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The four pivots of the consumer IoT market

For those tracking the consumer electronics market, the last 10 years have brought about a sea change. The rise of internet-connected appliances coupled with the falling costs of sensor, mobile and cloud technologies has disrupted traditional product-based business models while shifting consumer expectations for product (and brand) experiences. More and more, consumers expect their analog products to deliver digital customer experiences.

Of course, these impacts aren’t over. In fact, they are only beginning to take shape.

Even with the relatively sluggish adoption of smart home and wearables markets (~16% and 12%, respectively in the U.S.), the broader consumer IoT space is evolving rapidly. This is a market driven less by consumer demand and far more by supplier dynamics. Digital has reshuffled the competitive landscape in consumer IoT repeatedly and 2018 marks yet another shift. What follows are four pivots of consumer IoT and a look into where we’re headed.

1. From analogue to connected: The dawn of consumer IoT

Depending on one’s definition, the roots of smart home devices date back decades. But IoT’s rebranding of consumer electronics occurred when sensors and internet connectivity became part of product experience. Early “smart” devices were all about connecting — to the internet, via Bluetooth, Wi-Fi, Zigbee, mobile app, etc.

Connecting meant controlling one’s device from anywhere in the world. First cameras and then thermostats, lightbulbs and doorbells, slapping sensors and a mobile app onto any and every “thing” became en vogue overnight.

But the sheen wore thin as most consumer IoT products, take fitness trackers, seemed little more than jacked up versions of their analog counterparts, an average of 10 times more expensive and requiring another mobile app for consumers to download. It quickly became apparent to everyone in the ecosystem that connecting random objects to the internet was inherently limited in value.

2. From connected to interconnectivity: The realization that IoT value is a function of interoperability

Next came the market’s realization that connectivity wasn’t enough — interconnectivity and interoperability across devices was the ticket to value. We saw the rise of home automation hubs and apps, numerous standards groups, IFTTT and more protocols packed onto devices.

This pivot gave consumer IoT its first breath of real utility for consumers. With a little patience and manual pairing, consumers could now control multiple devices from one app, or even build “recipes” to turn on the lights, heat or music, given predefined conditions.

For “traditional” product companies, the imperative to render products interoperable opened up a world of new challenges. Never mind that traditional industrial design was no longer enough — building a consumer IoT product now requires a complicated blend of connectivity, software, interface, service, systems and security design expertise. Beyond user experience, “seamless interoperability” was touted as the key enabler to monetize devices, but proprietary instincts held the market back.

3. From data collection to data management: The realization that data collection ≠ data utility, nor data monetization

In shifting focus from the things to the “interconnectivity,” companies realized the collection of more data did not equate to the utilization or monetization of data. More integrations introduce multimodal context, but just because we’re collecting more data doesn’t mean we’re using it. This painful realization that value is a function of the usability of data — not the hardware things per se — prompted the next pivot in the consumer IoT landscape.

Managing data — never mind knowing how to properly process, analyze and activate it — is the paramount challenge for most businesses today — IoT and otherwise. Managing the multifaceted, multimodal, multi-formatted, sometimes unstructured, product (and other third-party) data sets is but step one in enabling IoT monetization. If feedback loops between product and company introduce new efficiencies and revenue models, basic data management is tablestakes for contributing to and extracting value across all stakeholders.

  • Business-to-consumer value: Using product data to inform better customer experience, personalization, reliability, preemptive support, convenience, security, product/service improvement, etc.
  • Business-to-business value: Using product data to inform operational efficiencies, improve sales conversion, marketing decisions, security, inventory optimization, etc.
  • Business-to-ecosystem value: Using product data to inform partner strategies, integrations, APIs, content needs, supply chain efficiencies, etc.

The complexity of this phase was compounded by the powerful, even if relatively late, entrance by technology giants. Amazon’s Echo, the smart speaker which reshuffled the landscape in the smart home because it was the first consumer IoT product to translate the app ecosystem model celebrated of the smartphone era to interoperability with other products and services. The product didn’t just integrate with multiple standards; it invited the ecosystem to build in new integrations and “skills” through open development. Alexa quickly became a magnet for everyone vying for consumer IoT share — telco providers, OEMs, startups, brands, developers and beyond.

4. From smart devices to intelligent interfaces: The realization that the future of UX is about software

This brings us to the latest pivot in the consumer IoT market — one characterized by technology giants’ influence. Not only have Amazon, Google, Apple and Samsung penetrated the consumer IoT market in pure sales, these big data powerhouses have brought consumer-facing artificial intelligence to the mainstream. Consider how the following examples are already (re)shaping consumer experience:

  • Voice recognition: From Siri to smart speakers, voice-based interactions are on the rise. At this year’s Consumer Electronics Show, a major theme was the ubiquity of voice integrations in everything from lightbulbs, vacuums and mirrors to televisions, cars and wearables.
  • Biometric (facial and touch) authentication: First came fingerprint (touchID) in 2013. Next, facial recognition, which shipped on some 29 million iPhones in Q4 2017 — a number forecasted to hit a billion in just two years. Thanks to the mobile giants, biometrics aren’t just popping up on consumer IoT devices, they will soon replace our default authentication modalities.
  • Recommendation engines: Made famous by Amazon and now ubiquitous in everything from media streaming services to news, analyzing individual and aggregate user trends for personalized recommendations has become an essential element of digital consumer experience, for products too.

Other AI use cases like predictive typing assistants, image recognition, chatbots, consumer robotics and contextual intelligence based on location are all entering the consumer vernacular and shifting everything from preferred interface to expectations. Our research finds AI is infusing the smart home in three distinct areas: in devices and hardware, in interface, and in functionality supporting both.

Spoiler alert: Maturity will go unnoticed

Although the last five years have offered a wild ride to the consumer IoT ecosystem — if a fairly yawn-producing one for consumers — the reality is consumer IoT will never reach a destination. When it comes to the future of how and where we interact with networked devices and infrastructure, the future will be embedded, expected and, in some cases, invisible. We will spend less (or no) time configuring, pairing, troubleshooting and pecking at a screen and simply enjoy greater comfort, care, convenience and cost savings. If past is prologue, the dynamism of both technological advancement and consumer expectations will force suppliers to continuously apply the former to the meet the latter.

All IoT Agenda network contributors are responsible for the content and accuracy of their posts. Opinions are of the writers and do not necessarily convey the thoughts of IoT Agenda.

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