The ‘smart’ home market - the market for products that create a living space inter-connected for communication, either between various automated devices in the house or to an off-site location - is expected to see significant growth over the coming decade. A new report says it could potentially be worth hundreds of billions in the not too distant future. Yet many of the same ideas currently being trumpeted date back to The Jetsons cartoons of the sixties and the Suburban utopia ads of the fifties. Flying cars and intelligent robotic servants aside, why have other smart home innovations not taken off despite current technology being up to par?
According to the new report from
Addressing the last first, DT says that a recent study undertaken on its behalf by GfK, a market research company, found that 72% of households knew nothing about smart homes. This is despite recent large-scale successes such as Nest thermostats which was bought by
DT expects this to change naturally and quickly in the next few years. There will be an inflection point in the next 3-5 years which will see awareness and acceptance of smart home technology shoot upwards, says Holger Knoepke, vice president of Connected Homes for DT. There will be something of a snowball effect, with much of this occurring naturally, he adds. “Once you see two or three friends with it in their home, you’ll want the advantages,” he explains. “Expansion will proceed like that.”
The GfK research would seem to agree. It found that: “When the concept was explained and specific use cases were outlined, 98% of consumers were extremely positive about the benefits that it could bring.” However, to achieve this easy expansion, companies are probably going to have products, systems and processes in place that deal with the rest of the consumer concerns about smart home technology.
Perhaps the biggest and most difficult concern companies need to address is consumer fear about privacy and data security. A smart home system would have access to a significant amount of customer data and some devices - such as security cameras - will have the ability to breach privacy even further. Consumers will worry about direct intrusion into privacy, what corporations are going to do with the data they mine and how companies will ensure that others do not breach their systems and access that stored information.
“To overcome these concerns and satisfy European data protection regulations, building trust with consumers will be fundamental,” DT says. “To achieve this, companies will need to be transparent about the types and proposed use of data they collect. Furthermore, when one considers that the connected home will be an attractive target for hackers, it is clear that security is of critical importance.”
Practical examples may include providing clear and easy to understand terms and conditions that lay out exactly what data is collected, what is kept, how it will be used and why. Partnering with trusted names may also help address concerns. And while ensuring absolute security is always going to be difficult in a time of advanced hacking techniques, following protocols that keep retained data to a minimum and/or completely anonymous may help to mitigate risk, Knoepke says.
But there will need to be further work undertaken no matter what solution is found to addressing consumer concerns about data and privacy. Essentially companies must still do more work to convince consumers that smart home systems are worth it. As one commentator put it: “I don’t see how paying a premium for a fridge that knows when my milk is going to go off works out better financially in the long run.”
Part of this will be addressed by the education and natural snowball effect described above, says Knoepke. But even when consumers fully understand the potential benefits a smart home can offer, companies in the sector will still have to address the unclear value to cost ration. Current systems can be very expensive - running around the €10,000 ($11,175) - for a fully wired inter-connected set-up, he adds. Although that is reducing in price more needs to be done to drive costs down.
One way this may be achieved is through alternative pricing models. For example in certain circumstances a start-up might offer consumers equipment for free in return for a share in savings generated.
European countries are implementing energy efficiency targets to ensure they make a variety of environmental goals - such as reducing carbon emissions. Some governments are looking at innovative ways to meet these goals - including paying consumers for making reductions in energy use. A utility or start-up could easily offer the smart-home equipment needed to achieve a reduction for free and then share in a portion of those payments, says Knoepke.
But companies will still have to ensure consumers that equipment is future-proof. “If a household pays €10,000, or whatever the current price is, to have a system installed. It doesn’t want to find out a short time later that it is no longer compatible,” Knoepke adds.
This is also a problem that will particularly affect start-ups. “Lots of customers we're talking to grasped that putting eggs into start-up is risky,” says Knoepke. “A start-up could be bought by competitor, it could go under or it simply might not grow.”
Of course these same challenges still face established companies. DT is looking at solutions that could overcome issues of future-proofing such as building open-source linking systems that can communicate between various smart home devices and systems, looking at different methods of wired and wireless communication and fostering partnerships as well as ending “silo” thinking amongst companies interested in the industry.
To read more about DT’s idea - and why the firm is interested in the sector - click here.
To read more about potential opportunities that could be developed if smart homes prove to be successful click here.
For a look at some smaller opportunities, click here.
