Smart Home Platform Innovator Strategies

Early in 2012, I completed a study for the GSM Association (GSMA) on the topic of new business models that would be linked to innovative, connected-device applications. This study laid out a sequence of value propositions, as companies seek to move up the value chain. In order to bring these new value propositions to market, new and innovative business models would need to be designed.

In the early days of M2M, the value proposition was all about connectivity. This would make stand-alone devices ‘smart’ and the business challenge was largely about how connectivity could be ‘embedded’ inexpensively. Later on, the market evolved as companies started to care about deployment, reliability and the user-experience issues. This ushered in a new value proposition around managed connectivity and several specialist platform providers have emerged in their own right or as partners to mobile operators.

The final two sources of value that were identified included the delivery of ‘platform innovator’ and ‘stewardship’ services. The connected devices market has been moving in these directions with three companies – Arrayent, Deutsche Telekom’s Qivicon and Zonoff – investing their energies in the platforms arena.

Business Models Road-map for Connected Devices and Services

M2M connectivity is typically considered to be a low revenue, but potentially high margin, business if well executed. It can be a perfectly adequate strategy for connectivity providers that aim to be efficient, low-cost data carriers.

Most companies, however, are interested in offering higher value services to offset the competitive pressures that erode pricing. In the connected devices arena, the following illustration demonstrates the likely evolution of company strategies up the value stack, beginning with basic- and managed-connectivity.

Stewardship services would apply in situations where a service provider, such as a mobile operator, has responsibility for providing a variety of communications and non-communications services to an end user. A simple illustration might involve a mobile operator that has visibility of a homeowner’s energy consumption patterns and uses that data to negotiate a better utility service contract for the homeowner, from one year to the next.

In the case of the Platform Innovator model, a mobile operator could establish an open platform that allows a variety of devices, from different manufacturers, to be connected to manufacturer back-end systems. In the case of a smart home, the platform would allow different household appliances to be reached via the Internet and for the data from these appliances to be supplied to the appliance vendors as a means of supporting a variety of different applications.

A refrigerator manufacturer, for example, might benefit from such a platform to provide alerts to the homeowner (e.g. unusual patterns of use or energy consumption) or to provide reminders about when it is time to replace the water filter. The benefit of the open platform is that it avoids each appliance vendor having to build and deploy its own smart-connectivity solution. For the homeowner, there is only a need to deal with a single interface and not to have to manage a different remote control application for each and every appliance.

The value migration illustration shows a possible transition between Stewardship and Platform Innovator stages. This is because there is a degree of commonality with the underlying capabilities necessary to offer the respective services. A Stewardship strategy could ultimately lead to a Platform Innovator one and vice versa.

To date, there has been little evidence of companies progressing in the area of Stewardship Services. The Platform Innovator path, however, is being tested by several companies, three of which are profiled below.

Comparison of Smart-home Platform Innovators

Each of these initiatives follows a common pattern in terms of the component offerings that create value. The basic building blocks consist of: a home-hub; cloud-based device- and application-management services; and, support for PC/Smartphone/Tablet Apps to handle user interaction with their home environment and connected devices.

There is recognition in each of the above initiatives as to the limitations of a pure-technology proposition. In other words, the platform providers have to make an effort to crystallize the smart home market by bringing on-board appliance vendors and also by orchestrating different parts of the eco-system (developer community, design guidance and tools etc.). In particular, it is important to assist appliance vendors and service providers, which typically lack the necessary communications sector expertise, to develop innovative applications.

• For example, in addition to application development support services, Arrayent, provides weather information. It also provides access to utility-company, demand-response applications. These capabilities can inspire more complex applications to differentiate from ‘vanilla’ forms of remote monitoring and control.

• In the case of Qivicon, it plans to support a community for independent developers as well as a store-front portal which can only help to drive critical mass and lower the barriers to adoption.

The genesis of each of the three initiatives is also different – Arrayent (platform), Qivicon (wide-area communications to homes) and Zonoff (wireless technology portfolio) – as are the strategies and business models being deployed.

What these developments do show, however, is that new business opportunities are opening up as the connected devices market matures. This provides considerable food for thought to those mobile operators that are initiating Connected Home initiatives. It is also clear that these types of initiative depend on strategic and corporate commitment. They also have a lead time measured in years, not months, as evidenced by the progress of AT&T’s Digital Life and Deutsche Telekom’s Qivicon efforts.

One closing observation is that, for now, the most prominent platform innovators are centered in the home market segment. As I have previously written here, however, there are other promising opportunities for service providers with broader ambitions and a belief in other segments of the Internet of Things market.