Author(s): Martin Garner
I recently caught up with Cees Links, general manager of smart home chipmaker Qorvo's Wireless Connectivity business unit. Mr Links was previously CEO of GreenPeak, which was acquired by Qorvo in April 2016.
GreenPeak produced ZigBee chips and supplied the Sensara remote monitoring system. Sensara employs machine learning to keep an eye on elderly family members in a nonintrusive way, using data from door sensors. The system learns regular patterns of behaviour and reports if there's a significant change, such as no activity from the kitchen door sensor before lunchtime.
Mr Links has refreshingly blunt views about the state of the smart home market at present, consistent with much of what we've said in the past 18 months. Notably, that:
The area is complicated, and difficult for consumers to navigate
There has been too much focus on the "things", not enough focus on the Internet element
The things are connected, but not smart
Marketing staff in smart home manufacturing companies have completely failed to communicate the central concept of "smartness" in their advertising
The market isn't currently in a great state, but Mr Links is upbeat about its potential as more smartness is introduced. He outlined two main phases from here, with a focus on security and energy management leading to a more integrated and intelligent home environment. These are moves toward homes having a virtual butler to provide greater convenience, comfort and safety, and believes that the key role of the technology is to democratize this for all households.
He also argues that social media apps will become important as a main way of interacting with our intelligent homes, echoing a CCS Insight prediction from 2011 that Facebook will emerge as a key user interface for the connected household — a prediction that hasn't yet come true.
Mr Links thinks that we'll look back in 10 years' time and wonder how we lived in such relatively primitive conditions without the intelligence that smart homes will provide.
With this in mind, Qorvo has launched Family@Home — an extension of the Sensara system — that offers "lifestyle monitoring" through sensors in smart plugs and a variety of other devices. It aims to serve a broader and more generalised set of domestic uses than monitoring elderly people.
However, CCS Insight and Mr Links have different views about how the large market will be built from where we are today. Mr Links argues that telecom providers and utilities are best positioned to further this thanks to established multiplay billing relationships with homes throughout the country, and that the market will emerge as a model he calls "smart home as a service". He also points out that these players will need to move quickly as serious competition is building.
We agree that there's a reasonable-sized segment that wants to buy this way, and that some telecom firms such as AT&T and Deutsche Telekom are doing well with this approach. However, many telecom providers and utilities companies suffer from the problems of lacklustre commitment to building the smart home market and a lower level of trust than they should command. Our main scenario for the development of a mass market is that it will be led in the near term by large ecosystem players like Amazon, Apple and Google. We also expect some local heroes such as Ecobee, Lowe's in the US, Hive in the UK and tado in Germany.
In our scenario, we expect to see a shift from today's market conditions:
The ecosystem players will begin marketing with messages reassuring customers that they've overcome the complexity of the smart home market for the user
These firms will invest heavily in developer communities (Amazon's $100 million Alexa developer fund, for example), and spend a bigger share of their profit and loss statement on marketing and sales activities
This will be problematic for the thousands of smaller players that can't compete on budgets, and these will eventually be forced to align themselves with one or more of the larger ecosystems
This scenario shares parallels with the smartphone market after the launch of the iPhone and Android. There is also some evidence of these moves in the smart home market already, with the growing success of smart speakers such as Amazon's Echo. We expect smart speakers to be a catalyst for a much bigger marketing push during late 2016 and 2017.
We believe that the market will mainly consist of one-off equipment sales for now, but also see huge potential for services layered on top once people are happy with the equipment and what it does for them. A service model is almost imperative, as suppliers will need to recoup their ongoing cloud infrastructure, software and support costs. This leads to the same outcome as Mr Links describes, but by a different route.
What's important here is not which of us is right, but that the full potential of the smart home market can start to be realised. There are many clear potential benefits for users and, of course, also for suppliers if we can achieve this.