubiquitous communications networks, cloud infrastructure, and advanced data-analytics capabilities.
2. Insightful data. IoT will translate previously untapped data into insights that enable enterprises to take the customer experience to the next level: When thinking about the value proposition of IoT, most businesses point to efficiency and cost savings as the key benefits. Yet access to data – including previously untapped data – and the ability to translate it into actionable insights, the hallmark of IoT, will deliver greater customer-service transformation and new opportunities to build brand/service loyalty and satisfaction.
3. Premise-to-cloud confidence. The IoT will promote an open, interoperable and hybrid computing approach, and it will foster industry and government collaboration on global architecture standards that address cybersecurity concerns: While cloud-based IoT solutions will grow in popularity, no single computing architecture will monopolize their delivery. IoT instead will flourish across systems, both at the edge and on premise, as part of private cloud or public cloud offerings. Making IoT available across heterogeneous computing environments will help end users adopt IoT solutions in the way that best suits their security and mission-critical needs while also offering entities with legacy technology infrastructures a logical and manageable path forward, allowing them to transform over time.
4. Innovations that leapfrog existing infrastructure. IoT will function as a source of innovation, business model disruption and economic growth for businesses, governments and emerging economies: Just as the Industrial Revolution, birth of the Internet and mobile revolution have driven advancement, innovation and prosperity, so will IoT. Businesses and cities alike will deliver new IoT-enabled services; new business models will emerge; and, in particular emerging economies will have a significant opportunity to quickly leverage IoT without the constraint of legacy infrastructure, essentially leapfrogging old ways. In fact, McKinsey forecasts that 40 percent of the worldwide market for IoT solutions will be generated by developing countries.
5. A better planet. IoT solutions will be leveraged to address major societal and environmental issues: IoT will help countries and their economies respond to the biggest challenges facing our planet, including global warming, water scarcity and pollution. In fact, survey respondents identified improved resource utilization as the number one benefit of IoT to society as a whole. In concert with the private sector, local and national governments will embrace IoT to accelerate and optimize current initiatives to curtail greenhouse gas emissions in accord with the breakthrough COP21 climate agreement, whereby 196 countries pledged to keep global warming under the threshold of 2 degrees Celsius.
The key global survey findings that informed the predictions revealed:
• Seventy-five percent of businesses are optimistic about the opportunities the IoT presents this year, including:Improved customer experience: Sixty-three percent of organizations plan to use the IoT to analyze customer behavior in 2016, with faster problem resolution, better customer service and customer satisfaction ranking among the top five potential business benefits.Cost savings in automation: Building and industrial automation represent the highest potential annual cost savings (63 and 62 percent, respectively). Results showed automation technologies will be the future of the IoT, with nearly half (42 percent) of respondents indicating that they plan to implement IoT-enabled building automation systems within the next two years.Mobile delivers the value of IoT: Two out of three organizations (67 percent) plan to implement the Internet of Things via mobile applications in 2016. Even further, one- third of respondents (32 percent) plan to start using the IoT in mobile applications in as little as six months, citing potential cost savings of up to 59 percent as a major driver in implementation.
• 81 percent of respondents feel that knowledge gathered from the data and/or informationgenerated by the IoT is being shared effectively throughout the organization.
• 41 percent of respondents anticipate cybersecurity threats related to the IoT as being a critical challenge for their business.
Smart home service providers like Vivint, Alarm.com, and Xfinity Home are getting more positive online reviews than smart home devices makers, according to a new report from Argus Insights. This shows that customers prefer to have a service provider who comes in and installs their smart home devices for them.
The report analyzed more than 56,000 online and social media reviews of smart home devices and apps. Looking at the app reviews, Vivint’s Sky app had the highest satisfaction rating in the report. Other service providers including Xfinity Home, Alarm.com, and Cox Communications are all seeing improving app satisfaction and subscriber growth, according to Argus. In comparison, smart home apps from device makers like Nest, Philips, and Belkin are lagging behind in satisfaction, the report found.
The big difference between the service providers and individual device makers is that the service providers will install customers’ devices for them. When consumers buy an individual smart home device like a Nest thermostat they have to setup and install the device on their own.
