Flexibility will be key to dominating the smart home market

Mariana Zamoszczyk, a senior analyst at research company Ovum, explains why only the most flexible vendors will come to dominate the smart home market.

The role of AI as a home assistant – see, for example, the Amazon Echo or Google Home – is already helping consumers to embrace the concept of the smart home, expanding its reach and deepening its impact on our lives.

But the real driver for adoption will be the connection of smart home technology with new services that provide meaningful value. Further value, meanwhile, will be provided by new, more intuitive ways to interact with smart home technology, enhancing ease of use and bringing greater functionality.

Connect the dots

The most obvious and biggest trend for the smart home is everything becoming connected. The idea of connecting everything in the home has been around for some time, but in terms of consumer perception, it’s no longer considered a strange idea.

The questions that need to be asked now are: ‘Is it important?’ and ‘Is it useful?’

Consumers may not yet see the value of something like a connected hairbrush, for example, and it is very difficult for companies to show through concrete examples how such a thing might improve their lives. But in future, the winners will be those companies that are able to articulate clearly the benefits of their products and the losers will be those that struggle to capture the public’s imagination.

Putting service first

The point of most interest for businesses is how they can harness the power of connected devices in the home to launch new services and expand revenues.

For example, energy providers are championing smart thermostats to use less energy at peak hours. Service providers can gain a sizeable portion of revenues if they are first to market with services as new smart home technologies come to market.

Taking this idea further, the more services that are connected to or each device, the bigger the opportunity. For example, the Amazon Echo has great functionality because it can so many different things – from ordering a taxi to turning a light on or off.

As more service providers act to accommodate these flexible applications, competition for existing providers will increase and they will have to change their business model to embrace IoT in much the same way as health and energy providers are doing.

Smart assistants driving change

Smart assistants in the home represents the first step in integrating AI into a home environment and unifying existing smart propositions via the same user interface.

As such, the use of AI at home will be very effective at pushing the adoption of technologies, both in the home environment and in the wider business world. As has happened with other consumer technologies like videoconferencing, consumers first become comfortable using a technology in their daily lives – such as Skyping loved ones, for example – and then technology companies will take notice and try and exploit the potential in the business environment, as happened with Microsoft acquiring Skype and launching Skype for Business.

Players like Google are seeing the potential of smart assistants in convincing users to use services that they would not use otherwise. For example, there are a number of apps and interfaces that control the lights in your home via your mobile phone. The trouble is that you may not necessarily have your phone in your hand all the time when you’re at home – but you may still want to adjust the lights.

Technology providers are learning the lesson that you can’t force consumers to change the way they interact with devices in the home, and consumers are asking for multiple interfaces – voice, touch, motion – to suit their own specific needs.

Flexibility is key

Being able to offer flexible interfaces will be key for vendors to survive in the coming years, and will be integral in unlocking the smart home’s potential.

In the case of assisted living for example, many older people don’t use smartphones and yet can benefit most from the applications of smart home technologies.

For example, motion detection that can tell if they have not moved in a while may be useful to them and their carers, or voice assistants that alert them to take their medication.

This year will see more applications around healthcare. At the same time, other consumer groups such as families can benefit from the same technology to check on the dog or the baby and contact each other more easily around the house without using their mobile phones. Being able to offer safety and security in the same package as greater comfort and enjoyment is the type of flexibility that will widen the opportunity for service providers and will be a key driver behind success.

The most significant services that we will see being adopted in the next few years will be those that already have a close connection with the home and whose providers are most trusted by consumers – such as insurance, healthcare, utilities and home security providers.

These companies are already offering IoT-related services, such as Aviva offering a better rate for customers that equip their homes with leak detectors such as the LeakBot, which reduces the amount they have to pay out each year on preventing leaks.

The symbiotic benefits of these relationships will be further progressed by technologies like smart assistants, such as Alexa notifying homeowners when a leak is detected and reminding them to contact a service company to resolve it. The Nest thermostat is also another product that has a huge list of energy partners that is well equipped to target a niche market in energy management and connect with new smart home technologies.

In conclusion, the smart home market is entering an interesting time, as service providers increasingly seek new customers and revenue streams through partnering with smart home vendors.

However, the vendors that offer the most flexible interfaces and enable the widest range of applications will be the ones that have the largest number of suitors and win the biggest market shares.

It is too early to predict which companies will win out in the end, but those that do will be the ones that transform smart home technologies from novelty status to daily necessities.