It's all to play for in the race to capture market share in the connected home market. Globally, by 2020, Strategy Analytics forecasts that global spending on systems and services will reach €91.1 billion, with almost 10 billion connected devices.
The connected home is only now taking shape and there is ample opportunity and time for the utilities sector to stake out territory in this exciting market. However, there a number of critical decisions to be made that affect the industry as a whole.
Be aware of market limits
It’s certainly the case that the large global players will be heavily involved in this market – Amazon, Apple and Google have already staked out their claim in various aspects of the connected home, and no one would bet against them not being prominent players in say ten years’ time. However, although these companies possess the power to create their own communities for virtually anything they choose to turn their attention to, there are limits in this complex and rapidly evolving market.
Controlling the market for a portable computing platform – such as Apple does with iOS for the iPhone and iPad – is a lot more straightforward than doing the same for the connected home, where there will be a huge number of devices, applications and connectivity options, as well as many categories of company involved in the value chain.
As detailed in Deutsche Telekom’s new market insight “How to create growth from the connected home”, the opportunity for players that don’t have global scale is that the connected home market is too diverse and will change too rapidly for dominance by a selected few. The challenge is what steps to take to secure traction in this market.
Drivers that determine strategy
Much depends on developing the right strategy, customer proposition and business model.
There are several key drivers that determine strategy for enterprises in this market. Some will be facing competition in their sector from other companies offering connected home products as added value services, so it could be essential to enter the market to remain on an equal footing. There is also a danger of being cut out of the value chain altogether if a sector becomes marginalized – so-called disintermediation. This threat faces retailers, for example, which could be bypassed by device makers selling direct to consumers and service companies.
Whatever the strategy, it is critical to focus on creating a compelling proposition and an innovative business model. There are many ways of entering the market but innovation is likely to be increasingly important, no matter what the approach. An underpinning theme for all players is the launch of services for the connected home rather than traditional product-based retailing – but the value to consumers of buying into say subscription-based appliance monitoring schemes for their homes will need much crafting and will probably require a complex suite of partnerships with other key brands, affinity programmes and service bundles.
Building customer trust and satisfaction
The connected home market also demands that companies provide a great customer experience from the outset and a market presence that builds trust. Connecting into the ‘nerve centre’ of people’s lives through their home routers – with access to security and lifestyle information – requires the highest degree of trust and data protection. Providers should ideally establish a dedicated brand for their connected home offer to build this trust and encapsulate their proposition to consumers.
In turn, a dedicated company unit with senior, visionary personnel in charge, integration into existing sales channels and exploration of new channels is recommended. Additional external expertise, especially in areas where there may be a rapid learning curve, such as in home application design, data analytics and protection techniques may also be necessary.
Buying into a platform of choice
Finally, there’s the platform. It is not feasible for all companies to make any headway in this market without joining a platform that offers a standards-based system for connecting devices, which can scale up to potentially millions of homes and, above all, can provide a way to build innovative services that customers value and recognize from their experiences with established computing and music platforms.
The alternative to general-purpose and proprietary platforms is one built on open source principles and which has ecosystems targeted at various industrial and retail sectors. As with the Eclipse Foundation, which is supported by Deutsche Telekom, IBM, Oracle, SAP and others. The Eclipse SmartHome project is a flexible framework that is designed to support the rapid development of new home services. Indeed, by collaborating with a developer community, there is more flexibility than closed proprietary platforms.
This is not to rule out working with devices supported by Apple and Google – quite the contrary. However, as Deutsche Telekom believes, the only way to integrate with and future-proof against the many incompatible devices and standards in this market is to be part of a collaborative, open ecosystem. A neutral ‘language’ greatly cuts the chances of disappearing into a proprietary dead end and provides customers with the reassurance they are buying into a platform of choice.