|Issue:||Europe I 2016|
|Topic:||How to create growth from the connected home|
|Title:||UK Head of Business Development – Connected Home|
Jon Carter is the UK Head of Business Development – Connected Home, Deutsche Telekom AG
Jon leads UK Business Development for Deutsche Telekom’s white label and open connected home platform.
Successfully launched in Germany in late 2013, Deutsche Telekom’s open platform is now available internationally, with an initial focus on Europe, and particularly the UK. Deutsche Telekom’s platform has been designed to move the industry beyond simple control of connected devices, to create a foundation for new revenue generating services.
Jon’s focus is on establishing partnerships with telcos, utilities, insurers and retailers, as well as third party platform providers and OEMs to enable the realization of innovative new models and revenue generating services.
Jon has worked in and around the connected home space since the early 2000s, and has a deep knowledge of the European market, and in particular what will finally drive growth in this market.
Many firms still need to grasp the impact that the connected home will have on them. Over the next five years, the connected home will affect multiple industries that provide products or services to consumers in their home. For many firms, the implications will be dramatic. There will be further commoditisation for many players, disintermediation of others, and dramatic changes in the relationship between brands, and routes to market.
In a new market analysis report, 'How to create growth from the connected home’, Deutsche Telekom sets out the impact that connected home technologies will have across multiple different industries.
The report details a number of different areas from energy management, to security and home automation, which could be exploited by a range of players – telcos, utilities, retailers, insurers, warranty providers, home assistance providers, and appliance and consumer hardware manufacturers. In total, the report highlights research by Strategy Analytics that the Western European connected home market will be worth up to €12 billion annually by 2019, with almost 50 million homes benefiting from such services.
A great deal of this revenue will be due to new growth, but much of the change in the coming Internet of Things (IoT) revolution will be about value shifting from one sector to another. One of the many insights in the report is that companies will need to move from selling mainly consumer hardware to a services-based approach, which will impact existing business and operating models, margins and routes to market.
The report also makes much of the very real threat that much of the value that will be created in this new market might be taken by players from outside Europe, if the industry here does not 'step up to the plate’ and take a proactive stance. It claims that global giants have their sights firmly set on European markets, from connectivity and energy, to insurance and warranty. They will not wait for European players to finalise their strategies and product development plans.
It asserts that many firms still need to grasp the impact that the connected home will have on them. Over the next five years, the connected home will affect multiple industries that provide products or services to consumers in their home. For many firms, the implications will be dramatic. There will be further commoditisation for many players, disintermediation of others, and dramatic changes in the relationship between brands, and routes to market.
The report sets out how IoT reaches into the connected home and how it will transform the way we live both in and out of our homes: from micro-ordering of consumables, to providing greater peace of mind through safety, security and insurance solutions, to saving energy and managing home appliances.
Industry-wide platforms and standards are currently lacking, and Deutsche Telekom believes that many companies will not survive without partnering. Proprietary and closed approaches, or 'gated communities’, won’t do: we need to open up a high level of collaboration. In the long run, no company can establish the connected home alone – those who think that they can will not succeed.
Let’s look at three of the key industries with a compelling interest in the connected home.
Strategies for utilities
Home energy management services (HEMS) enable utilities to create a positive interaction with their customers through the energy visualisation, monitoring and control of energy use. Smart thermostats and data from other connected home appliances, such as smart meters and smart home systems, represent a compelling opportunity for utilities to help consumers better manage their energy costs and improve tenure, whilst exploiting new and innovative models.
The report examines how utilities can increase adoption of smart thermostats and related smart devices through innovative pricing and retention strategies with existing customers, and also develop new channels to market, such as by setting up affinity partnerships with insurers and retailers to drive growth.
With closer integration between energy demand in the home and energy generation, it is clear that consumers can save money, be more energy efficient and so combat climate change. Home owners can benefit from new, flexible tariff structures that enable them to pay less for energy when there is excess supply and only run energy hungry appliances, such as washing machines or tumble dryers, when the cost is low.
