IoT platforms and the product iteration argument

When it comes to the smart home, big names like Nest and Dropcam have gotten most of the attention due to their product success and lucrative acquisition figures. But as impressive as these products have been, there are a multitude of other unknown products ranging from door locks to basic thermostats that require connectivity and back end cloud services.

Stepping into this market niche are a wave of Internet of Things (IoT) platform providers that work with manufacturers to provide both hardware (modules with a processor and a wifi chip) and software services like iOS/Android integration, APIs, and cloud services. While big players like GE and Cisco likely will make a play for this space, particularly on the industrial side, the early startups include Electric Imp, Ayla Networks, Xively and Arrayent.

Sexy air conditioning

It’s a lot less sexy than Nest, but for manufacturers that don’t have internal engineering teams to handle the task of making, for example, a window air conditioning unit smart, finding an IoT platform provider to partner with becomes necessary.  This is exactly what happened when the Quirky+GE window unit required connectivity. The companies worked with startup Electric Imp, which recently picked up $15 million in VC. Electric Imp co-founder Hugo Fiennes was an early adviser at Nest.

As I prepare an upcoming research note for Gigaom Research that will examine the nascent IoT platform provider market, I identified six key factors that should inform any manufacturer’s decision on which IoT platform provider to go with. They include cost, hardware form factor, security, end-to-end solution, scalability and analytics. The ability of each startup to deliver on these six factors will determine which companies differentiate themselves in the market.

All of these startups see a significant potential market because their solutions can serve every potential device that requires connectivity. In fact, many are eying the industrial markets, where different requirements like asset tracking and preventative maintenance would greatly improve operations as the cost of adding connectivity declines. In the end, the so-called smart home is an artificial market drawn line in the future physical graph.

And while many IoT platform providers are responding to manufacturers feeling like they need to add value to their products for consumers, there’s another argument being made by the platform providers related to product iteration.

How smart?

There has been some criticism in the smart home regarding whether the added complexity of making devices smart is justified by the benefits of doing so.  A thermostat that provides a 20 percent power reduction is a no-brainer. But do you really want connected lighting, or will the age-old flip of the switch be just fine?

Regardless of the value to the consumer of making devices smart, many of these IoT platform providers believe manufacturers will get ancillary benefits related to knowing how their product is being used. And making them connected and aggregating data on product use gives manufacturers greater insight.

“They [manufacturers] have much more of an opportunity to understand how the product is being used, how often it is being used and in what situations it is being used,” Electric Imp’s Tom Sarris noted to me.

Will connectivity make consumer products better by influencing product design? It probably can’t hurt. And for companies that don’t have the likes of Nest’s in house design time, having improved access to data on consumers’ use of their product may have the unintended consequence of subtly changing the culture at manufacturers toward incorporating data on product use into the next product design. Which, in the end, should make the smart home as a whole more user friendly for the consumer.