Parks Points

The objective of the connected home experience is to enhance the lifestyle of the consumer, delivering an anytime, anywhere, borderless lifestyle where all devices work together whether the applications aim at entertainment, home control, or energy management.

Connectivity expands the functionality of consumer products, and it can radically change the dynamics of a market. Apple, for instance, leveraged connectivity to change the music industry with the introduction of the iPod and iTunes and radically expanded the functionality and usefulness of cell phones through connected applications.

Today, single product solutions are rapidly entering the market, expanding the value proposition of everyday products. For example, consumers purchasing a garage door may choose one that is connected to the web and provides them with an interface to check the status of the door and remotely open or close it using their smartphone. If their experience is positive, their interest in connected devices will expand, and they will want to add connectivity to other devices in the home.

Companies invested in single-system solutions argue that people don’t go shopping to purchase a home control and monitoring system. Instead, as they shop for a new appliance or electronic device, they come to understand how their smartphone can be used to remotely monitor and control that new purchase. Interoperability is a secondary concern that emerges when consumers accumulate multiple single-system solutions. Individual functionality trumps interoperability at the point of purchase.

However, consumers do understand and respond to the value proposition of connectivity across systems. Parks Associates reports almost one-third of U.S. broadband households find remote control of lighting, thermostats, and appliances via computers or mobile phones to be highly appealing.

Similar percentages find value-added services such as energy monitoring and energy management to be highly appealing.

At the same time, retailers and service providers are entering the markets for connected home services, including security and energy management. Bundling energy management with IP services will drive adoption of multiservice home networks to over 20% of U.S. broadband households by 2015. The market is moving toward a home environment with multiple devices, all connected to the Internet, and consumers will expect these devices to be interoperable, regardless of their original intent at the initial purchase.

Criteria for Success – Installation and Configuration

This interoperability must be transparent to the consumer. Connecting a new device to a home area network must be as simple as plugging in the cord. When customers purchase a Blu-ray player, they plug in power and the connections to the Internet and the TV, and it works. The powerline carrier groups want to simplify installation even further, eliminating all but one cable, the power line. Other requirements after plugging in a product should not be more than a single button touch, similar to the action required to connect a Bluetooth headset to a cell phone.

Criteria for Success – Operation

From an operational perspective, functionality can be broken down into four major groupings:

1) Adding monitoring and control functionalities to an individual device.

Consumers can use a smartphone, tablet, or PC like a remote control to control a device while in or away from the home. They can check whether a device is on/off, up/down, locked/unlocked, and the system will notify them when a device state is changed. Users can program the device to operate automatically based on pre-determined times or events, and with autopilot-like features enabled, the device can make decisions on the owner’s behalf in order to reduce operating cost.

2) Expanding the functions of an individual device, adding new features and capabilities

A device can expand e-commerce options by providing a method for consumers to order accessories and access service or request warranty support using remote diagnostic capabilities. The manufacturer or provider can maintain and enhance their relationships with customers by sending alerts and notifications as well as by providing new feature downloads. They can also get invaluable feedback via a two-way connection on how often or intensively a product is used, information which can be used to create additional options and enhance the overall process in which a product is used.

In the first two categories, functionality adds value to an individual end device. Manufacturers have the opportunity to create differentiating features for their products, just as iTunes added value to the iPod.

3) Enabling monitoring and control of multiple devices in the home via a single user interface and an interoperable group of devices

In this instance, consumers use a smartphone or tablet like a remote control to control multiple devices simultaneously while in the home or away from the home. They could use a smartphone to check the status of these devices in the home and be notified of any changes. This group of devices can also be programmed to work automatically, based on certain times, events, or preferences, leading to more automated tasks based on learning household behavior. For example, when leaving home, consumers can touch a single button to arm their security system, lock the doors, turn off the lights, and set back the thermostat.

4) Adding new capabilities to a group of devices

In this instance, companies can go beyond accessories or upgrades to recommend other products that, when paired with products already owned, further enhance the value of all within the network. Two-way communication with the users concerns system-level operations and improvements. The users can provide feedback, and the companies can work to enhance the overall environment in which a product is used and how its state affects others in the group. For example, the system can notify the user that the air conditioner is running with the windows open.

Initially, success will be defined by simply having the first group of features, those that provide monitoring and control of individual products. Over time, as the competitive landscape for connectivity related features evolves, success will be judged on value creation through groups of devices and how they interact with and complement one another.

Ensuring interoperability will also open new revenue streams. For example, retailers, service providers, and utilities are all entering the U.S. market for energy management. As a result, annual subscription revenues from these systems will exceed $180 million by 2015, increasing demand for devices that can share energy information and respond to environmental conditions in the home.

The successful devices will be those that can thrive in a multidevice environment.