Professional Documents
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industries.
January 2013
Smart Home:
Hope
or hype?
January 2013
Nicolas Clinckx
Partner
nicolas.clinckx@greenwich-consulting.com
+33 (0) 6 64 73 56 41
Yann Baffalio
Senior Manager
yann.baffalio@greenwich-consulting.com
Axel Duplan
Manager
axel.duplan@greenwich-consulting.com
Executive Summary
The Smart Home market is based on home automation and covers four distinct areas:
3. Energy efficiency: automatic control and regulation of all utilities (water, electricity, gas)
For this report, we are mainly interested in energy efficiency services and comfort solutions.
Long proclaimed as the future housing revolution in the 90s, it is clear that home automation failed
to capture the imagination of the general public; it was hampered by technological complexity,
the prohibitive cost of devices dedicated primarily to comfort use, and low perceived added value
for customers.
The rise of environmental issues, encouraged by the environmental awareness movement and
the sustained increase in fossil energy prices, has led to a revival of the Smart Home concept.
Benjamin Ferrand
Senior Consultant
benjamin.ferrand@greenwich-consulting.com
Although today the penetration of Smart Home commercial offers remains confidential, several
factors are positively influencing the adoption of these solutions:
T
he maturity of access technologies and the simplification of interfaces; even if the
technological silos between different home environments still differ widely, the development
of technologies and standardized protocols inherited from the telecom and computing
worlds is reducing this complexity. In addition, the proliferation of tablets and smartphones
at homes creates new multi-screen uses, allowing the simplification of client interfaces and
lowering equipment costs (not strictly dedicated to home automation usage but integrated
with existing devices)
T
he need to reduce home energy consumption: the low return on investment of current
energy efficiency solutions (between 12 and 20% reduction on the total bill depending on
the quality of the consumption measurement) has not encouraged provision until recently.
The likely increase in energy prices and the impact of the economic crisis, however, should
improve the perceived value of these solutions and the quick return on investment for
customers in the medium term
R
egulatory initiatives encouraging the development of the Smart Home market: the
European commission has set a 80% target of European homes to be equipped with smart
meters by 2020
The proliferation of initiatives and partnerships around the Smart Home, involving major
players in the utilities, telecommunications and IT integrators
Thoughts, Smart Home: Hope or Hype ?
Alstom Grid
Direct Energie
General Electric
Lyonnaise des Eaux
Somfy
Webhelp
Although today, an interest from the B2C sector can be seen as beneficial to B2B, the widespread
adoption of such technologies remains uncertain and conditioned by the removal of various obstacles:
Strong consumer inertia regarding the increase in energy costs and a lack of visibility
of Smart Home solutions: for example, Americans would be willing to undergo an
increase in their bills of $128 per month before considering the option of energy efficiency
improvement in their homes (Energy Pulse 2011)
Consumer distrust regarding issues of collecting and processing private energy
consumption data, which hampers, especially in France, the deployment of smart meters
such as Linky
Despite the obstacles outlined, Smart Home players have to meet two major challenges in order
to stimulate the market and develop attractive offers:
1. Adjust the value proposition based on the expectations and the maturity of customers
across user lifetimes
2. Build a viable business model and clarify the procedures of value repartition between
stakeholders
Five models exist among Smart Home players today: stand-alone equipment, stand-alone
service, Fremium service, equipment subsidized by the B2C service or by a third B2B player. The
trend is to develop the equipment subsidy model by the service.
Due to their control of the triptych device / software / service, and their central presence in the
home via internet box and mobile phones, we believe that telecom operators hold key assets to
structure the Smart Home ecosystem around their connectivity platforms. They are also equipped
to address the key issues of the value proposition and manage Smart Home customers at a lower
cost. However, their difficulties in integrating and leading the whole value chain by themselves
force them to develop the ecosystem by implementing logical partnerships: large operators like
AT&T or Deutsche Telekom for example have created standardized platforms open to partners
from other sectors (electricians, manufacturers, pure players).
Based on our experience in working with complex ecosystems which involves a multiplicity of
stakeholders like NFC, we recommend a three stage approach to implement a Smart home strategy
Build an aspirational
segmentation
Investigate
innovative services
Portfolio of initiatives
Features of current solutions
Q
ualitative and quantitative
studies
Successful strategy execution must be guided by a prioritising approach of the clients value
proposition:
The demand is currently greater from B2B customers compared to residential customers, especially
for energy-intensive industry types of businesses (data centers, process or manufacturing
industry...) that are constantly looking for levers to optimize their costs positions
Corollary of the target retained, the services presenting the best return on investment are those
that will be adopted most widely
A minimal partnership with a Utilities player seems necessary, since telecom operators will not
be able to propose by themselvers all the key services for companies
Thoughts, Smart Home: Hope or Hype ?
3. Regulatory initiatives
Construction standards include maximum limits for energy consumption several recent standards and
labels (BBC standard, RT2012 in France) have set strict consumption targets (50kWh / m / year). The
RT2020 is geared towards the development of constructions with positive energy.
Likewise, governments are under pressure to legislate the housing industry to meet their Kyoto Protocol
commitments. The European declination, the Climate and Energy Package, sets a target of 20%
improvement in energy efficiency (compared to 1990) and 20% share of renewable energies in energy
mix. To fulfill these commitments, governments are setting up public aids encouraging owners to equip
themselves.
