Smart Home Market Analysis – Expectations vs. Reality
All eyes were on the smart home market in 2017. After all, industry experts such as MarketsandMarkets predicted that the industry would be valued at to$137.91B by 2023, growing at a CAGR of 13.61%. Tech giants are all clamoring to get in on the action with Google Home, Apple HomeKit, Amazon Echo and Samsung SmartThings creating buzz, and new smart devices flooding the market at a dizzying rate.
However, despite these high expectations, smart home adoption has been slower than anticipated. While the connected home market is growing steadily, it certainly has not exploded. In fact, according to PwC’s 2017 consumer study of the IoT and the connected home, while 81% of consumers are aware of smart technology, only 26% actually own a smart device. Moreover, 68% of consumers reported that they are not very excited about the future of smart home tech in their daily life. Worse, the study found that 30% of consumers are not fully satisfied with their device or mobile app supporting their device.
What went wrong in the trajectory of smart home adoption, and why did so many experts miss the mark?
Reasons for the smart home slowdown
In many cases the value of individual parts of the smart home is unclear. While some smart home devices may initially seem like the epitome of value and convenience, in practice many may not be as relevant or as helpful as anticipated. For example, the Bruno is a $140 trash can that features a built-in vacuum and will remind you to take out the trash when full. However, the product does not fully replace a vacuum, rather simply acts as a high-tech dustpan, diminishing its value especially when compared to the price of a standard $20 trash can. In addition, it must be recharged every month and requires the use of proprietary trash bags, which further brings its value into question. Or, while the Samsung Family Hub refrigerator can show you the inside of your fridge and help create and sync shopping lists, its $4K price tag has consumers considering whether auto-updates on groceries is really that critical.
Security & Privacy
While many people choose to actively share their personal experiences over social media, they are wary of smart devices having access to personal data about their homes and habits. Considering the level of access afforded to connected security cameras, motion sensors and other home-based Virtual Assistants, the fear of disclosing private information is a real obstacle to overcome. Imagine the sheer magnitude of information a home-base device like Alexa has stored, and the potential fallout if that data is breached. Similarly, hacking into a home’s connected security cameras can allow footage of an individual’s most private moments at home to enter the public domain.
With widespread privacy scandals in the news on a regular basis, such as the recent one at Facebook, it is not surprising that a Deloitte survey found that nearly 40% of respondents were concerned about connected-home devices tracking their usage, and more than 40% said they were worried that such gadgets would expose too much about their daily lives.
Interoperability and Stability
Smart home products depend on protocols and standards to interact with each other, such as Wi-Fi, Bluetooth, Z-Wave and ZigBee. The industry has not adopted a mainstream standard, which can make coordination between devices built for different platforms difficult. In addition, while connecting appliances to the Internet can make a smart home run smoothly, when the supporting servers go down, so do the conveniences. As demonstrated recently when Amazon Web Services experienced a wide outage, smart devices that relied on network availability effectively became useless. Outages result in dark homes when wireless light bulbs will not turn on, cold homes when smart thermostats cannot function, and quiet homes when entertainment systems cannot be operated.
Installation maintenance and troubleshooting
Connected devices are perceived differently than the older consumer appliances or electronics. While an older model washing machine can operate with nary a repair for a decade, a connected machine must be regularly updated, maintained properly and connected to the right networks in order to deliver all of its smart functionalities. This perception is in conflict with modern consumers’ aspirations to be able to self-manage their technology. In the TechUK’s 2017 State of the Connected Home report, 49% of consumers reported that they want to self-service their devices, and 39% prefer to install their devices themselves without the assistance of the supplier.
Steps to overcome obstacles to adoption
Focus on Value
While the perception of innovation was able to carry the smart home through the initial phase of hype cycle, the next wave of adopters is expecting real value for their investment. Providers must ensure smart devices demonstrate clear value, beyond just comfort. Segments that have established clear value – such as dollar savings due to energy management or heightened safety due to smart security systems – have traditionally experienced higher rates of adoption. For example, according to Priori data, the global smart lighting market grew 81% between Q2 2016 and Q2 2017 to $101.2M, and the global smart security systems market grew 78% between Q2 2016 and Q2 2017 to $723.8M. The consumer benefits of these segments are clear and with the cost gap closing, demand is likely to further increase.
Enhance Cyber Security and Ensure Privacy
The connected home is vulnerable to cyber security threats: either via devices connected to the network or to the servers that gather, store, and analyze information from the sensors. An attacker may be able to contaminate a smart device with a virus, hack into the wireless service, manipulate any of the smart devices, and access personal data such as banking information. This could lead to a number of worst case scenarios, including identity theft, or a home invasion if the house’s smart lock is breached. Providers must take a two-fold stance to remove this barrier: implement appropriate levels of controls to safeguard consumer data and protect the smart home ecosystem, and proactively address the relevant consumer concerns in order to assure users that they are well-protected.
Increase Interoperability and Stability
The lack of universal standards for the manufacture of IoT devices is one of the most important hurdles to clear before the smart home can truly succeed. Device manufacturers and service providers should act together to create an environment where devices can interact with each other. Clear standards in terms of interoperability, security and data must be put in place for IoT to grow at its potential. Open source platforms and inter-industry collaboration will nurture innovation and ease the path to mass adoption.
Provide Installation Support and Troubleshooting
Providers must consider consumer sentiment when making decisions about product complexity, packaging, and other consumer-facing services, creating a consumer centric business model that keeps the customer experience top of mind. In cases where consumers do need extra help in setting up devices, customer service must be easy to access and provide all the information needed. Companies can provide interactive autonomous self-installation solutions such as augmented reality (AR) user guides, installation bots, etc. or partner with third-party providers to provide installation and troubleshooting services to customers.
Despite the initial popularity of smart homes and smart home technologies, their prevalence is not as widespread as anticipated yet, and thus their potential remains untapped. Device manufacturers and service providers must take steps to increase the value and convenience of the smart home, focus on any security or privacy concerns, address the interoperability and stability of smart devices, and develop clear processes for installation support and troubleshooting. Then, further action can be taken to raise awareness and educate consumers about the relevance and practical benefits of the connected home in order to drive more consumers to adopt smart lifestyles.