The Smart Home is Stuck

Alphabet’s Nest subsidiary has been in the news recently for all the wrong reasons. Whether for unpleasant management styles, uncomfortable financial belt-tightening, or a failure to hit annual targets. All this has many people asking why Nest, which was the darling of the smart home market before its acquisition by Google, seems so stuck. I think the answer is that Nest is mostly a victim of the current state of the smart home market, which itself seems perennially stuck in the early adopter phase.

A category in search of a problem

The smart home and home automation category has always been a solution in search of a problem. For the vast majority of people, there’s no desperate yearning for something new to come along and replace their thermostat, refrigerator, lighting, doorbell, or baby monitor. Most of these things are well established, work just fine, are reliable, affordable, and easy to use. Replacing these items with more expensive, less reliable, more complicated technology just doesn’t sound like a good idea to most people. There are, though, people willing to buy and use these technologies, and a number of companies have benefited from the openness of these early adopters who want to spend lots of money on gadgets for their homes.

Some exceptions have crossed over

Some exceptions to this pattern have crossed over to the mainstream. Those exceptions include – to some extent – Nest’s original product: its thermostat. That device meets several key criteria which make it unique in the broader home automation category:

  • A small number – in some cases, just one – are needed for the average home
  • The installation is somewhat intimidating but doesn’t require complex electrical skills
  • There is a promise of a clear return on investment from smarter use of the home’s HVAC system

Straightforward installation, a whole-home solution with few constituent parts, and a return on the cost of purchase are not claims many other smart home solutions can make. That has allowed the Nest thermostat to sell better than most products in this category (indeed, it’s about the only smart home product in the new home I built a couple of years ago). Other product categories require electrical expertise, devices to be installed throughout the home, and cost a lot of money with increased convenience the only real benefit.

Maxing out a series of small markets

The challenge, then, is the addressable market for most smart home technology is pretty small, composed of innovators and early adopters in the classic technology diffusion curve. As a result, many products are attempting to squeeze every opportunity out of these small markets until they’re maxed out. Nest has been criticized for not innovating more around its original product but I suspect this is the result of a deliberate strategy to saturate many individual product markets rather than focus on ongoing significant improvements in a single market. This helps to explain Nest’s acquisition of Dropcam, its smoke and carbon monoxide detector, and the other products it’s been rumored to be working on. There’s more mileage in opening up new markets than there is in squeezing incremental value out of existing markets already nearing saturation.

Alexa as a smart home device is a red herring

I see some people referring to Amazon’s Alexa as a more mainstream smart home or home automation product, and I think that’s actually a red herring. Yes, it can be used to control smart home devices but I suspect (a) only a subset of Alexa devices are used for this purpose and (b) such a focus would limit its appeal to a niche within that smart home early adopter category. I think Alexa’s potential is much broader than that and it’s precisely because it isn’t just a smart home controller. Alexa isn’t extending the smart home market – it’s more mainstream precisely because it’s not limited to that small and limited opportunity. Having said that, it likely appeals to the same sort of early adopters as smart home products do but it appeals to others as well and that’s its strength. This is also why others will likely follow Amazon into this category even as the smart home market continues to fizzle – it shows more short-term promise.

Nest’s challenge

Nest’s challenge, then, isn’t just the internal struggles within an Alphabet subsidiary but that the smart home market has failed to cross over into the mainstream. As such, Nest’s addressable market is limited. It can expand its opportunity by moving into new sub-categories of the market but those are being competed over by more and more companies eager to tap into these same opportunities, which makes its path ahead even more challenging. I’ve written before about some of the things that can help unlock a larger smart home market but most of the short-term challenges are here to stay. That’s going to make life tough for Nest and any other company that makes its money selling smart home gear.

Published by

Jan Dawson

Jan Dawson is Founder and Chief Analyst at Jackdaw Research, a technology research and consulting firm focused on consumer technology. During his sixteen years as a technology analyst, Jan has covered everything from DSL to LTE, and from policy and regulation to smartphones and tablets. As such, he brings a unique perspective to the consumer technology space, pulling together insights on communications and content services, device hardware and software, and online services to provide big-picture market analysis and strategic advice to his clients. Jan has worked with many of the world’s largest operators, device and infrastructure vendors, online service providers and others to shape their strategies and help them understand the market. Prior to founding Jackdaw, Jan worked at Ovum for a number of years, most recently as Chief Telecoms Analyst, responsible for Ovum’s telecoms research agenda globally.

