Updated: Mar 21
Internet connected devices often enable services ecosystems whose value can eclipse the device values, as demonstrated by the smart phone ecosystems. This can also lead to commoditization, as demonstrated by connected TVs. How can home appliances escape this commoditization?
The purpose of connecting smart home devices to the Internet is to enable services using the devices. Once connected, value of the service ecosystems can eclipse the value of the devices, as we see with smart phones and smart speakers. At what point does this effect kick in with smart home devices? This question may be less important for simple devices such as garage door openers or light switches. With major household appliances, though, where many services are brand agnostic, differentiation in a service ecosystem is a vital issue for appliance manufacturers.
Despite continuing attempts, Internet-connected major appliances have seen little traction with consumers. A review of the landscape suggests that the service ecosystem must complement and augment the appliance function to create true value for consumers, to alleviate work around household tasks.
This blog explores the interaction of connected appliances with their service ecosystems and suggests a path to true innovation.
Getting value from connected appliances
The value manufacturers derive when consumers connect their home appliances is pretty clear. The data they collect from the appliances adds value across the entire appliance life cycle. They obtain a direct link to their customers, can conduct remote diagnostics, reduce call center and warranty costs, learn when to offer a replacement, and use the data to design the next appliance generation.
However, this value can be harvested only if consumers actually connect their appliances and generate data. In informal conversations, manufacturers concede that few consumers connect their appliances, and fewer use the connected functions regularly.
Consumers don’t appear to see much value from connecting their appliances, despite many attempts to create useful features. Appliances such as refrigerators, ranges, clothes washers and dryers serve complex, highly variable household tasks that are deeply embedded in people’s daily routines. The tasks involve manual work, often require multiple steps, and may involve multiple appliances.
Consumers’ benefits from appliance connections so far are limited. A common mobile device app to view the status and control all of a brand’s appliances has become standard. This benefits consumers only to the degree that their appliances come from the same brand. Also, using an Internet connection, consumers can
· … get advice on how to use their appliances through online access to manuals;
· … get usage advice, such as recipes for their cooking appliances;
· … connect voice assistants to control some of the appliance functions;
· … automate the delivery of consumables, such as laundry detergent.
However, none of those benefits has found wide appeal. True innovation must address entire tasks, integrating the appliances and the associated services.
Consumer appliances interact with ecosystems
Creating true value for consumers requires focus on household tasks that the appliances are expected to serve, not on the appliances themselves or their features. For cooking appliances this can mean providing healthy food, less effort and less time to prepare a meal, and avoiding mistakes. It can also mean giving the cook the opportunity to be more adventurous, trying out new tastes with limited risk. For refrigerators this can mean reducing waste, keeping food fresh longer, and reducing the shopping effort. For laundry appliances it can mean reducing the effort associated with clothes care, reducing wear of clothes, and reducing water and energy waste.
Some of these goals may be accomplished by appliance features. Many of those goals, however, can be accomplished only by connecting to an ecosystem of services. Many of those services lie outside the core competency of the appliance manufacturers. The use of kitchen appliances can be enhanced by recipe services, shopping services, remote information applications, energy monitoring, and similar. Laundry tasks can be eased by detergent supplies, energy management.
A great example of raising the focus from devices onto household tasks is Home Connect, a rich ecosystem developed by B/S/H. While the platform is promising, the full commercial impact has yet to be achieved.
Smart home services are brand-agnostic
The majority of these services are brand agnostic and can be used in many contexts. This makes it difficult for appliance manufacturers to create true differentiation through a brand focused ecosystem. It will be difficult for an appliance brand to “own” a household task such as cooking, shopping, or laundry. Most people have appliances from multiple brands.
While there are attempts to build cross-brand smart home ecosystems, the market inroads up to now are limited, and rarely include major appliances. They usually integrate smart speakers, lighting and temperature controls, surveillance cameras, and similar simple single-function devices.
The largest and most mature cross brand ecosystems in the home are the voice assistant systems. On their own, they have “crossed the chasm” to broad acceptance: consumers understand and value what they provide. Their utility with large appliances, however, is still limited. In essence, they replace button pushes with voice commands, rather than addressing entire tasks. The intense competition between voice assistant services is driven by the objective to establish walled gardens to gather the most detailed insights into people’s home lives.
