Hackernoon logoThe Unbundling Of The Home. Brought To You By Amazon, Tesla and Apple. by@seyi_fab

The Unbundling Of The Home. Brought To You By Amazon, Tesla and Apple.

Seyi Fabode Hacker Noon profile picture

@seyi_fabSeyi Fabode

Strategy Consultant

With every new product release we see Amazon, Tesla and Apple unbundling the home. These companies have picked a home use case and they’re creating swarms (a group of intelligent products all serving the same goal) to completely own that use case. The traditional providers (TPs) of the services these companies are strategically coopting— tv stations, utilities, security providers etc.- aren’t quite sure how to respond. These TPs are scrambling, buying up companies, starting their own streaming services and spending money on all sorts of stuff unsure about how to avoid losing their lunch.

But the TPs are doing it all wrong. The TPs took their eye off the ball and, by focusing on their business models and not the customer, are bound to fail.

Looking Through The Eyes of The Customer

There are basically three buckets of need we have in our homes; Safety/Security, Comfort and Convenience. With the advent of Intelligent Devices, also known as Internet of Things devices, the Amazon’s/Tesla’s of the world saw opportunity to capture some value by providing us ‘toys’ as the gateway drug for owning the home.

A home with every device, and the home itself, as a node on a complex adaptive platform.

1. Convenience

We’ve all heard of the Echo. Even the most beloved of smart home intelligent devices provided nothing but easier access to music through voice activation. And we loved it. Until it started providing more. Just last week (late Sept), Amazon announced The Echo Plus, it’s relatively inexpensive (at $149) smart home hub, that allows the customer to control the Philips Hue light bulbs and several other smart home devices including thermostats. It was one of several products released on that day masking what was a strategic move from Amazon. The company moved from owning just the convenience use case into competing for the comfort use case. At a reasonable price point.

Amazon's brightest new innovation might just be the smart home bundle

2. Comfort

Under the comfort bucket are services in the home like heating/cooling and power to cook food or boil a cup of tea. The TPs thought of these as providing electricity. But no one cares about electricity. We care about what it does for us; heating/cooling, boiling a cup of tea/coffee and cooking food. The use case is about how we feel in the home. And that’s what a company like Nest is selling. From the utility TP’s viewpoint, that one small device (the thermostat) is not enough of an asset to charge for (a remnant of an outdated business model that I explain here). In a world where you are selling comfort, ‘what provides comfort?’, is the question utilities should be asking. Not the question of ‘how can we rate base our assets in a changing world?’. Companies like Tesla (with electric vehicles charged by solar panels on your roof) already found a way to provide that comfort at the high end of the market and they’re moving down towards the mass market.

The next phase of comfort will come from devices that take the work out of even charging our devices. The phrase ‘behind-the-meter’, what the utilities call our homes, will mean nothing when our devices generate their own energy. Apple’s charging pad, using the ‘Qi’ standard, while not the first of it’s kind, will likely usher in ubiquity for charging stations starting with the Apple fans who can afford to shell out the money for the convenience (taking us back to the first use case). It’s a gateway towards identifying other convenient connected home devices that can be charged wirelessly.

3. Safety

Ring, and now Nest with its Alexa voice activated security camera, has owned this most critical of use cases. Every species of animal has its young look towards its old for security and protection. It is the most basic of our needs. And it is the need that Ring (and IoT products in the security category) has tapped into. To put it bluntly, I haven’t met any low income consumer who’s bought Echo (or Google Home) but I’ve met a few who’ve bought Ring (or similar IoT security products) for their homes. From my research/calculations, Ring sold ~407k units of products on Amazon over the last year. Just on Amazon! That’s enough reason for the TPs (ADT etc) to worry, especially as a generation of customers who are attached to their mobile phones, the hub for these security systems, start to turn their attention to protecting their own children.

What’s A Startup To Do?

For startups that are interested in getting into this space, the key is to find a product or niche within these use cases that Amazon/Tesla/Apple/Google isn’t focusing on yet and build a great product to serve that need. Build a great and user-friendly product that fits into their platform. A startup doing just that is Cujo. As we buy more IoT products/Intelligent Devices for our homes, we increase the possibility of security breaches and hacks. Cujo is building a firewall for all the devices in your home. Watch Cujo get acquired pretty soon.

So what’s left for the TPs losing their lunch? I’d suggest a 4th use case where there is still opportunity to capture the hearts of the customers; community.

A 4th Use Case For Traditional Providers (A Power Utility Example)…

One business model that the increase in connected devices provides is the possibility of building a community of shared experiences. Sticking with the home as our example, there is an opportunity to bring people together through the intelligent devices (comfort, convenience or safety) that they now own. Let’s use a comfort/utility example.

An engineering team out of Stanford University have developed Rematch, a platform that analyzes the actual patterns of electrical demand and the potential generating capacity of every home in a neighborhood, and then designs a cost-effective smart grid for that locale. This is the business model killer part of the text ‘What they found was that the mix of new energy sources suggested by the ReMatch model could reduce the total cost of electricity by aboåut 50% over the next 20 years. The new equipment would cost about $58 million, but it would save about $227 million in operational costs tied to purchases of fossil fuel”. And these are conservative estimates of the capability of the tool.

What this enables the utility TP to do is create a platform where every homeowner can register each device and, using Artificial Intelligence (AI), help the homeowners to make decisions about when to get power and when to ease up (using price signals for example). This business model even provides the utility a way to invest some of its cash by funding all the elements of a smart home. It also provides one thing the utilities have always failed to get, which their competitors have managed to build; a community platform of this sort enables the utility to engage their customers and build a relationship with them.

Relationships with customers, now that’s something that new technology won’t take away any time soon.

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