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1 November 2019

Smart Home Summit – market in right direction, progress still sporadic

Many of our readers have met Rethink staffers at the events we attend and chair, and while always a bit of a blur, they are a vital way to get a taste for an overall market – away from the worst influences of marketers and PR types. Connected World was no different, and the co-located Smart Home Summit was an excellent resource of tidbits and leads – painting a picture of a market that is heading in the right direction, if a little more slowly than people have expected.

The first speaker, Siemens’ Head of Global Change Alexandra Kirk, outlined how the business world has changed quicker than most could have anticipated, migrating swiftly from VHS rentals to Netflix streaming on smartphones. Energy is, she stressed, at the heart of this transformation, and now with the concerns surrounding climate change and the rise of renewable energy, the data provided by IoT devices is key to navigating this transformation.

Kirk said that buildings used to be extremely passive, one-way systems, but that they are now moving to dynamic interactive environments. The key applications in these buildings are HVAC, DER, EVs, lighting, and security, and in Siemens’ view, mobile phones are at the heart of this transformation. In parallel, the energy suppliers’ systems are moving from centralized distribution models to ones that have to accommodate DERs at the grid-edge, actively responding to customer date. Decarbonization and decentralization are the name of the game here.

Siemens says that there will be double the current demand for electricity in 2050, and that the energy mix itself should reach 50% renewable by 2035. Currently, buildings account for around 36% of total energy consumed globally, and this figure is likely to rise as the urban population grows from 54% today to 70% in 2050. Kirk then illustrated the difference in readiness and capabilities for a selection of smart cities around the world, which might look similar on paper but vary wildly in the field, and pointed out that in the past twenty years, the global container export volume is now four times larger – a sign of our increasingly global economy.

Next to the stage was SAS, represented by Jennifer Major, Head of IoT in SAS’ UK & Ireland wing. Joking that her attire lacked pockets for the microphone unit, Major asked the audience to take a few steps back and ask what people really meant by smart. She travelled through the example of a smart home, arguing (correctly) that most of the current use cases are better described as automated, rather than ‘smart’ as in an intelligent system.

The big issue in SAS’ view is that the systems remain in isolation from each other, and that there are no real standards yet. Major likened it to the VHS-Betamax war, but questioned whether it was necessarily a good thing that the winners would get to set the standards here. Sure, because the integrations only need to happen at the data-level, joining up the different applications via some form of cloud-based intermediary, this might not be a big issue, but an industry standard way to avoid the cloud-based translation would be welcome.

Major then talked through some examples, with BBP in Singapore that managed to save 10-40% of its energy bill using SAS’s software services, and where they were able to optimize older HVAC equipment rather than rip-and-replace with shiny new connected versions. Major highlighted the ongoing problem of siloed data, and said that a lot of money is going to be spent in the smart city market before they work out how to overcome that integration problem, before ending by saying the IoT is very similar to the dotcom boom, and faces similar issues with businesses not tying the new IoT projects into their core operations.

At this point, we moved into the Smart Home track, where Riot was leading proceedings. First to the stage was Haier’s Andrea Contri, IoT Ecosystem Director, who told the busy room that Haier and its other brands, had so far sold 6mn connected home appliances and had 1mn registered users. Contri stressed that voice interfaces had key convenience benefits for smart home appliances, with the natural language processing opening up the technology wo non-early-adopter types – but only when done well.

Contri said that voice is a key differentiator at the moment, but Haier knows other brands will catch up. It is a great way to drive engagement, and a way of bypassing the user manuals. Voice lets Haier offer more valuable services to its customers, such as cleaning program recommendations and advice. Contri did note though that the likes of Haier are only able to take advantage of voice because of the work that Amazon and Google did, saying that the home appliance industry itself could not have done this.

But voice is not without its limitations. Contri described how it requires very clear intent, and how it is very difficult to browse the capabilities as you might in a smartphone application. To this end, Contri said that voice was more of a vitamin than a painkiller, a way to improve an existing process rather than remove the problem entirely, and that voice is still very resource intensive for manufacturers to develop. Contri noted that the lack of push notifications in voice is still a problem, and that letting Google or Amazon have such control of the user interface is something that makes many uneasy.

