We often get asked, ‘are smart homes worth it’ and today we’re choosing to answer the question by using Samsung as a case study. This is a technology company who are famed for ubiquitous across almost all areas of consumer technology, yet they are making a very big bet on the whole concept of the Internet of Things (IoT) enabled smart home being the standout subset of the consumer electronics market during 2016. To put it another way, if Samsung are making a big bet on this, its because they see value in the whole concept and expect consumers to answer the question with their wallets this year. In fact, some analysts believe we’re looking at a $58B market by 2020, with $15B a year of that spend being in Europe.
Why are Samsung suddenly so interested in smart homes, whilst consumers are still questioning if its worth it?
There are a number of reasons, and they start with the reduced amount of smartphones that Samsung are selling.
After ten years of dominating the smartphone market, Samsung are seeing declining figures according to the Register. After riding high on one of the biggest technological boom towns of its age, Samsung now see their future in providing the inter-connected technology that powers the home, with their TV offering – arguably the best in market – spearheading their assault on the increasingly popular Smart home segment.
Samsung’s smartphone problem is not that their offering is getting less popular – quite the opposite in fact, as the company have been the breakout winner over the second half of the ‘decade of the smartphone’. They came from a long way behind Blackberry and then Apple, before becoming the market leaders, riding the wave of Android popularity to be Google’s headline promoter of their OS. The problem is instead one of market forces instead, with the market reaching maturity and saturation, meaning less organic growth caused by folks buying their first smartphone. The feature phone is essentially dead, with the vast majority of people now upgraded to a smartphone offering and as such are locked into upgrade cycles. The result? lower profit margins, sales growth of below 10% for the first time ever and the end of the boom, according to IDC researchers.
The other reason why Samsung believe that smart homes are ‘worth it’ is because of the raft of innovation coming out of the space. The Consumer Electronics Show, held annually in Las Vegas every January served to highlight this year that everybody from the smallest of niche focusses start-ups right the way through to the biggest of blue-chip manufacturers are focussing energy on this space. This means that there are suddenly a lot more players in the game, with individual and focussed offerings, from smart door locks through to TVs, all of which can be connected up through the Internet of Things. What they all need is a central ‘brain’, the hub of the system if you will, which joins the dots and lets them talk. This in a nutshell is why Samsung are so keen on the space. Owning the core of your smart home could be the most lucrative play in consumer tech for the next 5-10 years, replacing the smartphone and entering a decade of the smart home.
Are Smart homes worth it? The manufacturers are betting big on them being their next smartphone-esqe rockstar
This paucity in smartphone growth leaves the technology industry – spearheaded by Samsung, Apple, Google and Amazon – seeking their new rockstar device. Its arguably the first time in a decade that they have needed a new rockstar device, as their focus has been on iterating the existing. So this leaves questions, and many execs in big jobs at top manufacturers have not yet faced this challenge. How to find a rockstar device, the holy grail of consumer tech?
How to find a rockstar device?
Ideally this will be new meaning nobody already owns it (or at least an upgrade of such huge proportions that early adopters are compelled to buy quick), and it needs to solve a problem OR be ‘sexy’ enough that the market immediately ‘gets it’ and orders the new device/solution/product quickly.
If the Consumer Electronics Show in Las Vegas, concluded this week, taught us anything, it is that the technology industry believes in has its new rockstar – the smart home devices collection. And it ticks every box imaginable for the tech industry, when it comes to finding their new rockstar;
- This is a new segment – meaning almost nobody owns this stuff already, yet there’s demand (56% of Brits intend to buy a smart home product in 2016 according to the Dixons retail group)
- It compels you to upgrade, from ‘dumb’ unconnected devices to the new world of smart home technology which leverages the internet of things to enhance our interaction with such devices. A smart thermostat can be sold as a huge upgrade on a normal one, taking a device which nobody even thinks about and turning it into a subject of desire.
