Smart Home Business Model: Embracing Challenges to Drive Success

TechSee discusses the need for a new smart home business model and what this includes.

As providers of Support of Things (SoT) technology, we’re helping shape the future of the smart home industry. In the following article, we’ll explore how we use our day-to-day experiences to inform and evaluate our smart home business model.

Re-Evaluating the Smart Home Industry Business Model: A True Scenario

On a recent visit to a customer’s contact center, I was reminded of the magnitude of SoT’s disruption and how it’s forcing companies to re-examine their internal processes, from warranty policies to the smart home business model as a whole.

The customer, a consumer electronics enterprise, had just implemented our visual support platform, TechSee Live for Call Centers. The VP of Customer Service and I were walking around the company’s contact center, reviewing how customer service agents were using the system. We stopped to watch one agent as she spoke with a customer that required assistance with their washing machine.

Download TechSee’s guide to learn how to provide next-generation smart home support

With an Easy Solution, Why Wasn’t the Problem Resolved?

On the agent’s display, the three of us could see that the source of the problem was the washing machine’s rubber seal, which had become dislodged. The solution was painfully obvious: all the machine’s owner needed to do was gently nudge the seal back into place.

But rather than provide this simple instruction, the agent ended the conversation by scheduling a technician dispatch to resolve the problem. Obviously that was going to cost the company ten times more than getting the problem solved on the call, plus the customer wasn’t going to be able to use their machine for a few days. Intrigued, I asked the agent why she didn’t just tell the customer to try adjusting the rubber seal during the call.

The agent’s reply surprised me: while she clearly saw the problem and its easy solution, the product’s warranty policy states that tampering with the rubber seal voids the warranty. Therefore, the company’s customer service protocol prohibits agents from instructing machine owners to manipulate the seal in any way.

The VP and I took a moment to digest and discuss the implications of this information.

Technology’s Influence on the Smart Home Business Model

During the visual session, the problem’s diagnosis was clear, with no room left for error. Moreover, the agent could have easily instructed the customer on how to repair their washing machine, then provided visual confirmation that the customer had carried out the required action properly.

The extent of the influence that technology which supports the Internet of Things (IoT) is starting to have on businesses dawned on us both. As we walked back to the VP’s office, we talked about how visual support could affect the company’s warranty policy. We realized that what we’d just observed was only the tip of the iceberg. Our conversation went from warranty policies to the challenging margin left when considering the average price of smart “things” versus the complexity and high costs of smart home support. By the time we got to his office we were evaluating how the challenges and technologies of supporting the Internet of Things are disrupting his company to such a degree, that they demand a new perception of the company’s smart home business model.

The IoT and SoT Effect

IoT refers to physical and software integrated products and devices and can communicate with each other via internet connection. SoT refers to the support of IoT-related products as well as the services and apps that enable smart “things” to function in smart home networks. IoT and SoT are transforming businesses that serve the smart home in two ways: the need to scale to address challenges, and the introduction of new technologies.

New Challenges

First, IoT presents significant new challenges consisting primarily of volume and complexity. This creates a need to install a staggering quantity of connected devices as well as resolve multi-layered technical issues.

New Technologies

Second, SoT introduces critical innovative technologies such as:

  • visual support
  • deep-learning-powered automation
  • smart sensors, and
  • predictive support.

These are all transforming customer service operations while simultaneously changing manufacturing processes, support protocols, and go-to-market strategies.

The Convergence of Services and Products

The shift to consumer-centric business models is driving consumer expectations of better overall service, omnichannel support, short time to resolution, and extreme personalization. These expectations are propelling a competitive marketplace and shifting existing support and warranty standards towards 360 support models. These support models place the customer in the center and the provider is responsible for the functionality of the customer’s connected environment as a whole.

The service that companies provide has become an essential component of what they are selling. Building on this and our observations in the call center, we can see that IoT and SoT have, in essence, the same objective: delivering consumers a seamless smart home experience.

Therefore, smart device manufacturers and suppliers need to take a holistic approach to delivering smart home technologies and services to mass markets. They need to examine their smart and connected products business models to ensure they are in line with this approach.

How Do Smart Homes Fit into the Business Model Framework?

When the smart home becomes mainstream, consumers will be less concerned about a single appliance operating than they will be about everything in the home functioning as it should. They expect their homes to work as a whole. If a company wants to dominate this market, they need to ensure the efficient and effective installation of, and support for, every smart device that makes up the smart home.

As the connected home grows in complexity, consumers will look to a single entity (provider/ distributor/ manufacturer) to make sure that everything  is operating together as it should. Breaking down smart home service and support into multiple components is going to guarantee customer disappointment.

The Growth of the Smart Home Market

The smart home market is growing rapidly. Statista projects that revenue in the US is expected to show a CAGR (2021-2016) of 11.07%.

YEAR REVENUE IN US$ (*PROJECTED)
2020 23,328
2021 28,864
2022 33,659*
2023 37,995*
2024 42,338*
2025 46,767*
2026 51,235*

Source: Statista

Forming a Winning Smart Home Business Model

The key to entering mass markets will be the creation of the right package for the right price. The idea of consumers gaining the knowledge and spending the time and effort required to pick and choose every aspect of their smart home, will quickly become as unique as car enthusiasts who build their own cars from scratch.

In addition, most smart devices are inexpensive to the consumer; the margins of profit for manufacturers are low and don’t allow for costly activation and support models. Ignoring this fact can result in an unsustainable business. Creating a sustainably priced package that delivers an affordable, fully-functional smart home to consumers is the key to success.

We are already starting to see the launch of models such as “smart home as a service” (SHaaS) and smart living subscriptions. An effective smart home business model offers consumers plenty of benefits, such as:

  • simplicity – devices and services are pre-selected
  • installation and support are included
  • regular updates and upgrades (this is critical considering the rapid pace of innovation)
  • guaranteed fast setup, activation, and maintenance, and
  • little to no hassle, high reliability.

Smart home industry business models like SHaaS and smart living subscriptions enable providers to create bundles for sustainable business. This relieves them of the obligation to provide complete (and costly) support for a device that generates little revenue when purchased; rather they can provide an ongoing, financially viable service.

Conclusion: The Developing Smart Home Industry Business Model

The smart home is changing how we view and make decisions about our lives.

Smart homes exist to make our lives easier; however, they are complicated to set up and maintain. Therefore, customer service is becoming a vital component, and the primary competitive differentiator, of enterprise smart home offerings. This is leading to the creation of new smart home business models.

Technology which supports the Internet of Things are the enablers for the new type of smart home business model. It helps companies provide superior service, reducing consumer downtime caused by technical malfunctions in a way that’s both scalable and affordable.

Leveraging SoT technologies to keep the promise of a seamless smart home experience, and provide service at scale, is a key capability that companies in this market must possess. The ones that are the best at doing this will succeed in winning this critical battle.

Download The Ultimate Guide to Smart Home Support to learn how to provide next-generation smart home support.

Amir Yoffe, COO
Amir Yoffe is a senior executive with decades of experience in managing enterprises and helping them grow. Amir co-founded TechSee in 2015, and is currently serving as its Chief of Operations.

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