Many people recognize that the IoT is not actually new. For years, industries have become increasingly sophisticated in the way they collect and use data from systems and devices.
In the B2B space, the IoT market is already well advanced. The majority of new commercial buildings are ‘smart’; systems are connected to make buildings safer, more energy efficient, easier to manage and the cost of operation is significantly reduced. Even in agriculture, IoT is well advanced. John Deere uses connectivity on their fleet of combined harvesters to remotely monitor and maintain machinery as well as provide real-time analysis of the quality of the grain in each part of the field and use the data to create a tailored plan for fertilizer.
However, the B2C channels are lagging when it comes to exploiting IoT. They are struggling to adapt to the tidal wave of change as the technology used so successfully in commercial IoT applications leaks into the mass consumer market. This is disappointing because the infrastructure for growth is in place; broadband and smartphones are ubiquitous, the technology is now simple and affordable, and the value propositions are often compelling.
Startups have stirred up the consumer space but the reality is that the big channels such as retail, service providers, utilities, insurance companies and health have yet to see real mass market success. Many channels have been slow to see the opportunity, and fog surrounding standards and interoperability are often quoted as reasons for being hesitant with investment. This is affecting the speed of growth which is disappointing because, in reality, the real issue affecting the proliferation of smart home products in the consumer space is not interoperability or standards, it’s the business models.
The initial wave of innovation in the smart home space has been what could be considered Point to Point (P2P) devices; a single device managed through an app. Nest is the most obvious example. They used IoT and connectivity to reinvent the thermostat and rapidly stole market share from the traditional manufacturers. They secured a mind-boggling exit and instantly created a business model that many other startups are trying to emulate.
Unfortunately, there is a fundamental flaw in the P2P business model and the recent rumblings with Nest is proof that the business model has its limitations. In a connected world, consumers do not want to stand on the doorstep and open the door with one app, control the thermostat with another, trigger light switches with another, and so on.
Consumer-facing industries need to recognize that the killer app in the smart home space is a single app. Consumers want an app through which they can monitor and control all the devices in the home to receive a wider bundle of value-added services from channel partners. In the B2B IoT applications, industries worked together to deliver comprehensive system solutions to companies like John Deere and farmers. Unfortunately, in the consumer space, none of the traditional players are organized or structured to act as aggregators. Indeed, in many cases, they are competitors and want to herd consumers in a particular direction with their preferred business models.
Who will be the consumer IoT aggregator?
So who will step up to the plate and act as an aggregator to deliver a truly connected experience to consumers?
Service providers such as Comcast and others were the first to try. They created ‘curated’ smart home systems by sourcing a set of devices to give customers a broader smart home experience with a range of products and services—all managed through a single app. Unfortunately, many consumers are wary of monthly fees and long term commitment typically secured from the traditional security monitoring is attractive to service providers. Apple, Google, and Microsoft are pressing forward with their own agendas but they are largely focused on delivering infrastructure solutions so none of them are really offering to act as aggregators for the consumer.
Some major players in consumer channels are making bets and stepping up to act as aggregators for the customer. Retailers such as Lowe’s and Amazon offer more ‘open’ platforms that support a broader set of devices and they are working to bundle value-added services using freemium business models. These ‘open’ DIY systems are starting to gain traction and they could ultimately displace P2P and overtake curated.
However, there are new channels that could also be big winners. Utilities are a sleeping giant in the smart home, but the dynamics of their market suggest they are unlikely to ever wake up to the opportunity. Insurance companies are more interesting. They are suddenly showing strong interest in bundling smart home solutions with their policies and they could become a strong channel. The opportunity to mitigate risk, improve consumer engagement, offer new value-added services to generate new revenues are a significant motivator as their markets become more competitive and revenues are squeezed.
Clearly, the jury is out on the winners in the IoT B2C channels, but the opportunity is huge so those who find the right business model could ultimately be the biggest winners in IoT.
The author is Senior Vice President of Business Development for ROC-Connect