Who Will Be the Leader in the Connected Smart Home?

By John Flanagan, Hitachi Consulting - Communications services providers (CSPs, e.g., Comcast, AT&T), device manufacturers (e.g., Honeywell, GE, Lutron), big box retailers (e.g., Home Depot, Lowe's, Best Buy, Sears, Staples), tech giants (e.g., Amazon, Google, Apple, Microsoft), electronics manufacturers (e.g., Samsung, LG), a slew of startups and God knows who else are rushing to get into consumers' residences to get their share of what is now referred to as Smart Homes.

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As the connected smart home comes into focus at an increasing pace there is an interesting dynamic playing itself out in the marketplace.

Btrjohnflanagan070516Communications services providers (CSPs, e.g., Comcast, AT&T), device manufacturers (e.g., Honeywell, GE, Lutron), big box retailers (e.g., Home Depot, Lowe's, Best Buy, Sears, Staples), tech giants (e.g., Amazon, Google, Apple, Microsoft), electronics manufacturers (e.g., Samsung, LG), a slew of startups and God knows who else are rushing to get into consumers' residences to get their share of what is now referred to as Smart Homes. It's something that, frankly, has been around for more than three decades. But now, with the penetration of personal smart devices such as phones and tablets, the pace is starting to reach a fever pitch.

Other advances such as 4G, FTTP, WiFi, small cell and DOCSIS 3.1 are also helping to accelerate the pace of demand, to the point that we are on the verge of mass adoption. All the analysts are in agreement that during the next five years we are going to see an explosion of connected devices in the home and that many companies across the spectrum noted above will benefit. Who will be the winners and the losers? There will be many of both.

I tend to agree with many of the analysts and prognosticators who feel that those who are the providers of connectivity stand the best chance to gain the lion's share of the market. Yes, there will be device manufacturers, retail distributors, service providers and others who will get a piece. But who will get the biggest piece? I am intrigued by Amazon and Google the most.

Dash and Nest

In Amazon's case, it's offering Amazon Prime customers Amazon Dash buttons that, once authorized, let you quickly order products you use frequently, from detergent to cosmetics to toilet paper, at the touch of the button. In addition, Amazon's voice-activated navigation and control device, the Amazon Echo, has Alexa. Like Apple's Siri and Microsoft's Cortana, Alexa is a voice activated/recognition personal assistant of a sort.

The Amazon Echo and the newly launched Echo Dot and Amazon Tap have expanded the product set and have a number of uses. They can be fully integrated in a connected smart home solution to control a wide area of devices (e.g., lights, doors, cameras, thermostats, music), with more being added regularly.

I can see the near future where Amazon integrates the Dash button with Echo and potentially has a play for control of the connected smart home. This is something that the CSPs need to track as they position themselves to control the home. Voice activation/recognition capabilities can truly improve the customer experience and increase adoption. These capabilities have come a long way from the early days where they caused total consumer frustration. They are now refined to the point where they work effectively the majority of the time, and you are seeing them in GPS apps, TVs, OTT apps and automobiles. If CSPs are going to dominate the smart home they will need to place this technology at the heart of their controllers.

Google, on the other hand with the Nest home environment controller, Google Fiber and Google Pi, seems to be potentially positioning itself to provide connectivity and devices and gain a controlling position in the connected smart home by cutting the CSPs out entirely.

What Do People Want?

The offerings of Amazon and Google are very interesting and constantly evolving examples of how the Internet of Things is pushing the connected smart home concept forward and how this might be received by the general population. Who is adopting earlier? Who will refuse to play at all?

In my household, my wife isn't playing at all on the two Amazon options (even though she is an avid Amazon Prime customer). To her, Dash and Alexa are too much of an invasion of privacy and that issue, along with interoperability, will keep consumers from adopting. Conversely, I see these things as absolutely valuable and that it is just a matter of time before they become integral to our lives.

One question we always must ask ourselves, as we move into the connected smart home space, is: Just because we can do it, should we? What is the value add, past the initial purchase revenue, of an app that is relegated to the tech dinosaur bin?

Steve Jobs famously said, "Consumers don't know what they want until we tell them." I haven't heard of anyone who said, "There's gotta be a remotely assisted way to order paper towels." Nevertheless, how convenient is it to be able to just push a button as you are pouring the last bit of laundry detergent in the machine and have your supply replenished with no further effort?

I believe that providers of connectivity (e.g., Comcast, AT&T) have a leg up, as they are already in the home and positioned with devices that can be the whole home smart controller. But they will need partners. Companies need to be smart as they move into this new business, using data analytics to provide services that are comprehensive, desirable and truly worthy of the title "service" over the long term. They need to think about being a long-term partner in the home, not the next "'Member that?" meme on Facebook.

Time will tell which of these advances get adopted by the general population and which end up stunted at the early adopter phase.

John Flanagan is senior vice president, U.S. communications, media & entertainment industry, at Hitachi Consulting.

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