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FROM SMART DEVICES TO SMART SYSTEMS:
CATALYZING SMART HOME ADOPTION

With so many cooks in the kitchen, how will all of these devices, services and technologies interact to create this value?

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Over the past 20 years, increasing availability and adoption of mobile devices, televisions, electronics and the Internet has set the stage for a new wave of technology to enter the lives of consumers. This new wave, like the ones that came before it, provides consumers enhanced comfort, convenience, safety, and entertainment, not only on-the-go, but at home as well.

From security systems to entertainment devices to appliances, our homes have always been domains for technology to improve our lives. Now, thanks to the advent of wireless networks, new sensing capabilities and cheaper, more powerful computing technologies, this new age of pervasive connectivity and computing in the “Smart Home” has the potential to unleash unprecedented value in the form of cost savings and quality of life improvements.

For evidence, look no further than the sheer volume and velocity of manufacturers, service providers, and tech companies racing to capture the potential opportunity to create new data-driven value in the Smart Home market.

RESTRAINTS TO ADOPTION

Security & Privacy are Top Concerns for Consumers. Just as enhanced physical security can be a driver of adoption, increased cybersecurity and privacy concerns, if unmet, are a barrier. Connecting home devices like appliances, lights, and locks introduces cybersecurity risks that were hitherto entirely absent. For example, a connected garage door opener collects data about my comings and goings, which can translate into a vulnerability if the data were to land in the wrong hands. The multiple baby monitor hijackings in 2015 and 2016 are another example of the many events that put security and privacy in the spotlight for consumers relative to connected devices.

But it isn’t just misuse by hackers and cybercriminals. Smart Home devices also raise the issue of the collection and handling of highly personal and private information by companies. As these devices collect data on our whereabouts, habits and lifestyle, consumers have questions about how companies might use that data in less than benevolent ways. Examples go beyond creepy advertising and could potentially include predatory data sales, targeting and segmenting without consent, even disenfranchisement of demographics based on forces beyond their control. With this said, a recent survey conducted by Intel concludes that a majority of consumers are willing to share personal data from Smart Home devices in exchange for money. Regardless of consumer willingness to share data, however, security from outside threats remains a significant issue.

KEY CONSIDERATIONS FOR THE SMART HOME

As manufacturers and service providers think about their role, differentiators, and roadmap to capture and create value in the Smart Home, they must consider the importance of interoperability from the consumer perspective. Harbor Research finds the following best practices a valuable starting point in developing successful Smart Home strategies.

Future-Proof Products. Many manufacturers do not realize the bristling pace at which the Internet develops and changes. In the past, manufacturers have been forced to design products that may last a decade or longer with the same functionality, due to the static nature of the home environment and users’ interaction with the products. Because the Internet and smart technologies change so quickly, connected products face rapid obsolescence unless designed to be upgradable. Not only will users expect connected devices to have lifespans similar to their non-connected counterparts, but they will also come to expect increased functionality and security measures as they become available. Manufacturers must future-proof their products to the best of their ability by enabling over-the-air upgrades and updates to a product’s software to keep customers engaged and secure.

Design With User Experience In Mind. If connected products only work when connected to the Internet, or need to always be plugged into the wall, what happens when the power goes out or Internet connection fails? Does that mean my smart lock is now useless and I cannot get into my house? Or, probably worse, can someone else get in? Manufacturers rarely have a user experience team with a technology focus. As manufacturers offer devices with significant embedded technology, they must consider and understand the lifecycle of the persona interacting with the device, and its connections to other devices in the home. Consider power source and lifecycle, connected and unconnected control, troubleshooting and other technology-related issues when designing connected products. Design for usability, not spectacle.

Embrace Transformation, But Do What You Do & Do It Well. There is significant value in Smart Home technologies and a myriad of opportunities to capture that value. Manufacturers must embrace the transformation of the market to survive, but need not rush to the party with overly extravagant use cases or solutions. It is important at this early stage of the market to put in the time and effort to make sure the product works and the company can handle the ongoing customer support requirements. Move now, but start slow. Yes, the fact that your toothbrush may be able to recite the morning’s biggest news stories as you’re brushing your teeth may seem cool and innovative, but is that really necessary? With connected products, it is important to design for functionality first and foremost. Learn from the failures of others, and understand the extended value of products and related services in the lives of consumers. Design for usability, not spectacle.

As Smart Home adoption continues, the number of connections in the home will begin to inform new strategic revenue models informed by the data coming from these connections. While these models will not work for every company, it is important to consider the full extent of possible configurations enabled by connected products and services.

Pay-per-use. Connected devices enable companies to track how often and how long products are used. This ability can allow these companies to charge users for only what they use, when they use it while the company retains ownership of the product. This model is best deployed with large appliances with discrete use scenarios, such as washers, dryers and dishwashers that may otherwise have restrictive upfront costs to consumers.

Little to no upfront cost, plus recurring costs. This model is based on the principle that the value of the software or services provided on top of a connected product will be worth more over the lifecycle of the product than the hardware. In this model, companies may give the product away for free, or charge a relatively low price up front while recouping losses and generating profit on the recurring charges for software or services.

Higher upfront cost, little to no recurring costs. Interestingly, a 2013 Continental Automated Buildings Association survey suggests consumers would be more willing to pay a higher upfront cost with little to no monthly charge as opposed to little to no upfront cost with a monthly charge. This model facilitates the use of a warranty-based servicing program in which the customer pays upfront for a certain number or length of services.

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