Unfortunately, many smart home devices are plagued with technical glitches that can make installing them very difficult for the average consumer. If a customer is experiencing technical problems with their device, it will likely reflect on their satisfaction with the app that controls that device. So smart home service providers are carving out a space for themselves in the nascent smart home market by solving this technical challenge for customers.
Peter Tyroller, member of the board of management of Bosch Group responsible for Asia Pacific
GERMAN industrial giant Bosch earlier this month launched a connectivity strategy for China, its second-largest market. Its broad range of businesses and technologies — from automotive, consumer goods, building and energy efficiency solutions, and industrial products and solutions — provides a natural resource for the exploration of connected mobility, connected industries, smart homes and smart cities.
It’s product eco-system is in tune with the rapid growth of the Internet of Things in China, thanks to the government’s Internet Plus initiative for integrating the Internet into traditional industries.
Having just achieved record-high sales in China of 77 billion yuan (US$11.7 billion) last year, despite a slowing market, Bosch predicts strong momentum in sales of connected solutions and services.
Peter Tyroller, a Bosch board member responsible for the Asia-Pacific, shared his company’s vision of “connected for life” at a press conference in Shanghai during the Asia Consumer Electronics Show.
Q: Talk about smart homes and smart cities has been going on for years. Turning talk into reality is another matter. Are these ideas still ahead of their time?
Tyroller: It’s a pretty expansive debate, with everyone fielding their own ideas. What matters lies in the detail. For example, with connectivity, Bosch runs an active parking management system that draws on data collected by sensors installed in the pavement of parking spots to record availability. And for buildings, connectivity of all kinds of devices helps boost energy efficiency within a more integrated system. The Internet of Things takes shape step-by-step.
The market for all these visions may not yet be all that large, but people nowadays seem to be willing to spend extra money on connectivity solutions if they bring costs down. We expect some 230 million households to be “smart connected” by 2020 globally.
This will not be a repeat of the dotcom bubble of the early 2000s. Communication technology is much better developed today, and the Chinese government is sparing no effort in upgrading infrastructure that will lead to the 5G era.
Q: Bosch claims to be the only company with a whole package for the Internet of Things, the sensor, the software, and the service. Which part of your specialty do you see as the strongest growth point?
Tyroller: It is hard to see any of them as a stand-alone business because their power comes from cooperation. Sensors are the eyes, ears and noses, software is the brain, and services are deliveries of value. We have a very strong presence in the hardware field, with three out of four mobile devices in China equipped with Bosch sensors.
We are actively developing data mining and analyzing capabilities as our soft skills. In 2015, 30 percent of the 5,500 Bosch researchers and developers in China were working in software development, and this year over one-fifth of our recruitment of university graduates in China will be related to software. We have a target to connect every product we are selling now with the Internet, compared to the current 50 percent. We have a natural reason to explore the idea of smart homes and smart cities because we ourselves make home appliance and supply building and energy solutions.
Q: A Chinese Internet company called LeEco has the strategy of selling hardware cheaper than cost to attract more users into its product eco-system, where they pay for more value-added services and content. What’s Bosch’s opinion on such a bold business model emerging with the Internet of Things?
Tyroller: The Internet of Things will certainly broaden the traditional way of doing business. Will we make our sensors free and charge for services? It is open for discussion. There are already some business possibilities we can explore with the power of connectivity. We can keep insurance and leasing companies posted with how drivers behave and help them develop a new fee rate like “pay how you drive.” With live data diagnostics, we can advise on routine maintenance to operators of construction and mining machines to avoid breakdowns and business losses.
Q: Do you believe that data will become the “new oil,” and whoever owns it will make a lot of money?
Tyroller: I think there will be an increasing number of cooperation models for that in the future. It is not a competition for one to fight alone because data streams come from a connected world. We are in favor of an open Internet of Things and solutions not just for Bosch products.
Q: The merger of the physical and digital worlds raises a lot of issues about security and privacy because our lives now seem easier to peek into. How will Bosch insure that its Internet of Things users are not vulnerable to intruders?
Tyroller: Whenever we handle data, there must be no leaks. For that purpose, we have launched our first Internet of Things cloud-computing infrastructure and platform at a dedicated data center in Germany. Additional cloud services locations are planned for the United States, Singapore and China. We leave the decision to users as to what we can do with their data, when to provide their personal data and when they want to have them deleted. We understand that as everything gets connected, our customers will be more concerned about their lives becoming too transparent.