The report also recommends that utilities consider emulating telcos by offering such appliances on a subsidised basis, employing demand disaggregation smart meters and demand side management to provide new energy tariffs. This will provide greater differentiation for utilities, as well as new revenues and much improved customer loyalty. The risk for utilities if they do not adopt such an approach is further commoditisation, especially with the introduction of legislation in some countries that will mandate same-day switching to other providers.
The report advises telcos to consider establishing ecosystems of third party manufacturers and service providers to create greater differentiation and so boost customer loyalty – leveraging their ownership of the broadband router. It also outlines opportunities for telcos to enter new markets, such as home security.
The connected home is a natural extension of the telcos’ quad play offerings. For integrated operators that provide customers with a broadband router or TV set-top box, it is an obvious next step. In the near future, operators won’t just be providing Wi-Fi connectivity, so customers can connect their PCs, tablets, smart TVs and smart phones, but will also be connecting the majority of their home devices and domestic appliances to the internet.
Deutsche Telekom argues that there is a particular urgency for insurers to act, as it claims that there is evidence that a number of players in adjacent markets are looking to disintermediate them, deploying more agile business models and innovative solutions that turn existing actuarial models on their head.
The most frequent claims are the same across much of the world – escape of water, smoke or fire damage, and burglary. When technologies allow a home to be monitored, some of these traumatic events can either be prevented, or alerts can be issued to ensure the relevant individuals are made aware before there is any serious issue. By far the biggest risk for insurers are water leaks and the related damage, and innovations in water flow meters coupled with analytics software 'in the cloud’ offer a potential to lessen the risk, or ensure no issue ever occurs.
The connected home will also be able to provide insurers with more reliable data for risk management, and more real-time data.
Key to any firm’s success in this market is understanding the needs of the customer. What are their day to day issues and pain points, and how can these be met by new forms of connectivity? To date, this market has been too focused on technology for technology's sake. Flexible business models and payment structures will be critical for the broadest appeal, with the aim of providing consumers with comfort, convenience and peace of mind.
There also needs to be greater willingness to work with partners to grow and shape the future of this market. The biggest winners will be those that are prepared to innovate, take risks, and become leaders in a new community of open, connected home ecosystems.
Open for business: Deutsche Telekom´s Connected Home Platform
One of the greatest challenges facing firms seeking to enter the connected home market is the lack of common standards and architectures for connectivity itself, as well as a lack of openness in terms of the APIs between platforms. Today, many proprietary and incompatible wireless protocols exist, which is a major obstacle to mass market adoption of connected home services. To get past this, Deutsche Telekom has built an open platform so that end-users and partners can rapidly integrate connected devices and create new services.
Beyond creating a truly open and interoperable connected home platform that can be utilized by a wide range of industry players will bring faster time-to-market, Deutsche Telekom is also leveraging the Eclipse SmartHome/openHAB initiative open source developer community to further maintain this openness. This open source software is a core component of the platform architecture.
With an open ecosystem, partners can play to their core strengths, benefit from multiple synergies, discover new routes to market, deepen consumers’ loyalty to their brand, and create new growth for their business.
Deutsche Telekom now has more than 35 partners integrated into the platform, including Philips, Osram, Miele, eQ-3, Sonos, Samsung, Huawei, Netamo, Bosch Junkers, DOM, Provedo, Urmet, Kärcher and Assa Abloy. In Germany and Austria, Deutsche Telekom has also partnered with utilities such as EnBW, Vattenfall, Rheinenergie, Entega and eww Gruppe to provide a range of home energy management services designed to meet the needs of consumers and the regulatory environment.
Now is the time to join forces
Now is the time to join forces, combine industry-specific knowhow and drive the connected home forward to realize new growth for everyone. The key to success for the future is to maintain an open, agile and flexible course. Only then will we – as a broad and eclectic range of businesses – be able to drive the connected home market forward and realize that long desired growth.