964 thoughts on “The Smart Home is Stuck”

  1. I think the issue is a smart home investment needs to be worth it for very narrow tasks because people need a clear reason for that relatively high expense, but most of the value appears only once you’ve made your home very smart, ie spent a lot of money on a variety stuff that needs to interoperate – and yet right now, finding a good tool to do one simple job is hard, let alone a complex heterogeneous setup.

    Reply

    1. I don’t hink it HAS to be a huge investment. There are lots of initiation points that don’t require large upfront costs (DIY security system installs, thermostats, detectors, lighting control). The expense comes in when trying to find systems that play well together without a rocket science degree to make it work.

      Security systems seem to be the most logical point right now for some reason. Most security systems off other products that are from third parties (thermostats, keyless locks, lighting systems, etc.) but there are usually a limited selection of devices that might not meet all you are looking for, but do integrate.

      In other words, the smart home providers right now are their own worst enemies.

      Joe

      Reply

    2. And it’s not just the dollar outlay—our home system constantly presents glitches & bugs. Two devices can’t be set to turn on at the same time unless they’re part of a single “scenario.” For some reason, the back patio lamp comes on when we switch the entryway light on manually. The side stairway light, which is scheduled to turn off at 11:00pm, can often be seen on when we turn off the bedroom lights around midnite. If you lose mobile service while you’re logging in on the iPhone app (for remote functions) or login gets stuck, the stored password no longer works and you have to remember that oddball password & log in again.

      I DO value the ability to turn the thermostat on manually on our way back from an evening out or a weekend trip during the winter. But it has taken so many hundreds of dollars and hours spent trouble-shooting to get a system to where it’s only clunky.

      These glitches are presumably unique to our system, but the ones I’ve heard for the Nest are much more problematic. Buyers should be willing to put up with a lot of “what’s going on?” setup, re-setup and tolerating a lousy system.

      Reply

  2. To me, a big part of the complexity is finding solutions that work together, never mind work together well and without great complexity. Homekit was supposed to (and to a certain, limited degree has). I ditched Nest both because of Google and it did not play well with more important systems I also have installed, like my security system.

    I got an ecobee, but it’s built in ability to integrate with Homekit was less successful than a third party workaround. That is kind of sad. But I do like the remote sensors.

    Anyway, the point is there are a lot of reasons the smart home is stuck. In a lot of ways I do think there is an opportunity for some company to do what Apple has done for smartphones. But I think they will need to either provide the whole solution themselves, or do better at incentivizing participation than Apple and Homekit has done.

    Joe

    Reply

    1. I’m a developer working on home automation. I agree with your comments about the lack of a value proposition for most HA products. Also, HA hubs are too complicated, and we are a long way away from having any SIMPLE user interfaces that could be used by the average consumer.

      Here is my website for Philips Hue automation using a Raspberry Pi.

      http://ledhomeautomation.com

      Reply

  3. 1. I am a nerd and I have bought only one smart device. A light switch for my porch light. A complete piece of crap from Lutron. I cannot program it correctly and I have programmed in assembly languages. It resets to default with the slightest power glitch. $33 down the toilet.

    2. Hardware manufacturers have no concept of software updates. Your refrigerator has an expected lifetime (by you) of 20 years. Are Samsung/GE/Whirlpool going to provide software updates for 20+ years? Of course not. They have already proven with “smart” TVs that they won’t go beyond 1 year.

    3. Utilities have no incentive to provide smart meters. Electric, maybe. But, gas and water? No way.

    All in all; it is too complicated and the ROI sucks.

    Reply

  4. I remember reading articles about the “smart homes” we would soon all be living in thanks to personal computers, in the 1990’s. I’ve seen fundamentally identical articles from the 1980’s, and articles that say all the same things (only without computers) from the 1950’s and 60’s. Like fusion power or flying cars, they’ve always been “just around the corner.”

    “The smart home and home automation category has always been a solution in search of a problem.”

    I feel like that quote misses the point in the same way that saying “widespread adoption of flying cars has always been saddled with issues of fuel economy and cost” misses the point of why flying cars never got off the ground (ahem).

    There’s a whole constellation of reasons why flying cars never became a thing, ranging from cost to public safety regulations to the fact that learning to fly safely has a much higher learning curve than learning to drive safely. Likewise, the high cost to low benefit ratio of smart homes is just one of many reasons why The Home of the Future has remained a pipe dream for over 60 years. That at least 50% of the gadgets being touted for smart homes are completely idiotic doesn’t help matters (an internet connected toaster? a refrigerator that tells me when it’s time to buy more milk? oh come on!).

