The Value of the Smart Home
Almost every company I’ve worked for has developed a smart home product: connected light switches, lamps, heaters, thermostats and more. They were all well promoted at their debut and then stumbled on through low sales. However, two smart home companies have been very profitable: EcoBee and Nest. What can we learn about decision making through these two smart home brands?
- Don’t believe the hype.
The Nest thermostat was launched in 2011, but I remember sales people and others in the architectural product field discussing the smart home for a few years before. It was supposed to be the next big thing and the opportunity that could change the sleepy little importers and manufacturers in the industry into high valued tech companies. That’s how many pitched it to me. The thing they failed to see is that the smart home wasn’t a new product.
Home automation was imagined in the ’60s and commercialized in the 1970s. They were wired systems that required extensive renovation to install. Installation also required experienced technicians to make sure everything worked seamlessly. This made the costs simply too high for all but the wealthiest and ambitious early adopters.
As the decades continued, more and more companies simplified the products and installation. Finally, around 1998–1999, the low power wireless protocols Zigbee and Z-Wave were launched. By communicating wirelessly, products became far easier to install.
But, there is always a but, installation is still complicated and the devices themselves are expensive as all of these radios are proprietary and require hubs or other hardware to function.
Just as the Lindy effect suggests that the future life expectancy of an idea is likely to equal how long that idea has been around, I’ve found that unpopular technologies tend to stay unpopular unless they become essentially free or their perceived value is increased.
2. Focus on customer value.
Customer value is where value perception comes into play. One field of smart home have become valuable and widely adopted is thermostats. Thermostats have a clear value to customers, and unlike with most smart home products, thermostats make the product far easier to use, rather than harder.
First is the value to customers. Heating and cooling are the two highest costs in any home. The added cost of a smart thermostat can easily be recovered in savings. However, the savings of a light being turned off would be imperceptible to a customer.
The second value is ease of use. Customers have long been told that programmable thermostats can save them money, but they are difficult to set. In talking to installers and customers, I’ve seen many programmable thermostats set to “hold”. The smart thermostats either allow the programming to be done off the device through a website or automatically set their schedule through detecting the home owner. This is huge time saver and reassures the customer that the programming will be valid and actually used.
So, next time you analyze a market opportunity keep these two things in mind: stay cool and don’t buy into hype and ask yourself what the customer value of the technology really is. Chances are that if you don’t know what the value of a technology is, the customer will never find it.
