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Companies Continue to Advance an Indefatigable Smart Home Concept but New Business Models is What’s Really Needed

The smart home returned in the 2016 Consumer Electronics Show (CES), which recently concluded in Las Vegas, Nevada. As in 2015, firms developing products for this segment of the market have continued to press for solution integration across devices related to enjoyment of the home. As ever a certain amount of smart home technology is linked to home energy management (HEM) – either directly (say smart thermostats), or indirectly (smart appliances that can turn on/off in response to external signals). Beleaguered automaker Volkswagen unveiled its BUDD-e concept car, which comes with connectivity to smart home security and thermostat devices. Whirlpool unveiled several smart appliances such as a smart Refrigerator and a smart dishwasher, both of which can be remotely controlled to save energy. Consumer electronics firm, LG, proposed a TV-based Smart Home Platform. While all of these are quite interesting and fit in with the tech-centric CES – home automation and HEM still have a few (huge) hurdles to overcome.

Suppliers of home automation solutions are exploring several alternatives for getting around the high price points of platforms from bundling solutions with security services to developing software only propositions. Vendors are struggling with two barriers, the first is the price of the required hardware needed to transition to a home automation system, which can run from around $30 for a smart plug to a few thousand dollars for full-fledged systems which integrate digital media, security and home energy use. Often, these are not costs that an end customer will want to take on unless they are building a high-end home or the equipment comes pre-installed in a new home, the cost of which is integrated into the purchase or lease pricing.

Another barrier to overcome before we see the home automation market accelerate is low user engagement. Utilities, such as UK-based Ovo Energy, have found that upwards of 60% of customers who have been provided with an in-home smart meter to view energy use do not actually use the device. In fact, their study suggests the devices may not even be turned on. Platform suppliers need to devise strategies to entice and engage consumers to interact with solutions. To grow deployments, home automation platforms have to seamlessly integrate into a consumer’s lifestyle – so that they want to use the system – like they want to use their smart phone, tablet or gaming console. User interfaces, such as that used by the Nest platform, need to interact with users to help them understand how behaviour changes can positively improve comfort at home. NEST integrates a green leaf icon that appears when home temperatures are set most efficiently.

Ultimately what this market requires is business model innovation rather than more technical innovation – witness the advances made by Opower when it brought a business model where the revenues come from the utilities rather than the consumers.

It will be difficult for a single firm to overcome these barriers on its own. Partnerships are required to develop appropriate solutions of hardware, software, services and pricing models that will excite consumer engagement. Home automation suppliers are not alone in having to overcome these barriers. Energy management vendors, in general, are faced with similar problems – whether their clients are commercial or industrial.  To get into more detail on the challenges and successes of energy management solutions, register to attend the Verdantix event Getting Value From Investments In Energy Innovation being held in London on February 11, 2016.