Accenture: The Age of Intelligence
The future of the connected home isn't connected toothbrushes – it's entirely new business models
From peer-to-peer exchanges to smart insurance that spots problems before they happen, the next generation of connected buildings will look very different from the last, says Accenture's Hugo Pinto
In partnership with Accenture
The smart home is dumb – in its present form. The first wave of Connected Home products has become synonymous with technology for its own sake: fridges that remind you to buy eggs; internet-enabled ovens; toothbrushes that connect to insecure servers but not to their customers.
But that's temporary. The coming wave of Connected Home innovation will enable far more than smart locks and security cameras – it will fundamentally change our relationship with the built environment, providing a new platform for creative business models. That means the risk of disruption for existing providers in fields such as energy, insurance and telecoms.
In energy, the traditional top-down models of supply are under threat because of trends such as the rollout of low-cost renewables (even IKEA now offers a solar panel and battery product), or the emergence of peer-to-peer, blockchain-based energy exchanges such as New York's Brooklyn Microgrid. Then there are additional pressures, such as the government-mandated rollout of Smart Meters, talk of price caps and incoming EU data rules. "There's this atomic bomb about to drop called GDPR, which means if someone comes along with a better value proposition that connects to the devices you already have at home, and gives you an effortless changing experience, you're going to change," says Hugo Pinto, managing director at Accenture Digital. "Which means you need to either have a very strong value proposition, or you're going to be under threat."
In short, Pinto says, "a big cultural transition needs to happen, internally at energy companies, as to what these companies think they are. What's the purpose of energy providers, once they're not actually selling electricity or gas? What do they do for customers?" He suggests opportunities will arise: for example, in aggregation or new business-to-business plays. "It's about opening up horizontal business models," he says. "If you take care of boilers for your customers, why aren't you taking care of the boilers for all the other companies?" He raises the example of IKEA who, in addition to exploring energy, bought the gig economy company TaskRabbit, reportedly to explore offering services like at-home furniture assembly.
Take insurance. "Today, home insurance is a grudge purchase: no one likes to spend money on it, but you have to have it," says Rebecca Skiles, a managing director at Accenture Digital. Behind-the-wall innovations like leak detectors and smart meters will let companies change that. "There's an opportunity for insurers to change this conversation – to alter the perception from 'we'll help you fix it after it's gone wrong' to 'we will use connected devices to protect your home so that bad things don't happen.'" Such shifts are already happening in car insurance thanks to telematics, and, Skiles says, in health insurance, due to the influx of data from wearable devices. "But so far, none of the large insurers have done much to change that conversation."
Companies thinking about the Connected Home, Pinto argues, need to be thinking radically about what the next decade will bring. "Why don't I charge my electric car when I drive to work, and use the allowance of electricity that I generate at home? You don't move the electricity you produce at home, you move the settlements based on where you consume it, without moving the electricity," he says. What if electricity companies ran autonomous car fleets, with the effect of managing electricity distribution? Or will there be end-to-end propositions like Tesla, in which the whole home and service are rolled into one?
Those changes might seem far off, but change is coming fast – traditional industries such as energy and telecoms have been slow to adapt. Meanwhile, the tech giants are looming. Apple, Google and Amazon in particular already have your address, bank details and the capital to disrupt almost any business vertical. "Communications service providers have been quite conservative in their rollout of connected home products," agrees Accenture's Cian O'Hare. In the meantime, these disruptors are combining AI virtual assistants with open ecosystems, assuming the role of virtual butler – one that can provide access to digital and physical products and services without the involvement of traditional providers. Not being part of that conversation is doubly-damaging, says O'Hare, as companies will miss out on not only revenue opportunities, but crucial usage data, which will instead be harvested by the big tech companies, providing further business advantage.
"One thing's for certain," says Pinto. "The first ones to create the platforms for these ecosystems are going to be the ones that have the better chance of surviving."
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