Smart homes UK: how to unlock market potential

Technology is only half of the smart home story. The lead actor is still the customer, says Baringa Partners

The annual Consumer Electronics Show held in Las Vegas in January 2017 is a good indicator of the technology that will eventually cascade down into the mainstream smart home market.

Examples include Amazon’s Alexa voice assistant, which adds voice-activated smarts to everything from cars to speakers to fridges. While Samsung showcased its FlexWash/FlexDry laundry machines, a washer/dryer combo that can handle four loads at once.  

Despite the development of smart appliances - and a prediction that device shipments will hit 1.8 billion units by 2019, outstripping smartphone or tablet device growth, according to Business Insider - take up in the UK is slow. A survey from Deloitte, which looked into smart home device ownership levels and interest in the UK, shows almost no growth between 2015 and 2016, even in the most popular smart home device categories.

The 2016 study highlights that 48% of respondents think smart home devices are too expensive and 26% said they think the technology needs to evolve further before they buy a smart device. The survey also pointed to the US smart home market as being in the ‘chasm’ of the technology adoption curve. The chasm being the crucial stage between early adopters and the mass market in which manufacturers must prove a need for their devices.

Simplicity and the smart home

Anya Davis, Partner, Energy at Baringa Partners, suggests one way to encourage adoption of smart home technology is to ensure customers are at the heart of solutions.  

“Smart for customers doesn’t have to be super clever and overly complicated. If it is, we’ve failed,” says Davis, who believes smart should equate to simple solutions that give customers real value.

“There is a real opportunity here for utilities to provide more enhanced, regular services centred around proactive maintenance for white goods (possibly through partnerships with manufacturers) or on-demand replenishment of consumables,” she explains.

“By expanding on existing services, such as helping consumers install and maintain devices, utilities can enhance brand awareness and develop a ‘smart appliance’ relationship with the consumer.”

Amazon has already shown what is possible with the Dash button, a Wi-Fi connected device that reorders a consumer’s favourite product, and retailers are ideally placed to benefit from this too.

Customer services wrapped up

Remy Sunner, Manager, Technology Transformation at Baringa, believes there is also a case for retailers to develop ‘wrapper services’ that consolidate the rich data that will be produced by many devices in smart homes (once they can communicate with each other), and present it to consumers via apps or web interfaces on a tablet or phone.

This can extend into recommending additional devices that may increase productivity, energy efficiency, or provide additive services the consumer hadn’t thought they needed. Retailers may find opportunities in understanding food consumption and replenishment in real-time, and recommending products that are tailored to the consumer.

While it may look as if the major players are well-advanced with their plans, says Sunner, the reality is that this will be a long-term game for everyone. Retailers, manufacturers and telecommunication companies should be looking at their existing business models with a smart mindset, and asking the question: “How can we transform our business model to leverage our existing strengths, combined with innovative ‘smart’ services and products, to deliver unique and compelling value to our customers?”

The Baringa consultants also point out that today’s customers expect nothing less than what has become standard in other industries. Assuming smart technology left in customers’ homes works and is reliable, the emphasis for suppliers will no longer be ‘metering’ per se, but instead delivering the improved levels of service and experience that the technology enables them to provide.

Smart meters in smart homes - give customers context

So what is the outlook for smart meters as a smart home device?

In the US, some 150 million smart meters have already been installed and although some customers used the basic information provided by these meters to cut their energy use, the initial programme has not reported significant progress, says Katy Mirzaie, Senior Manager, Operational Excellence at Baringa.

Mirzaie questions why telling customers about the ‘whens and hows’ of their energy consumption is not enough to change consumption behaviour and believes the solution lies in people needing context.

She says: “To change consumption behaviour, energy solutions must give provide customers with a benchmark that fulfils their tendency to focus on relative values. For instance, using data to compare consumption levels with that of your neighbour is highly effective. In the US, this solution has resulted in a 1.5% to 3.5% reduction of energy usage per home.”

Another solution is cloud-based energy disaggregation which helps customers see the amount of energy that each home appliance consumes. Gamification simulates a reward system - a behavioural technique used for changing habits - to facilitate changing consumption behaviours.

“Using the principles of behavioural economics, we believe cloud-based solutions can have a more significant impact on changing customer consumption behaviour,” says Mirzaie.

“Providing customers with accurate, real-time and granular data and a simulation of rewards can help customers change their behaviour and overcome some of the common behavioural biases that make us resist changing our behaviour.”   

As a result, the utility is no longer a faceless commodity provider, she concludes, but someone who becomes a valuable and meaningful part of a customer’s daily lives, the keys to unlocking the potential of the smart home market.

 
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