- Innate ‘boring’ home devices which rarely get upgraded (kettles, thermostats, security systems) are suddenly put into an upgrade cycle, much like where we find mobile phones, tablets and computers. This ensures ongoing revenue streams for the manufacturers
- There is a tonne of scope – smart home tech is touching almost all areas of the home, from security, to access, to heating, to energy efficiency. It wins advocates across the early adopter cool crowd through to the environmentally focussed – the latter being a group that are traditionally hard to lock into ‘needless’ upgrades, for obvious reasons.
- Owning the consumers smart home makes it much easier for the manufacturers to own all of the consumers home appliances, meaning the average value of a customer explodes
- Finally, the smart home glues together all offerings which the manufacturers have bet big on without winning – and yes smartwatches, we’re looking you firmly in the eye here.
At the end of Q4 2015, there were indications that the smartwatch could be the new rockstar, with a gold rush of manufacturers of the ilk of Asus rushing to join the market definers (e.g. Fitbit, Jawbone etc) in the space. However, smartwatches have not proven to offer a veritable advantage or even a compelling use case against the smartphone. Quite simply, the smartphone does everything that the watch offers and more, and yet it is slightly less intrusive than a vibrating wristband. Fitness bands have thrived, selling big of Christmas 2015, but they remain more niche, and they aren’t the next smartphone. Smartphones are indispensable, smartwatches, fitness bands and even tablets – whose short stint in the limelight has faded as fast as smartphone screens have grown – are not indispensable.
Are Smart Homes worth it? They could be about to become indispensable, much like the smartphone
However, as more and more homes will have the single point of access (not to mention failure) caused by becoming ‘smart’, this adds another tantalising benefit to the smart home movement. It too becomes indispensable, even if it is tightly linked to the smartphone once again.
As soon as you install your smart garage door, you need the tech to access your garage. As soon as you install a product like Nest, you rely on it to control the temperature of your house. Once you have a smart security system, your very home security is powered by it. This is all indispensable, but in a different – and even more important way – than the smartphone.
Once you add in the scope of the market, and just how many products are getting smarter, then you can see why the market is frothing at the bit to attack this space
TV goes back to the heart of the [smart] home
For many years, the TV became the central entertainment hub of the home. This changed with the emergence of the internet, as multi-screening emerged as a big trend. Samsung have put the TV back at the heart of their smart home plans.
This plays to their strengths, as they have been the dominant player in the TV market for five years. This becomes a smart way to protect that built-up legacy. Once households start building their homes around their Samsung TV, then they’re going to remain a Samsung TV customer on their next upgrade. It locks the consumer in around a central axis, and it uniquely works for Samsung because if you’re choosing a new TV today then Samsung is the one to be on. All of this helps makes smart homes more worth it for the consumer.
Samsung bought ‘SmartThings to enable this movement, and they now claim that SmartThings can power more than 200 different connected devices.
Are smart homes worth it, or are they still a bit stupid?
The big challenge with consumer technology is often timing, and some are still of the opinion that we’re not there yet. That was what I took from reading this Forbes article, which explained five reasons why Smart Homes are actually stupid. A lot of the air and flavour of the article was leaning towards the whole idea of prematurity within the space. For Gizmodo, they recently were left exasperated by how dumb the execution currently is. This is compounded by Wired magazines analysis, which points out that Apple have not made their play in this space yet. Their smart home product is in-market, but you can’t help but feel that it will get a massive overhaul and then cruise in to really compete with Samsung, Amazon and co at the top of the tree. Do you want to leap in and go big on the smart home concept before you see what Apple really have?
Well, as manufacturers bet big on them, they’re only going to get better and better. Increasing clever use cases for technology are emerging, all of which helps highlight why 56% of British folks want to make their home smart in 2016.
My view? for what its worth, I fully buy into the segment and idea, but think we’re only skirting the edges of what this space will get to. The big question of ‘is the smart home worth it yet’? I would say almost, and by the end of 2016, i think the answer will be yes