These goals cannot be achieved passively (using building materials/ optimised architectures). The use
of active technologies instead becomes necessary to control and optimise the use of resources for
housing.
EU regulation requires the deployment of smart meters: the target of 80% of European households
equipped by 2020 was recently confirmed by the European Commission which estimates the
necessary investments to be around 140 billion euros.
3 types of companies in these silos will compete to get hold of the customer relationship by positioning
themselves as the main intermediary for Smart Home:
Utilities companies access consumers through their smart meters and consumption sensors
Players in the world of Multimedia develop dedicated devices (Xbox 360, Apple TV ...) which
often have advanced connectivity features
For the moment, the logic of industrial partnership is limited and unclear for the consumer.
Multimedia
Utilities
(multi-fluids)
Confort,
Security &
Health
Primary
technologies
Wifi
DLNA
Radio waves
Zigbee IP
Bluetooth
Widi
Wifi
Zwave
Ethernet
Airplay
Homeplug
Femtocell
Miracast
Bluetooth
Low Energy
Dash7
OPEN ADR
EnoCean
SEP 2.0
6LOWPAN
Examples
of players
Horizontal
integration
through
partnership
Primary bill
Customer
needs
Verbatims
Install
and train
Use
Protect
Replace
Sustainability and
interoperability
Simplicity
Reliability
Management
of obsolescence
What do I do if it
breaks down?
I already bought
something of this kind
and I never used it
31%
30%
29%
28%
26%
17%
13%
Spain
Australia
Germany
UK
USA
France
Japan
On the other hand, there is a strong consumer inertia vis--vis the increase in their electricity bill:
Americans are willing to undergo an increase in their energy bill by $128 per month before considering
investing to enhance energy efficiency in their homes (either passively catering, isolation, or actively
via Smart Home type of solutions).
Greenwich Institute estimates based on demand and the Smart Home services price elasticity, a
french penetration rate of 20.3% for Smart Home offers by 2020.
28,1%
20,3%
14,0%
9,3%
5,8%
0,0%
2013
0,7%
1,8%
3,4%
Smart Home Penetration
2014
2015
2016
2017
2018
2019
2020
2021
2022
If the business development of Smart Home services seems limited in the short term, the global
market (including Smart Metering and sensors markets) would still represent $44 billion worldwide
in 2016 (ABI / Berg Insight, May 2012).
Operators
Telecom
Utilities
Facility
management
Metering /
Actuators
Sales
ARPU
Churn
OPEX
Capex
services providers
Electronics Construction
device
No opportunity
Consulting
/ IT
Assistance
/ Insurance Customer
/ Security Relationship
Some opportunities
Strong opportunities
10
11
Five business models exist today among Smart Home players. The main
trend is the development of a model of service-subsidized equipment
A Stand-alone equipment (e.g. Blu-Ray, The Energy Detective sensor )
B Stand-alone service (e.g. SIM only phone package, power supply)
C Freemium service:
C1 Without equipment subsidy (e.g. Somfy home automation)
C2 With equipment subsidy (e.g. Fox alarms)
C3 Without equipment (e.g. Powermeter by Google)
D Equipment subsidized by a B2C paid service (e.g. ISP Package)
E Equipment subsidized by a third B2B / B2C free service (e.g. Voltalis)
Service
Free
Paid
C1
Free
Not
included
Equipment
Paid
Not included
C2
C3
Multimedia
Security
& health
new
12
13
Zigbee or Wifi
synchronization between
the meter and the ISP Box
IP Network
Management of existing
electrical network
Smart Home Equipment
14
Broadband
Very high
broadband
Client
acquisition cost
250
500
130
130
20 /month
25 /month
ROI
ISP client smarthome
19 months
25 months
(+ 6,5 months
standard client)
(+ 5 months
standard client)
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2. Prioritising equipment
Consideration of the customer added value provided by the features with respect to the cost of
equipment needed to supply these features
Prioritisation of the value of the Stand-alone equipment, the equipment provided with the
functionality and the devices providing this functionality if purchased separately
Consideration of the equipment lifetime in the economic analysis
3. Prioritising fluids
Prioritisation of fluids (utilities) to be added into the package offered to the customer
Consideration of expected developments in the value perceived by the customer around the fluid:
volatility of unit price, total value perceived by the customer, target supply (house/ apartment ...)
4. Prioritising services
Prioritisation of services to be included in the service proposal made to the customer:
Consumption monitoring and management/ optimisation
Acessibility of the interface and display devices
Customer journey and support
Service settings (alert thresholds, modalities of alert, control functionalities,...)
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Based on our experience in working with complex ecosystems which involves multiplicity of
stakeholders like NFC, we recommend a three stage approach as shown in figure 10
Build an aspirational
segmentation
Investigate
innovative services
Portfolio of initiatives
Features of current solutions
18
Today, players from different horizons position themselves on this market but offer solutions that only partially meet customer expectations. To
propose a value-added offer, companies need to implement a more segmented approach based on customer types, by investigating their deeper
needs and better understanding their willingness to pay for such services
with regard to the expected benefits
Nicolas Clinckx, Partner - Greenwich Consulting
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thoughts,
The critical challenges raised by our
clients are continuously evolving,
requiring a specific and comprehensive
approach.
Greenwich Consulting thoughts address
structural issues that are reshaping the
telecommunications, media and utilities
markets.
All our latest publications are available
at www.greenwich-consulting.com
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