Roost, the startup that evolved from a connected 9V battery into something much more fully featured, was up next, with Business Development Director for Europe David Smart asking if anyone remembered a story by Ray Bradbury called There Will Come Soft Rains, in which a smart home keeps operating after a nuclear war kills off its occupants. Smart pointed out that we still haven’t caught up to the vision presented by a tale published in 1950 – that there’s a long way to go.

Smart recalled how a recent home extension project let him run wild with smart home devices, but even after spending around $5,000, he might only have a Phase 1 home – and is one of the privileged few. Roost’s experience with customer support calls illustrates how far the average consumer has to travel too, with Smart recalling how many don’t understand WiFi passwords or why that is not a problem that Roost can resolve over the phone.

Smart thinks that smart speakers have crossed the chasm in the smart home, but asked what else was guaranteed to make that leap. He stressed the difference between sales and adoption, and raised questions about how you measure a smart home in that regard. In terms of gratification, Smart noted that many of the more interesting  or valuable smart home devices, like water leak detectors, will suffer on the consumer market, because they don’t provide the instant gratification that a smart speaker can. But Smart also highlighted how users will find different yet still valuable ways to use your products, noting that most garage door sensors in the US are used to check if kids got back from school safely.

The next session was a panel, chaired by Riot due to a tornado disrupting the travel plans of the original moderator. With Simon Buckingham, Brand and Marketing Manager at EzViz, Daniel Crispin, Key Account Manager at Tado, and Kent Dickson, Co-Founder and CEO of Yonomi, the conversation focused on which devices would make the biggest impact on consumer living.

The consensus was that professional installation was going to be necessary for many applications to achieve mass market adoption, and that there would be many that would suit the subscription model. The issue of customer loyalty was raised, touching on how smart speaker platforms make discoverability a lot easier – and consequently the ease with which customers could churn away from a brand.

Of course, we asked whether the death of hardware was on the cards, with commodity equipment trapped in a race to the bottom and the only good profit margins relegated to the software-based services you could build on top of this. The panel mostly agreed that valued hardware was here to stay, that brands don’t have to fear the onslaught of no-name generic devices just yet, but that the equipment is a valuable foundation on which to build out other services.

Silicon Labs was up next, with Director of Field Marketing Anders Pettersson providing an in-depth presentation on the issue of radio interference. Pettersson recalled customers that were encountering clashes between the WiFi and Bluetooth chipsets used in a smart home product, and how software was now absolutely necessary to stop the radios interfering with each other.

He noted that two years ago, the big discussion was about which single protocol was going to be used for the smart home. Now, he said, the industry has moved past this, at least in the 2.4 GHz realm, where Bluetooth, WiFi, Zigbee, and also Thread have become established, but that if these don’t coexist, there will be huge congestion. But Pettersson warned that the biggest problem was that you wouldn’t even see the dropped messages, in the most congested environments, because of the way these protocols clash.

This is where the managed vs. unmanaged deployment comes in, with Pettersson describing how Packet Traffic Arbitration (PTA) was key to solving the interference problem, and is something that Silicon Labs specializes in. He also stressed that many manufacturers are not implementing all the recommended parts of the wireless standards, just those that are mandatory, and so many chips will not be able to enjoy features like PTA. To this end, Pettersson said, you can’t rely on 2.4 GHz just working.

Steve Moore, Chairman of very high-end smart home installer SMC, was next to the stage, who is also involved in a number of other smart home ventures. He described that in the real world, most consumer don’t want smart home systems, and that those who do don’t want to pay much for them.

However, looking at other consumer trends, you can see how this will evolve. It was not long ago that all the features provided by a modern smartphone would have required a computer costing thousands of dollars. Now, that pocket-sized device costs only a few tens of dollars per month, and consumers readily accepted the shift in business model. The transition from a large upfront purchase to a monthly-as-a-service approach has been pretty frictionless, Moore said.

In terms of adoption, Moore said that if a smart home vendor can make a single inroad into a home, it is likely to make additional sales. However, he questioned whether a free tier could be necessary, or whether the carrot or stick approach could work here, before settling somewhat on the carrot-flavored-stick model, where a free tier leads into something that a customer would happily pay for. Moore advised that such shifts should be done gently, so that customers learn to love the service or device.

