How to succeed in the connected home market – 10 key principles for IOT success

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By Jon Carter, UK Head of Business Development – Connected Home, Deutsche Telekom.

Who is going to win in the race to capture market share in the connected home market, amid the overall excitement about the Internet of Things? The connected home is only now taking shape and there is ample opportunity and time for the IT and electronics sectors to stake out territory in a market that will be worth more than 15 billion Euros in Europe by 2019[1]. But there are several critical decisions to be made for enterprises in this burgeoning market.

It’s certainly the case that the large global players will be in the frame – Amazon, Apple and Google have already staked out their claim in various aspects of the connected home, and they are likely to remain prominent players over the next decade. In spite of the power these brands wield, their ability to dominate the connected home market is not at all certain.

Controlling the market for a portable computing platform – such as Apple does with iOS for the iPhone and iPad – is a lot more straightforward than doing the same for the connected home, where there will be a huge number of devices, applications and connectivity options, as well as many categories of company involved in the value chain.

We believe that the connected home market is too diverse and will change too rapidly to be dominated by a select few. The real challenge is to find and secure traction in this market – and this ten point checklist from Deutsche Telekom’s new market insight “How to create growth from the connected home” outlines the major opportunities to do so:

1. Much depends on setting the right strategy. Some players will be facing competition from other companies offering connected home products as added value services, so responding appropriately could be key for survival. Especially as there is also a danger of being cut out of the value chain altogether if a sector becomes marginalized – so called ‘disintermediation’. This threat faces retailers, for example, which could be bypassed by device makers selling direct to consumers and service companies.

2. Whatever the strategy, it is critical to focus on creating a compelling customer proposition – one that meets a clear need. This can be driven and developed through close working with early adopters.

3. There are many ways of entering the market but an innovative business model is likely to be increasingly important, no matter what the underlying approach. An underpinning theme for all players is the launch of services for the connected home rather than traditional product-based retailing – but the value to consumers of buying into say subscription-based appliance monitoring schemes for their homes will need much crafting and probably partnerships with other key brands, affinity programmes and service bundles.

4. The home market also demands that companies provide a great customer experience from the outset – products and services should be ‘plug and play’ and new ones easily integrated.

5. It is essential to build a brand that people trust. Connecting into the ‘nerve center’ of people’s home lives through their internet routers ¬ and all this entails in terms of security, occupancy and lifestyle information – requires the highest degree of trust and data protection. Providers should consider a dedicated brand for their connected home offer to build this trust and their proposition to consumers.

6. There will be opportunity to use both existing and new routes to market with the connected home. Any proposition should be combined with current sales channels if possible – but there are opportunities to try out new online/offline sales approaches. Installation provides a key point for up-selling services.

7. When moving into this new sector, the set-up of a dedicated connected home unit is recommended. It will comprise of senior, visionary personnel in charge, and additional expertise in areas where there may be a rapid learning curve, such as in home application design, data analytics and protection techniques.

8. Then there’s the platform. It is not feasible for smaller companies to make any headway in this market without joining a platform that offers a standards-based system for connecting devices. This system need to be able to scale up to potentially millions of homes and, above all, provide a way to build innovative services that customers value and recognize from their experiences with established computing and TV platforms. The alternative to general-purpose and proprietary platforms is one built on open source principles. For example, Deutsche Telekom’s Connected Home platform supports Eclipse SmartHome, the flexible framework for the smart home.

9. One of the key advantages of an open platform is access to a large developer community which is producing applications and integration for a diverse number of devices and systems. Joining this ecosystem means being able to rapidly create new home services via a developer community that offers much more flexibility than in closed, proprietary platforms.

10. Huge amounts of data will be generated by connected devices. Data analytics promises to bring new value about consumer needs – but also raises major concerns about security and privacy. Providers of connected home services need expertise and partnerships with best-of-breed specialists in data management.

A final word on platforms. This isn’t about not working with devices supported by Apple and Google – quite the contrary. However, as Deutsche Telekom believes, the only way to integrate with, and future-proof against, the many incompatible devices and standards springing up in this market is to be part of a collaborative, open ecosystem. A neutral ‘language’ greatly cuts the chances of disappearing into a proprietary dead end and provides customers with the reassurance that they are buying into a platform of choice.

[1] Source: Strategy Analytics

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