Market Insight

The need to unlock the mass market drives discussion at Smart Home World 2015

July 23, 2015

Tim Hewitt Tim Hewitt Analyst, Smart Homes
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On the 23rd and 24th of June 2015, smart home experts from around the globe gathered in London to discuss the hot topics of the smart home industry. Speakers and panellists came from every aspect of the industry, including: IC manufacturers, entrepreneurial start-ups, device manufacturers, standards bodies, communication technologies, service providers, and research companies.

Some of the key takeaways were:

The smart home market it changing

A recent report from Argus insights showed a slow down in the demand for home automation through the analysis of social data. This was an interesting piece of research that sparked many conversations throughout the event.

The industry believes this trend is caused by the saturation of the high end, early adopter market for smart home products. Whilst many service providers in the US have launched smart home solutions, there has been a moderate uptake of these products. Service providers across EMEA are assessing the success of their pilot schemes and preparing their solutions for the mass market. IHS expects the install base of systems by specialist Smart home providers to drop from 54% of the market in 2014 to 30% in 2018. 

The smart home ‘cool factor’

‘Look and feel’ is becoming an increasingly important aspect of consumer products. Smart home products are no exception, and are often located visibly within the home, sparking conversation and interest with visitors. The Nest thermostat is a prime example of this factor. With dozens of connected thermostats on the market, who could say which one would capture the interest of the consumer? Nest achieved this by engineering a device that doesn’t just offer intelligent climate control, but looks ‘cool’ whilst doing it. This trend is also highlighted by the recent re-engineering of British Gas’s Hive thermostat by Swiss designer Yves Behar. 

Until now the industry has been focussed around engineering led design, with a huge range of devices being connected, from smart toothbrushes to smart piggy banks. This begs the question: “Just because we can, does it mean we should?”. In future, expect to see more products that reflect a ‘design led engineering’ philosophy, where technology is leveraged to fulfil a consumer need, resulting in devices that are aesthetically pleasing, functional and intuitive.

Insurance providers look to the smart home

The variety of businesses looking to utilise smart home offerings to compliment or replace their existing products is vast. Whilst security companies have been successful in the US, followed by mass media providers, many other company types are looking to enter the market. 

Insurance providers are now looking to move into the smart home space. With the home insurance market becoming increasingly competitive, providers are looking for ways to differentiate themselves and in some cases open up additional revenue streams. Many consumers are already familiar with the concept of insurance companies gathering data on them to reduce their costs through the use of ‘black boxes’ in vehicles. While American Family Insurance has offered its customers free Nest Protect smoke and carbon monoxide alarms, some insurance companies are considering a more direct approach. 

MORE TH>N shared their philosophy and strategy at smart home World. The insurance provider will be providing a full smart home service in the near future. MORE TH>N look to focus their smart home offering on products that protect the home from the three most common home insurance claims – fire, water and theft. This synergises with their business in a number of ways. Firstly, the presence of these devices should cut down the number and size of claims in protected households. Secondly, smart home services will greatly reduce the likelihood of a consumer switching to another insurance provider, an event which is becoming increasingly common due to the proliferation of comparison websites. 

Perhaps the most interesting part of MORE TH>N’s approach is their pricing strategy. The core of this proposal is a smart home service with a recurring monthly fee, similar to many other smart home models. However, they plan to offer home insurance for free alongside this system. This was a decision made by MORE TH>N in light of the increasingly competitive insurance landscape, and the realisation that there is less and less money to be made through its existing model.

MORE TH>N also plan to offer similar services based around pet monitoring, whereby they can track the activity and lifestyle of a dog in order to assess the risk attached to the insurance.  This could conceivably be integrated to the smart home offering to enable a diverse range of data to be collected.

European mass media companies starting to gain momentum

European Telecom companies were well represented at Smart Home world, with representatives from Orange, British Telecom, Telecom Italia, Deutsche Telekom, Siminn, and more. Numerous European telcos are planning to move their products on from small scale pilots into national rollouts, with some expected to incorporate smart home networking into their residential gateways. 

Telcos also made it very clear that they consider smart home services as a fully-fledged business line, with one company spokesperson going as far as to say that they wanted to become a reputable security company in the eyes of the consumer.

The mass market awaits

As the smart home market approaches the end of the early adopter phase, service providers and retailers will begin tailoring their systems for a mass market approach. One of the most important aspects to remodel will be the user interface, where lessons learnt during the early adopter phase will be implemented to create an accessible and more intuitive interface for the mass market consumer.

Whilst industry fragmentation is seen as a great hindrance to the realisation of a true internet of things, many companies consider this a long term goal and are focusing on producing closed systems where they are in total control. Cisco spoke regarding system security, and raised the point that a solution is only as secure as its least secure device. This raises the issue of whether a completely interoperable smart home will ever be a reality or if the security risks to the solution provider are too great.

There are still many barriers to overcome if the industry is to gain access to the mass market. However, with so many companies entering the smart home space, consumer awareness is expected to increase greatly over the coming years.

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