The next session was a panel discussion on digital healthcare, one of the most valuable use cases for smart home technologies but one that faces perhaps the largest barrier to adoption – due to the complexity of healthcare regulations and markets globally. Led by Tim Chaudhry from For Care For Living, featuring Kevin Meagher from Parks Associates, Dr Pari Datta from Cambridge Design Partnership, and Andrew Cowen, CEO of Future Care UK.

Meagher stressed the difference between telehealth and telecare, where the former deals more in the diagnosis realm while the latter concerns treatments. Cowen noted that a lot of the current technology available is not fit for purpose, which compounds the need to get the patient and customer education right, otherwise traction will be very poof.

Pari noted that the corporate environment had changed substantially in the past five years, and that there are now a lot less buzzwords. Now, the industry works much more closely with patients, he said, with more collaboration in the ecosystem. Pari added that the US seems a little more advance than the UK, but that the overall market is moving in the right direction. Meagher pointed out that it is a lot easier to demonstrate RoI in the US market, which explains some of that lead.

On that point, Cowen added that companies initially thought that research would be enough to persuade investors of the merits of their product or plan, but that this was not the case. These investors need to know the RoI in advance, and don’t want to spend time trying to understand the user or market. Pari recalled Theranos’ infamous downfall, and pointed out that this has had negative knock-on effects in the investor community.

Netatmo took the stage next, with GM B2B Jeremy Smyth recalling how the arrival of GDPR dramatically changed the market. For Netatmo, a smart home device maker that started in weather stations and has expanded outwards and was acquired by Legrand, security and privacy has been a key focal point, Smyth said that ‘Privacy by Design’ has been an important choice.

On the topic of innovation, a much hackneyed term according to Smyth, the incumbents in the market could use an innovative approach to create huge barriers to entry, but looking around the market, you will note that the incumbents have been sidestepped somewhat. For Netatmo, the smart home is all about simplicity, and under its new ownership, the company has looked to incorporate Legrand’s switches and lights into ‘scenes’ that can be triggered in a predictable fashion – carrying over the understanding that a light switch should turn an action on or off.

Smyth also pointed out that the Netatmo camera is probably the longest product lifetime in the smart home, remaining unchanged since its launch back in 2015. Four years later, the features have been upgraded through software and integrations, but Smyth explained that every time a customer has to consider buying the new version of a product, there is a chance that they defect to a rival. Continuing to keep the device relevant and useful is one of the best ways to keep customers within the walled garden.

The final session was a panel, led by Haier’s Contri, discussing the importance of partnerships in the smart home ecosystem. Hero Labs and Neos founder Krystian Zajac has been in this game for 15 years, and has now developed a ML-enabled water flow meter with emergency shut-off valve. Jon Harros represented the Zigbee Alliance, and noted that the group could probably be described as the extreme case in smart home partnerships, given its membership.

The final panelist was Martin Pansy, CEO of Nuki Home Solutions, a startup that has developed a retrofit smart lock that he says is gaining ground in B2B verticals. Contri set things out, saying that the panel had mostly agreed that there were three broad categories that were most important to partner across – Technology, Value Propositions, and Distribution.

Pansy said that Nuki was able to clearly outline its value to a partner like Airbnb, as it is the platform on which Airbnb hosts can solve the most burdensome part of the rental process – the key exchanges.  Similarly, Hero’s partnership with home insurance companies enjoys clear value propositions, and both companies are essentially the prime technology partners to these service providers. Hero is also looking to expand into facilities management and water utility partnerships, but Zajac noted that partnering with insurers didn’t solve the home installation problem.

On the point of distribution, Pansy recalled how difficult it is to get retailers onboard, with many still very unenthusiastic. To counter this, the business potential needs to be very persuasive, and a first mover might be enough to get the rest of the retailers to pay attention. Zajac pointed out that the KNX ecosystem once dominated in the EU, but that it did a lot of damage to the reputation or concept of the smart home, due to being quite flaky and unintuitive.

Closing out the day’s discussion, Harros said that partnerships need to benefit all parties, with the panel then largely agreeing on issues concerning data ownership and privacy that are going to crop up in the coming years. Contri noted that transparency would be key in the data exchanges between partners, and that this transparency should make consumers more willing to share their own data.