Deutsche Telekom’s new market analysis, ‘How to create growth from the connected home’, sets out the principal opportunities and business models for this burgeoning sector.
The report details several areas of opportunity, such as energy management and home automation, that could be exploited by a range of players – telecoms operators, utilities, retailers, insurers, warranty providers, home assistance providers, and appliance and consumer hardware manufacturers. In total, it finds that the Western European connected home market will be worth up to €12 billion annually by 2019, covering almost 50 million homes, says, Holger Knoepke, VP – Connected Home, Deutsche Telekom.
A great deal of this revenue will be from market 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 approach, which will impact business models, margins and routes to market.
However, there is a real threat of disintermediation. Global giants have their sights firmly set on European markets, from insurance to energy and warranty. They will not wait for companies to finalise their strategies and product development plans.
In terms of interoperability, industry-wide platforms and standards are currently non-existent, and Deutsche Telekom believes that many companies will not survive without partnering. Proprietary and closed approaches, or ‘gated communities’, won’t succeed: we need to open up a high level of collaboration. In the long run, no company can establish the connected home alone.
Here let us examine two 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 visualisation, monitoring and control of energy use. Smart thermostats and data from other connected home technologies, such as smart energy meters and home security systems, represent a compelling opportunity for utilities to help consumers better manage their energy costs, while exploiting new commercial models.
The report examines how utilities can increase adoption of smart thermostats through smart pricing and retention strategies with existing customers, and also develop new channels to market, such as by setting up affinity partnerships with insurers to drive growth.
With closer integration between energy demand in the home and energy generation, we can save money, be more energy efficient and so combat climate change. Home owners could 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 recommends that utilities consider emulating telecoms operators by offering appliances on a subsidised basis, employing demand disaggregation technology and smart meters to provide flat rate energy charges. This will provide greater differentiation for utilities, and new revenues and better customer loyalty. The risk for utilities is to remain as a commodity provider, especially with the introduction of legislation in some countries that will mandate same-day switching to other providers.
Insurer incentives
There is a particular urgency for insurance companies to act, as players in adjacent markets could potentially take a greater role in home insurance policies and bring more agile business models to the market.
The connected home will provide insurers with more reliable data for risk management, and more real-time data. The most frequent claims are the same across much of the world – water, smoke or fire damage, and burglary. When technologies monitor a home, some of these traumatic events can be identified and prevented. For instance, innovations in water flow meters coupled with analytic software ‘in the cloud’ have the potential to reduce risks, such as a collapsed ceiling as a result of a leak.
Open for business: Deutsche Telekom´s Connected Home Platform
One of the greatest challenges facing companies seeking to enter the connected home market is the lack of common standards and architectures for connectivity itself. Today, many proprietary and incompatible wireless protocols exist, which is a major obstacle to mass market adoption of connected home services. To conquer this, Deutsche Telekom has built an open platform enabling end-users and partners to rapidly integrate connected devices and create new services.
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’s open connected home platform was launched in Germany under the name QIVICON in late 2013. Now available internationally as a white label solution, the platform supports the Eclipse SmartHome/openHAB initiative, and open source software is a core component of its architecture.
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 realise new growth for everyone. More than 35 partners use Deutsche Telekom’s Connected Home platform, including Philips, Osram, Miele, Sonos and Samsung. Deutsche Telekom understands that now is the time to invest in the connected home – the growth opportunity is real and presents a significant opportunity for a diverse range of organisations. 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 realise that long desired growth.
The author of this blog is Holger Knoepke, VP – Connected Home, Deutsche Telekom.
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