So, What’s Up with the Smart Home Market?

The ’90s were all about home theaters. But, let’s face it, that market is dying a rapid death. In some areas, thanks to the 1 percent mantra, having a home theater isn’t an indicator of family-fun, it’s more of a sign of braggart.

But, having a smart home is a badge of environmental courage.

Smart homes, by default, same energy, time, efficiency and, thus, money. And, having one means, to many, that you care about the environment.

And, more smart home gear has debuted over the past six months than the entire last 15-years combined — thanks to initiatives from companies like Nest, Apple, Google and even Amazon. Like it or not, they WILL be driving the future of our market.

Fight it all you want, but you will lose that battle.

So, what’s the state of the smart home market?

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For that, we turned to the experts at Business Insider, who’ve been tracking this market for years. And, their findings are interesting. By the end of this year, the market in the U.S. will be an $83 million market. But, just four more years, they see it as nearly a $200 million market. That’s an annual compound grown rate (CAGR) of over 18 percent.

Obviously, the biggest (and easiest) market, and the low-hanging-fruit, is the lighting segment and, thanks to LEDs, this market is booming as smart bulbs are the rage. Of course, right now, Philips is dominating that, but don’t count out Lutron — they will be a MAJOR factor.

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Business Insider defines the smart home device as, “any stand-alone object found in the home that is connected to the internet, can be either monitored or controlled from a remote location, and has a non-computing primary function.” At first glance, this seems to simplified, but, when you bundle in smart appliances (washers, dryers, refrigerators, etc.), smart home safety and security systems (sensors, monitors, cameras and alarm systems), and smart home energy equipment like smart thermostats and smart lighting, then you see where BI is going with their market estimates.

And, BI says by 2020, we will each have at least 100 connected “things per home.”

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But, rightfully so, they’ve clearly identified the biggest obstacle to our growth — we’re literally in the chasm between the early adopter (or primary customer now) and the early majority (as defined by Geoffrey Moore’s classic business book, Crossing the Chasm. Haven’t read it? Why the heck are you in our market then? Seriously, you should! But, in the meantime, here’s an article I wrote for Creative MAC magazine about the book and how it relates to us back in 2005.

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So, crossing the chasm between the early adopter and the early majority (aka mass market) is the key factor for explosive growth. And, the primary factors that will drive that are price and perceived benefit.

In the price category, no one can deny this isn’t going to happen. What used to take a $10,000 control system to do in the house can be done with an iPhone and $1,500 of hardware, software and programming fees. This is huge. But, by 2020, this will be closer to $300 or $400.

Then, the perceived benefit will be the only hurdle left to cross. And, then, according to BI, when people see the benefits of smart homes to family security, energy savings, convenience and entertainment, we’re there.

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But, will we play? Will this all be relegated to the consumer market to capitalize on? Will we all have to keep focusing on the higher and higher end — eventually, the 0.5 percent?

I think not. I think our manufacturers will evolve.

In fact, if you look at this chart below, you’ll see that most people, no matter the age, want it “done for them” by someone else. Even with all the DIY stuff out there, we still want others to install and integrate the systems together. In fact, 53 percent of us want it all done for us and 21 percent more want to do very little of it themselves.

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So, the key is NOT the product — it’s the work — the install and integration. Keep staying focused don making money on the services, and we will all have model that’s a win-win. They’re going to buy most (if not all of it) themselves, but even though you buy it on the Internet, the Internet can’t integrate it.

But, we do. And, if we keep doing the integration profitably, we’ll always be relevant.