The potential of Smart Homes regarding energy savings, home security, and convenience are significant. But do you actually own (any) devices that automate your home? If no, why not? This post gives a short introduction on the Smart Home concept, elaborates on the major customer pain points and what companies do about it them.
The Smart Home, one field of application regarding Internet of Things (IoT) solutions, is a convenient home setup where appliances and devices can be automatically controlled remotely from anywhere in the world using mobile or other devices, being interconnected through the Internet and controlling different functions at home (energy management, home security, multimedia, health-monitoring etc..). The Smart Home phenomenon is not a standalone technological product or service. Its highest potential can only be exploited as part of an ecosystem that consists of many intersections and entry points.
To the end of customer pain points, PWC (2017) conducted a customer survey. The three most relevant barriers, deterring consumers to make their home “smart”, were identified as follows:
- The high initial investment costs are a big deterrent. More specifically, 42% of the potential consumers list price as their biggest hesitation. To reduce this hurdle, some companies offer subscription services to reduce the initial investment cost needed for the set-up of s Smart Home system.
- Due to unstandardized communication protocols, devices from different manufacturers may not be controlled from one single platform. 32% of potential customers stated they would be much more likely to invest in Smart Home devices if their centralized, instead of individual, steering could be ensured. The communications giant Telekom, for example, has identified this hindrance factor and established Qivicon. The subsidiary strives to set-up industry standards by forming alliances with other producers of Smart Home products.
- Furthermore 17% of respondents indicated Privacy of Data and the System Security is a major concern. More specifically, potential consumers are uncomfortable with the idea of service providers, or even governments, having access to their private behavioral data. To alleviate, service providers address consumer considerations regarding data security by locating servers in countries with strict information privacy laws. Furthermore, system security is an issue, because Smart Home devices are communicating wirelessly. Hence, the system or steering devices (mostly smartphones) can be hacked by third parties. Although, the hazard of hacker attacks is countered by improved encryption technologies, it remains difficult to rule the threat out completely.
Do you share those considerations regarding Smart Home devices? Or are other factors holding you back from purchasing? Share your thoughts!
References
Geschütze Daten in Ihrer smarten Wohnung! | Telekom. (n.d.). Retrieved October 19, 2017, from https://www.smarthome.de/stories/datensicherheit
Hive Home US – Start Your Connected Home. (n.d.). Retrieved October 19, 2017, from https://www.hivehome.com/
Maison intelligente, connectée et en sécurité – La boutique Home by SFR. (n.d.). Retrieved October 19, 2017, from https://boutique.home.sfr.fr/#offres
McKinsey (2017): There is no place like a Connected Home, 2017, McKinsey Company. Retrieved from http://www.mckinsey.com/connectedhome/
PwC (2017): “Smart home, seamless life: Unlocking a culture of convenience”, January 2017. Retrieved from http://www.pwc.com/us/en/industry/entertainment-media/publications/consumer-intelligence-series/smarthome.html
Serverstandort Deutschland – MagentaCLOUD Glossar | Telekom. (n.d.). Retrieved October 19, 2017, from https://cloud.telekom-dienste.de/glossar/server-deutschland
Very interesting and clear blog post Matthis!
I completely agree with the three mentioned points in your blog. In addition to the first point (about the high initial investment costs), I think the most people look to the value the Smart home device creates in comparison with their “dumb equivalents”. In my opinion many smart devices are priced to high for what they offer, Many people want to know of it is worth the investment. In the article of the link I post below they give a good example about robot vacuums, the automation increased the price a lot. In this case a traditional vacuum cleaner is a better option in my opinion and I think a lot of people would agree with me on this point. A smart thermostat (Toon in Netherlands) is a device which creates value and saves people money, so many people are willing to invest and the high investment costs shouldn’t be a problem.
Recently I also read an interesting article about the third point you mentioned (Privacy of Data and the System Security). The article is about KRACK, that is a vulnerabilty that effects any WI-FI connection using the common encryption method WPA2. That is pretty much every device using WI-FI. Laptops and smartphones are safer because of rapid security updates, unfortunately these rapid security updates are often not the case at smart home devices. This KRACK security flaw allow hackers to hijack the WI-FI connection, inject content and monitor the traffic.
The problem is that a lot of IoT devices do plain text communications (unencrypted text), meaning when they monitor your traffic they can see it. The problem is that patches to solve such things take to much time, because many IoT and related smart devices go out of support quickly, to be replaced by a newer version.
Hopefully in the future they will solve the privacy and security issues and the smart devices will be really worth the investment!
http://www.makeuseof.com/tag/reasons-avoid-smart-home-trend/
https://www.cnet.com/news/why-krack-wi-fi-attack-could-hit-your-smart-home-hardest/
Hi Matthis, thank you for the interesting post. I would like to share my personal experiences with Smart Home devices, as well as my thoughts regarding hindrance factors of purchase.
