• Insight Bite


IoT – Driving Home For Christmas?

Richard Baker, Managing Partner at Acuity Advisors, is keeping a close and insightful eye on the story of the Connected Home.

As this year’s well-anticipated John Lewis Christmas advert makes its way onto our screens, their Managing Director must be wondering what Christmas has in store for the retailing giant. Having announced a 15% fall in profits earlier this month, John Lewis will be betting more than ever on Christmas 2016 turning their fortunes around.

As part of this reversal, John Lewis has positioned itself at the epicentre of the Digital Home, with vast quantities of expensive retail space dedicated to the gadgets that promise to revolutionise our lives and save us hours each week. Indeed, Christmas 2015 saw a big “Smart Home” push from the big box retailers – and was given as a key reason behind the Dixons / Carphone Warehouse merger – but overall sales numbers disappointed… leading me to wonder:

Will the Connected Home finally happen this Christmas or will history repeat itself?

As a Partner at Acuity, part of my core focus within the tech landscape for the last 18 months has been the Internet of Things, and the numerous deals under my belt in that time have given me the strongest mid-market IoT M&A record in Europe. Naturally I am inherently interested in the progress of the Connected Home story as it continues to fascinate the tech sector and general media. My experiences have informed a unique insight into this story and in forming my view on what the next chapter might look like.

By 2020, analysts forecast that 2bn to 3bn Smart Home devices will be shipped annually – the Connected Home sector went through the classic ‘Gartner’ hype cycle at a supercharged pace between 2012 and 2014 (hype), through to the trough of disillusionment in 2015 / 2016 (lack of mass market traction). The sector is dominated by the US and Asian technology giants: Google, Samsung, Amazon etc. who deployed capital quickly and mercilessly in early 2014 to make significant strides ahead of the curve – for example spending over $4bn in 6 months on early M&A in the sector:

  • NEST: $3.2bn – Google acquisition (January 2014)
  • Dropcam: $600m – Google acquisition (June 2014)
  • SmartThings: $200m – Samsung acquisition (August 2014)

BUT moving forward 18 months, in Europe the general consensus is that the consumers, outside of those who love their gadgets, have not yet embraced the Smart Home and related connected products.

So why the lack of adoption?

The market has solved the first big barrier, interoperability, between devices and hubs. The original “fight” for control of the home is now more about collaboration with Google, Apple and Samsung all opening up their Smart Home propositions and platforms to developers and products.

My view is that for mainstream customers to adopt Smart Home technology it has to be all of these things: simple to install, intuitive, reliable, cost-effective (versus traditional products) and trusted (no security or personal data issues). All this, AND it must be better than the non-digital alternative.

The current reality is that the technology isn’t here yet. I do though believe it to be a matter of ‘when’ rather than ‘if’, but alas it won’t be in time to deliver the results John Lewis is asking for for Christmas 2016.

The Holy Grail of mass market deployment is getting ever closer. Prices are dropping; the technology is more robust; installation is simpler; the use cases are starting to make more sense – products can and will eventually work for mainstream consumers.

Whilst I doubt we’ll see a sudden break-through, I do predict a continual awakening of a huge market. Indeed, every week that goes by we get a little closer to fulfilling its potential. Leading US Connected Home solutions are starting to hit European shores e.g. AT&T’s Digital Life proposition, on its way to the UK this autumn in partnership with O2; Amazon’s Echo, having beaten rivals in the US, is now bringing its AI focused home hub and speaker to Europe; SmartThings is included as standard with a number of Samsung’s higher end UHD TVs.

Finally, it is worth considering the role of the European technology players in a Smart Home market dominated by global giants – can European companies compete or have they already missed the boat?

I firmly believe that European tech innovators can play a significant role in Connected Home technology as Europe moves to mass market deployment.

A number of European companies boast impressive Smart Home expertise – Netatmo, Tado, Intamac to name a few – each with significant traction, capital and years of experience across the space. Europe benefits from IoT development hubs from UK to France, Germany to Scandinavia – there is too much expertise in Europe for us not to be involved! European technology is already at the core of a number of successful US products now coming to the European market, e.g. Amazon’s Echo, launched in Europe last week, which is based on a number of technologies including AI from Evi, a UK company acquired by Amazon in 2012.

My prediction for the next chapter in IoT and the Connected Home?

In the next 3 years, expect to see mass market deployment coupled with more European companies breaking out and scaling in the space. Evolution will happen and European technology will play a key role across Smart Home technology, a trend I continue to see across numerous other sectors in IoT.

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