5 Ways to Accelerate Connected Home Adoption (and Yes, Apple should get involved!)

on June 24, 2013

In the past 5 years the Connected Home industry has progressed from relative obscurity to the focus of intense intrigue and significant advertising (seen any of the Comcast or ADT Pulse TV commercials lately?). Mass-market launches of Home Automation, Home Monitoring and Energy Management services are becoming increasingly common with Service Providers (Verizon, Comcast, Time Warner Cable, AT&T, ADT) and Retailers (Lowe’s, Best Buy, Radio Shack) having initiated programs, and the other large players solidifying plans to launch what we call “Connected Home Services.”

But this business has seen its fair share of false starts since the mid-90’s…

Even when compared to late-2000’s estimates, the size of today’s Home Automation opportunity has come up decidedly short. Despite modest adoption, the total number of households with Home Automation, Energy Management, etc. still represents less than 5% of the current market. By comparison, the traditional home security market has roughly 25% penetration, with broadband clearing just over 80%.

However, rising consumer interest combined with the broad proliferation of connected mobile devices, and channel support for millions of customers constitute an unprecedented mass-market opportunity for the Connected Home. As we continue to refine our industry’s thinking about how to realize the promise of this sector, I thought it would be helpful as a former insider to propose several improvements that could accelerate the adoption and strengthen the end-user value proposition for these Connected Home Services.

  1. Create “Found Time” – Consumers are increasingly overwhelmed by commitments both at work and at home. A service that demands the continual investment of their time clearly is not the answer. Consumers neither need nor want the ability to control everything in their homes at all times. These services, then, should be optimized to address problems proactively, improve efficiency automatically, and request attention only when it is absolutely necessary.

    By using Connected Home Services to drive wider efficiency in the home, Providers can actually help consumers create “found time,” which can be deployed against higher (perceived) value activities such as content consumption, social networking, and family time. This in large has been the promise of Smart Home since the Jetsons first appeared on TV in 1962.

    I don’t have a PhD in Psychology, but I posit that the Connected Home sits near the bottom of any leisure time hierarchy. For comparison purposes, I’ve attempted to contrast it vis-a-vis Maslow’s hierarchy of needs.

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  3. Link Content Consumption and Home Management – Right now these activities require different user interfaces, devices and services, but consumers have less time to “single-task” than in previous decades. We can create a more natural and integrated experience by positioning the Connected Home Services closer to the content behaviors they enable and by broadening user interface and device functionality to cover both.

    Some of the current solutions in the mass market are beginning to do this by programming “Good Night” scenes that can be triggered from a TV to turn off lights, adjust thermostats, and even arm security systems. High-end systems from Control4, AMX, and Crestron have been integrating media and comfort controls for over 15 years. Skeptics may poke at the seemingly infinitesimal upside of this automation, but those precious minutes at the end of the night are a step in the right direction for giving time back to consumers.

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  5. Partner Up (to reduce cost) – Traditional business model analysis for Connected Home Service launches usually includes the recoupment of starter kit cost with a combination of a one-time activation fee and a recurring monthly service charge over a 24 or 36-month contract. Given that some of the kits can top $500 that makes sense, but very little evidence exists that substantiates consumers’ willingness to pay significant recurring monthly fees for non-Security services. So how can these services meet consumer expectations while delivering the profit that channel stakeholders demand? Partnership is one answer.

    The first benefit of increased partnership is preventing the frequent duplication of features and functionality required to launch services. For example, compiling the protocol drivers or setting up a cloud service on AWS or Rackspace. Ayla Networks, which recently emerged from stealth mode, is one company that is attempting to provide the building blocks for connected devices. By providing some of the basic elements of connectivity and control for these connected devices, they can help to drive down the cost to deploy.

    The second benefit to partnership is facilitating creativity to derive value in the service offerings. We need to determine if there are interested parties who would benefit from partnering to deliver the service into the household? Do they want to grow/maintain a deeper relationship with the consumer? How so? Could they subsidize a portion of the solution? Offer a rebate or other incentives? Insurance Providers, Utilities, and Hardware & Home Improvement vendors are three types of strategic partners that come to mind when I propose this.

  6. Create a network effect – Tap into the value of larger network behavior instead of optimizing home management operations on a single-household basis. The telephone system is a classic example of a network effect where the value increased exponentially as more and more people (nodes) adopted it.

    We should investigate how to exploit collaborative consumption or shared resource opportunities as a potential channel for adding value to Connected Home Services (or at least to reduce costs). Presently, the startup Nextdoor is receiving significant attention for being a “Facebook for the Neighborhood.” Connected Home Services can encourage collaboration or even healthy competition in some cases (e.g. an Energy Management application that compares your usage to the average in your zip code). As an advisor, I’m starting to see concepts crop up in this area and I believe you’ll see them come to market shortly.

  7. Simplify – One of Steve Jobs most memorable quotes was: “simplicity is the ultimate sophistication.” It later became the slogan for the launch of the Apple II.

    In the case of the Connected Home, abstracting the complexity from various services takes work, but the work is worth it. Many companies have made the mistake of assuming people want to control things all of the time, but there is an opportunity in automating scenes or prioritizing outbound event notifications from life safety and monitoring devices.

    In addition, the myriad of standards, OEM vendors, pricing methodologies, etc. being explored are all indications that the market is still settling out. It’s important for us to have a healthy debate about how products are entering the market. Not all connected products need (or should have) their own system. For example, do we need a connected toilet or a smart fire alarm with is own branded application? These could clearly be components in a larger system and not be burden by development costs amortized into the MSRPs.

So Why Should Apple Get Involved?

The short answer (my long answer will be a follow-up article dedicated to the topic) is that they already are involved. First, through their sales of both Nest and Phillips Lighting products at the Apple Store. Secondly, through Apple Alumni such as Tony Fadell and Matt Rogers who founded Nest and Hugo Fiennes who started Electric Imp. But more strategically, Apple continues to make investments in wearable computing technology, to form strategic partnerships with companies like Nike, and to file a significant amount of IP relating to home connectivity.

Most importantly they are already shipping in high volume iPhones, AppleTVs and Routers that already utilize Bonjour for network configuration and could possibly host software to manage the connected home.

As recently as this month’s WWDC event, Apple noted that iOS 7 enhancements for iBeacons would include Bluetooth Low Energy (BLE) profile for micro-location. Apple Insider has an excellent analysis here. By enabling the micro-location through iOS 7, Apple can utilize that capability to provide home automation features such as lighting control, access management, and other location-based triggers.

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So will Apple aggressively attack Connected Home? Yes. The sheer size and scope of Internet of Things that I recently outlined will compel large players like Apple, Google and Amazon to fully articulate a strategy. Which strategy and what timing have yet to be seen, but you can expect much more scrutiny on these topics in the coming months.

Wrapping Up

In her article “Services Battle Shifts to the Home” Mari Sibley outlines the various risks and opportunities for Service Providers to enable the Connected Home. Among the specific incentives included “high margins and the chance to add value to existing broadband networks.”

While there are clearly product design and consumer demand hurdles to overcome, the constant ARPU pressure on Voice, Data and Video for Service Providers coupled with the rapidly changing Retail environment are putting increased value on Connected Home Services. But to fully reach its potential it must provide real value to consumers and be delivered in a services model that provides adequate financial outcomes to the myriad of stakeholders involved. With more coordination, hard work, creativity, and perhaps a little luck, hopefully now is the time “for the Smart Home to finally come Home.” (Quote courtesy of Jim Hunter, 4Home and Premise Founder).