The smart home is capturing headlines with its futuristic possibilities of smart cars, fridges and thermostats all connected to each other. However, it is important to be realistic. The current state of the smart home is not even close to this vision, writes Paige Leuschner.
Paige Leuschner is a research analyst with Navigant Research. Her latest report, The Smart Home, analyses the global smart home market, with a focus on residential IoT hardware, software, and services and smart home platforms.
The smart home is one of the hottest topics in tech. It extends to various aspects of our lives—from voice-activated speakers, to thermostats that change the temperature when users are home or away, to refrigerators with touchscreens and cameras that let consumers watch TV and see their groceries from a mobile app, to security cameras that recognise familiar faces—even Barbie has a smart home!
The smart home is capturing headlines and mindshare with its futuristic and hopeful possibilities. But what really is a smart home? And why all the fuss? What are the implications for smart home technologies, and why are big tech companies like Google, Amazon, Apple, and Samsung rushing to invest millions and billions of dollars in smart home technologies?
What is a smart home?
For starters, there is no set definition of a smart home. Marketers in the tech industry use the terms smart, connected, and automated interchangeably when referring to the Internet of Things (IoT) in the home.
However, these terms refer to different concepts. Navigant Research believes the concept of a smart home is the top tier of intelligence, interoperability, and automation in the home. It goes beyond individual connected devices and do-it-yourself home automation solution and involves comprehensive, integrated platforms where an ecosystem of interoperable devices is supported by software and services.
A truly smart home should be able to act intuitively and automatically, anticipating and responding to the need of consumers based on learned lifestyle patterns and real-time interaction to increase comfort, awareness, convenience, and cost and energy savings.
The concept of a smart home not only has the potential to revolutionise the way people interact with their homes, but it also extends to the role that the home can play in transitioning the grid from traditional centralised generation to the Energy Cloud.
Smart homes of the future are expected to transform into dynamic assets that balance home energy production and consumption with distributed energy resources, shed load demand through the optimisation of more energy efficient products, respond to signals that shift demand to times when the grid is less strained, and generally support a more reliable grid infrastructure.
Current state of the smart home market
However, it is important to be realistic. The current state of the smart home is not even close to this vision. Right now, the smart home market is about increasing the adoption of connected devices, which are ultimately supporting more digitally enabled, connected homes.
These devices are providing a framework of sensors that transmit data about the home (such as its temperature, or when its HVAC system is running) and its occupants (such as the time they usually come home in the evening, or the appliances they are using). Companies are starting to realise the value of this data, and are using analytics and machine learning algorithms to find patterns in behaviour that can help them enhance existing software solutions and offer consumers value-added services.
For example, British Gas is using the data it collects from devices deployed in the home to populate its MyEnergy app with personalised energy consumption information. It also uses data to offer its BoilerIQ monthly boiler monitoring and maintenance service.
Both moves can help the energy supplier increase customer engagement and satisfaction to avoid high customer turnover rates in a competitive energy market, while also increasing revenue outside of its traditional commodity sales.
Vivint Smart Home uses data collected from its ecosystem of devices to power its Sky digital assistant and make suggestions for tasks that users can automate, such as automatically locking the door when users leave the home. Comcast is using data and connected devices to sell more services to new and existing customers, as its traditional cable TV offering comes under threat to alternatives.
Why is the smart home so important?
The ability for companies to use data from connected devices is why the smart home is such popular topic that’s creating a lot of buzz and excitement in the tech industry, and why the market is seeing big investments from big companies.
Smart home solutions provide the framework that enables companies to learn more about their customers, which means they can sell more services more effectively, retain more customers, and ultimately generate more revenue in an increasingly challenging and competitive business climate.
Many of the companies becoming more active in the smart home market already have a relationship with residential customers—like an existing footprint in the home or a device in our pockets—so there is a low cost to entry for deploying smart home solutions.
Smart home solutions are a natural progression to the existing offerings of many service providers, which is why many of the existing smart home products and services are peddled through value propositions relating to energy, security, home automation, comfort and convenience, entertainment, and health and wellness.
Consumers understand these value propositions, such as saving money on energy bills and keeping their families and homes safer and more secure, but they are increasingly aware of smart home technologies. Platforms like Amazon Echo, Google Home, and Apple HomePod are spurring excitement about controlling devices in the home through voice activation and demonstrating the possibilities associated with the smart home of the future.
So why don’t we have smarter homes now?
There are many obstacles for the smart home market to overcome before it reaches mainstream adoption. The smart home space is riddled with interoperability issues, including lack of communication between devices due to numerous communicating technologies, standards, and protocols. Consumers still need multiple apps to control multiple devices.
Data privacy and security are also a significant hurdle, and customers are increasingly wary of technologies they feel are collecting their data and spying on them. Despite significant strides in technology, many of these devices still lack the advanced functionality that consumers expect of them, and consumers need more reason to adopt smart technologies than being able to play Jeopardy with Alexa.
The market is also leagues away from having a true connection to the grid. Consumers care little about their energy consumption, spending only 6 minutes annually thinking about their electricity bill (an issue more prominent in the US, as electricity prices are cheaper than those of European countries). Most utility-customer activity is focused on increasing customer satisfaction and engagement through home energy reports and is not as advanced as one would think.
Though the smart home will take longer to materialise than media hype would lead us to believe, it is happening slowly but surely. Big companies are making significant investments, which portrays the seriousness of smart home market’s potential. Though there are many challenges to overcome, the smart home of the future is becoming a reality.
Being able to talk to our homes and have them talk back, while also locking the door behind us, switching off the lights, sending a text message with the grocery list, and dialling down the thermostat to participate in grid flexibility events while we are away are not too far beyond the horizon.