The Internet of Things (IoT) has transformed how we communicate with, and control, the objects and environment around us. From asking Siri to dial the office, to relying on Alexa to tell us what the weather will be like, we are increasingly surrounding ourselves with intelligent and connected gadgets. In fact, the IoT has grown so significantly, that in just six years, we have seen the global installed base of IoT devices jump from a modest four million to an impressive 165 million devices (opens in new tab). Still, this is a market composed primarily of early adopters.
The real challenge for creating increasingly smarter homes comes in the form of convincing regular consumers that there is a real benefit to adopting and actively using smart home technology. This could be in the form of lowering home insurance premiums by using smart technology to monitor for leaks, all the way to helping save money on energy bills thanks to smart meters or thermostats.
Smart home adoption will increase when the day-to-day running of the home is easier and more efficient thanks to smart devices. However, the challenge for the industry will be in getting regular customers to adopt this technology to begin with.
It’s all about the product
The fact that a device is smart and connected is not in and of itself enough for customers. Instead, demonstrating a real-world impact is crucial for the smart home to become a reality. While connected coffee machines are nice, they are seen by the clear majority of consumers as nothing more than a luxury gadget. After all, getting up and making coffee themselves is not a particularly demanding task.
However, smart home technology really comes into its own when it enables core infrastructure such as pipes and electricity cables, to start sending consumers meaningful, actionable insight. For example, alerting a consumer to the possibility of a leak before it becomes a major problem. Even better, when it can automatically connect consumers with services that can get the problem fixed at the push of a button. The problem is that getting consumers to the point where they want to adopt this technology is a major challenge for the industry.
A good analogy that Ovum points to is the connecting of the first iPhone with other services and apps on the App Store. With the right apps, this meant that the iPhone could become a fitness tracker, a workstation or a free videoconferencing service. Otherwise it would have essentially just been an iPod Touch that you could make calls from.
The same is true with smart home technology – existing service providers have an opportunity through IoT to expand the reach of services into more people’s homes while offering new value to the customer. A good example leading the way is industrial applications of IoT in the Insurance industry. This is enabling traditionally conservative insurance companies to turn into proactive rather than reactive businesses, allowing them to detect and solve problems before they happen, and reducing costs and unnecessary disruption for both themselves and consumers.
Educating the consumer
So how do we get to the saturation point in the smart home market? The common problem is that users don’t know what they don’t know. Commonly what people want and what they need are two very different things. For example, some of our recent research showed most home users view home security IoT as most important, when they are far more likely to experience disruption from a water leak than they are to be burgled. There is also the fact that Smart Home IoT is still in its relative infancy and so the most popular products are also the ones from companies with the largest marketing budgets, like Amazon or Google.
However, Ovum's Smart Home Devices Forecast: 2016–21 found that device sales will be driven by sales of home security devices, such as cameras, door locks, and sensors, and by utilities devices, such as connected light bulbs and smart thermostats. Sales are predicted to grow to more than 1.4 billion units by 2021.
As the home increasingly becomes more connected, the interaction between these devices will give businesses a clearer picture of what their customer looks like. In insurance, this picture of a responsible home owner will provide more information on the level of existing risk and what lower rates should be offered to home insurance customers taking the right precautions. While this sounds like a rougher deal for less responsible home owners, another way of looking at it is that currently the majority of insurance premiums go toward payouts for a small portion of the population that may be less responsible homeowners, so IoT provides an immediate benefit to a large group of consumers.
The incentive for businesses is that wider Smart Home IoT paves the way for further opportunities in future, not just from a B2C perspective but also a B2B standpoint. The same companies that need to make use of business intelligence, customer analytics, IT infrastructure and B2B services will be challenged by the Internet of Things. They will need to manage many more services over many more devices. B2B providers can also benefit from many more opportunities and customer touchpoints in this expanded service ecosystem. When any service can reach any device in the world with an IP address, this also has interesting implications on the future of service delivery and the creation of new customer service models.
The smart home market is an interesting sandbox for the future of IoT, but the service models that will emerge will have interesting implications for the wider B2C and B2B communities. IoT has been tried and tested in the industrial landscape and now it’s time for the smart home market to evolve so we can all benefit from utilitarian and ubiquitous IoT.
Craig Foster, Managing Director, HomeServe Labs (opens in new tab)
Image Credit: Bakhtiar Zein / Shutterstock