    Even if we stick to the non-stupid smart home concepts (remote controls for lights and power outlets, remote control HVAC… having trouble thinking of a third category), there’s several factors preventing them from becoming more than expensive toys for early adopters. Just listing some of the most obvious: The high mental cost of having to learn a control system versus the zero mental cost of just doing things manually. The high cost/low benefit ratio touched upon in the article. Turning something with zero maintenance costs (home wiring) into yet another part of the home that can break down and need expensive repairs. The danger that the central control system could malfunction in a way that renders your old school manual backup switches inoperative, leaving you in the dark. The difficulty of teaching guests how to turn on the lights.

    The extremely high cost of a whole home rewire is going to keep smart light/power systems from ever becoming a thing in older homes — it really only makes sense in new construction or of replacing unsafe wiring in an older home.* I do think that the smartphone revolution has opened a door of opportunity for new upscale homes to have automated light/power/HVAC built in: smartphone apps have finally eliminated the need for a control panel… but is it ever going to go downmarket, or become standard rather than a custom option? I think not.

    * Yes, you can buy individual wifi controllers for each light bulb and
    each outlet, but then you’re in an entirely new world of hurt, because
    instead of one expensive but fairly durable central controller, you have
    to install and configure fifty or a hundred controllers, each of which
    is almost certainly going to have been built to be cheap rather than
    reliable, so the time cost of maintenance and replacement shoots up
    dramatically, as does the complexity cost of keeping everything
    configured and labelled correctly. That road is never going to move beyond the “toys for nerds” category. I can see normal people buying one or two smart controllers to enable them to eliminate certain pain points, but springing for a whole house full of them? No way.

    Reply

    1. Going back to the past is important because it helps you to see the home devices that DID succeed.

      Devices like refrigerators, washing machines, television, radio, coffee makers, microwave ovens, lawn mowers etc. all were wild successes. Roombas are pretty good too.

      These devices all helped you to save time from you household chores or helped you to enjoy the time that you made available.

      The question would then be, how can the smart home save me time? Or ask the question, what do you spend time on at home?

      A refrigerator that tells you to buy the milk might not make sense, but a fridge that is connected to a grocery delivery service and automatically brings milk and other stuff to your doorstep might. It will save you time for shopping.

      Reply

      1. Those successfull device have other things in common:
        – dead simple UI, often an “on” button, and a “by how much” dial (sometimes “for how long”)
        – very long, reliable, maintenance-free life.
        – relatively inexpensive+easy installation, further eased by inclusion in plans from the design phase. If I were to bill for my hours, my wifi router is more expensive than my refrigerator.

        I agree that smart devices should be sold as services, to take the hassles off the hands of the users, and offer a clear value proposition. How are Amazon’s buttons doing ?

        Reply

      2. The problem being, sometimes we don’t want to re-buy a particular food item. Or we decide to switch from one type of milk to another. The food we want, not just, do we feel like having bacon this week, but also the specific type of bread or the specific kind of milk, is going to vary. Grocery shopping is too personal and idiosyncratic and too much based on mood and whim to be trusted to a robot. And the cost of having a delivery service deliver some foods, ordered by robots, while I get other items the old fashioned way, would introduce too much rent-seeking overhead and increase costs to an unjustifiable degree.

        Reply

        1. I understand your points and if I had a solution, I probably would be creating a startup 🙂

          Imagine you were living in a country where you normally went grocery shopping by foot. Tokyo is such a region. If you had a couple of teenage kids, the weight of milk, rice and meat alone could be a few kilos per day. And you have to carry that on foot for maybe 10-15 minutes.

          My point is, an essential premise is that time/labour has to be significantly reduced. There has to be a strong tangible benefit. After that you can start thinking about where and how large your target market is.

          FYI, Japanese houses rarely have central thermostats. Instead, our air conditioners all have high-tech thermostats in them. Some even have IR sensors to detect how many people are in the room and where. Nest has almost zero market here. All markets are not equal.

          Reply

          1. Thanks for the perspective on grocery shopping in Japan. Yeah. A service that automatically delivers staple foods to your door is viable in certain situations (in Japan, carless urban dwellers feeding multiple people; here in Canada, the money rich/time poor demographic). The hard part is selling it outside of those specific and narrow situations. Putting a robot in charge of determining what gets ordered, given the current level of real world AI, isn’t going to help matters.

  5. If Alexa is meant as an audio controller for the home, that may be worthwhile in some cases. In our home we have a light switch controlled by a simple clapping. Empty nesters love that, since there is no need to move to turn the light on/off.
    A cutting edge technology also can easily be made SW upgradeable due to the software connection to the cloud.
    Utilities would be able to control a water consumption with a smart metering and a gas consumption(may be in some areas).

    Life balance, home-wide, struck?