Google Assistant, Apple Homekit, and Samsung SmartThings are working to tie appliances into general purpose smart home ecosystems, including everything from video doorbells to thermostats and smart lighting. It is unclear what value this integration adds to household tasks such as cooking or laundry.
Manufacturers’ roles in smart home ecosystems
Appliance brands must carefully define their role in the ecosystem: can they create an ecosystem and dominate it? If not, which ecosystems should they join, and under what conditions, and what roles should they play?
The best way to create an ecosystem is to build an industry platform. Examples in the mobile phone domain are the iPhone and the Android platforms. The value of the content services on those platforms exceeds the value of the platforms sustaining them. These example show that linking the platform to the devices is crucial for retaining control and assuring commercial success. Apple controls that link and is highly profitable even though they don’t provide the majority of the services. The Android ecosystem is open, and the mobile phones face fierce competition, resulting in lower margins. While there are attempts to create such a platform for appliances, for instance, B/S/H’s Home Connect platform and Samsung’s SmartThings platform, the breakthrough is still elusive.
Where they cannot dominate a platform, brands must decide how to differentiate their value in it. In the near term, appliance functions can provide differentiation. However, as the importance of the application ecosystem grows, the value shifts to the services, increasing the risk of commoditization by a brand agnostic ecosystem.
With voice assistants being able to access only a limited set of appliance functions, a branded smart phone app linking directly to the appliances represents an important way for manufacturers to provide value. Different from the voice assistants, the app can access all appliance APIs and supports 2-way communication with the appliances and the manufacturer’s services. A common application brings expanded functions to consumers in a simple and coherent way. Still, brands will have to enable the major voice assistant systems as consumers have come to expect this.
An important way to protect brand value, as shown by the iPhone example, is to carefully control the appliance functions made available to ecosystem partners, and the conditions under which partners can use them. This provides the brands with a way to selectively project their hardware differentiation into the ecosystem while benefitting from the ecosystem services.
As brands focus on household tasks rather than on the appliances, they have to consider geographical and cultural differences in the way consumers accomplish those tasks. How large are the households? What are the important types of recipes, and how do people manage their groceries? Much of this difference will not be reflected in the appliances, but in the ecosystem supporting the tasks. Therefore, the composition of the ecosystem and the way it operates strongly depend on the cultural context.
Create a platform with new value to the entire ecosystem
True platforms provide value to all stake holders – operators, partners, and users. Simple platforms create benefits through common standards, economies of scale, and by sharing non-strategic services to reduce cost. An ideal platform, though, enables stakeholders to enhance each other’s benefits. They provide services that did not exist before, form durable relationships, and create new businesses. Sometimes, these relationships create dependencies that, in addition to providing advantages, can drive undesirable value shifts. For instance, voice assistant platforms are inserting themselves between appliance manufacturers and consumers, and siphon off value from the consumer data.
Imagining a solution: a secure smart home service platform
An example of a transformative platform for connected appliances is an infrastructure for a secure device ecosystem. On one hand, it provides value to consumers by supporting security and privacy, enabling them to own and control their data, addressing pervasive concerns that have been well documented. In addition, the system creates transaction security and transparency for all participants, enabling new commerce businesses.
A blockchain-based platform registers all devices, their owners, and their software. Device ids and software status are also registered on the blockchain. The platform allows only registered and safe devices to interact with the ecosystem. Monitoring the devices continuously, the system notices when software has been tampered with and removes the device from the ecosystem. This way, all devices in the system are protected from hacking, and all transactions are certified and fully transparent. Using the blockchain, it allows users to control access to their information. This platform enables the creation of new services from many participants. A prototype has demonstrated its function, viability, and scalability.
As the blockchain technology supports the selective sharing of device access and information, it creates a platform for customized service relationships. Appliance manufacturers can retain full visibility of their devices and offer individualized service relationships to their ecosystem partners by controlling API access. This allows manufacturer to project their differentiation in a controlled way to brand agnostic content providers. Implementing this platform at scale requires substantial investment. However, it also offers the opportunity of substantial new revenue, and the ability to escape commoditization by brand agnostic ecosystem services. The existing prototype mitigates the technology risk. A first mover with such a platform can expect a huge advantage and market opportunity.