I actually bought an Amazon Echo about a month ago. My primary motivation was the curiosity to experience the “hype” around the technology. Although not flawless, I must say it is quite impressive, more specifically the voice recognition. Regarding my personal barriers to further purchases: Firstly, it is definitely the high price as described above. Secondly, I am not sure about future the compatibility of devices. There different communication standards out there, fighting to become the future “normal”. Compare it to the battle between HD DVD and Blu-Ray If you would have bought a HD DVD player back then it would be useless today. Therefore, I currently refrain from buying additional equipment to wait whether a certain technological standard is established.
Interesting post! Without a doubt I would say that within not long from now everyone will own a smart device in their homes. The privacy issue would for me one reason to hesitate whether to but a smart device or not. This is interesting as nowadays a lot of personal data from your phone, email and other personal accounts are saved on servers as well and people seem to care less about this than sharing private information with smart devices. Furthermore, the as the smart devices are still in the early stages of development I would rather wait until the development is in a later stage and devices are equiped with better features before as you mentioned investing my money. So for me it would indeed be a combination of the three barriers.
Hi Matthis,
Thanks for posting this article! From a personal view, I totally understand the hindrances that causes for not purchasing Smart Home devices. Last year, I followed the elective Competitive Strategies in a platform and networked market and I wrote, together with three other group members, a report for Philips about the smart light bulb (Philips Hue). The smart bulbs are able to connect with smart devices in order to create suited (colorful) lighting.From a case study point of view I would like to elaborate on this topic and take a look at how Philips is (still) trying to get a competitive position in the Smart Home industry.
Some things stood out. I will elaborate on these. Philips is having a hard time in positioning themselves in a platform and network coordinated market. It was causing the executives a head ache. (That was why they asked us for a good advice of course ;)) In the early days, Philips provided lighting solutions. Later on the focus shifted towards providing high technology health solutions. These advanced goods are tangible products or self-built and self-integrated systems. In some areas Philips is without doubt fulfilling the role as global market leader. But now, the times are changing. In order to keep up with consumers having their devices connected and integrated, Philips wants to enter the Smart Home industry with Smart Lightning. With a big installed base and products and technologies that earned their stripes, you would assume this would go well for the company. But the opposite is true. Different from their traditional business Philips now found itself connecting a hardware device to software coordinated by platforms. Firstly, this is new for Philips. Secondly, Philips is dependent on the influential platform providers (and their sponsors). Philips, as a complement provider has to establish relationships (and integrations) in order to be able to offer their products on interfaces and be competitive. Philips could also choose for an aggressive position strategy but the complexity of finding themselves in a web of platform and the smart lighting competition makes this an uncertain scenario and therefore risky.
An interface that could be valuable for Philips is IFTTT. This service connects apps and devices people use everyday. This creates new services. The Smart light bulbs of Philips, for example, can be adjusted in a way it aligns with the music played by Spotify. This creates the perfect ambiance.
All in all, I understand consumers are not yet willing to adopt Smart Home products and software because the supply-side is still figuring out, exploring and trying to understand the platform ecosystem in order to choose their strategy wisely and be present on the market. I think it will take a few more years before the Smart Home platform symbioses will be established. But when it is finally there we can dance in our living rooms on Disco Inferno while enjoying disco lights. I am looking forward to that!
Hi Matthis,
Thank you for your article.
The first and second barrier played a significant role in my decision to own a smart-home device. Especially the first barrier as costs for smart-home devices could be more than twofold or even threefold of that of regular products. For instance, Hue lights versus regular light bulbs.
The second barrier diminished quite quickly for me as major smart-home providers adapted to Apple’s Home-kit, which is a plus for Apple users.
Although it took a while to own my first smart-home device, I didn’t take long to acquire the second and third smart-home device. The convenience experienced and provided by the first smart-home device made me less sensitive to price and more willing to pay a premium for smart-home devices.
I therefore believe that many people will share stated the major barriers initially, but will be quick to adjust their perceptions after using one.
Kind regards,
Dai Shen
This is an interesting article. I personally agree with you. I bought a philips HUE light bulb a few month ago. It is a good and useful product. However, just as what you mentioned, the initial investment is too high. Only the bulb set costs already 30-40 euros. I am surprised that it cannot connect with my amazon echo. Philips require additional purchase of something like a router to connect all light bulbs together and then through router, it can be connected to amazon echo. To me, it is just too complicated to do and costly. Services are not compatible also. It took a long time to figure everything out. If a single company or platform can offer most of the smart product line (smart lock, light bulb, AI, TV, curtain and etc), I would love to pay premium price to get a package from one single company or platform. It really saves a lot of time and make my life easier.