    Reply

  6. I first installed a pre-Nest Honeywell programmable thermostat years ago. I find that my family’s day-to-day patterns are so varied that I’m overriding the program half the time. Same thing would happen with smart light switches, door locks, etc. If you will be overriding or reconfiguring the program frequently, it’s not worth the cost and effort of installing, programming and maintaining a smart home system.

    If your life is so uniform and predictable that a smart home system makes sense for you, I pity you.

    Reply

    2. I’m not even quite sure what “smart home” means. Things on a timer isn’t very smart. Remote control either. Must be scenarios such as “make sure the lawn is watered enough”, “make sure the house is warm/old enough when someone gets there”, “make sure the lights are off when the house is empty”.

      Reply

      1. I may sound like a complete ass. But based on your reaction to a statement made in mock indignation (that went whoosh about three feet above your noggin) and not directed at anyone, you have shown that you don’t sound like a complete ass, you are the genuine article complete ass. Now stop reading your comic books, move up to books with words only, and go get a more sophisticated sense of humor.

        Reply

  7. One of the mistakes that many of us in technology make is that most homes don’t have an engineer to set up and keep these devices running. And even if they did ,would it be worth the effort? Recently I had to replace a router, and it took me hours to re-setup just a few devices, such as a doorbell, a few video cameras, lights, a watering system, and TVs. Imagine when a router or Internet goes down and all these devices stop working. again Too much effort for too little return for many of these devices.

    Reply

  8. The Nest thermostat was a non-starter for me because it needs to be plugged in. Instead I got a Hive which has a battery powered wireless thermostat (just like the ‘dumb’ one it replaced) and that works great.

    I do have Nest Protects but honestly, they’re kind-of disappointing.

    Reply

  9. “Stuck” has negative connotation. “Chasm”, not so much because Geoffrey Moore suggested a solution to cross it.

    I would prefer to use “Chasm”, because it helps us think forward.

    Reply

  10. I’d also challenge if the Nest thermostat actually achieves “smarter” use for most homes. Protip: don’t blindly buy into a product’s PR claims. My house does fine with a basic thermostat with clock and timer settings. Some Honeywell unit I got at Home Depot for 50 bucks. Still going after 20 years.

    Every year I look into going into home automation and it’s still just crap. Multiple standards and protocols. Iffy vendors. Even higher end stuff like the Hue bulbs were not worth it- the stupid Zigbee bridge continuously lost its wifi connection, although the batteryless remote switch was pretty cool. I thought maybe Apple’s HomeKit would budge things, but, no.

    It remains in the realm of solutions looking for problems. For years all the Internet Of Things disciples could tout was “your fridge can tell you when you need milk!” Seriously, every f****** article with the existential threat of empty milk cartons. Not exactly a pearl clutching scenario to make me rush out and replace my reliable old Kenmore with a $4000 “smart” fridge.

    Reply

    1. Yes, but isn’t it great that you now have all these devices that can tell you the weather?

      Joe

      Reply

  11. I still want my thermostat (not just _any_ thermostat, but the one I own now—was a Nest, now an ecobee) to work with my security system so that when I have designated windows or doors open my HVAC either turns off or switches to fan only.

    Joe

    Reply

  12. Was Friendster an idea in search of a problem? Were the Newton or pre-iphone Touchscreen phones an idea in search of a problem? I am not saying the smart home will be that big soon but I think you are glossing over absolutely horrendous implementations. Wink is less reliable than North Korean weather forecasts. They shut down the entire service with their own update that required many boxes to be sent back, something hackers cant do to most products on purpose. Sony got owned by hackers and nobody had to send in their ps3/ Smartthings got much worse with its 2.0 update and is also highly unreliable and supports many devices through github code explained across a history of 50 forum threads that take 50 hours and a degree to figure out. Its really hard to say if the smart home might catch on if anyone made a hub that didn’t shame all its developers family and ancestors for eternity with the degree of its complexity and unreliability. Imagine a hub with an open app store where every app was broken into open api and interface halfs. Every officially supported device would have to have an open api. You could download both easily together. The community could make better interfaces for the official apis where the official interface was lacking. The community could make apis and interfaces for unofficially supported apps but these would be easy for anyone to download not have to fork the correct release from github. And imagine if the backbone of the service had servers like myspace or facebook not like friendster or salvation army. We just don’t know how good platform would be embraced because a good platform does not presently exist.

    Reply

  13. Upgrading to a smart home is a journey; people don’t yet have their heads wrapped around the concept very clearly and buy individual devices at different point in time which doesn’t lead to desired outcomes due to different standards and network protocol issues. If you take a system approach and invest in multiple devices simultaneously, the outcomes can be more desireable.

    Reply

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