IoT platforms and the product iteration argument

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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.

6 Comments

Jim Hunter

Nice article Adam. The most important observation “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”

To me this speaks to the value that a sensor driven feedback loop would have to inform not only product design, but how products are used, consumed and shared. This is THE future #IoT value proposition for 3rd parties… as long s the data is obtained fairly and ethically.

Jim Hunter

#IoT by def speaks to connectivity. The term “Smart” device suggests that logic exists within a device. But if a device can communicate, the “smart” can be elsewhere in the network. Not all things that talk will be “smart”.

jjj

lol you get caught too into one of the bigger problems when it comes to the smart home, data. Everybody just wants the data and assumes they should get it. Why? Why would consumers give them access to the data? Is it reasonable to ask for it , how much each side involved benefits from it? Companies should focus on what their customers need not on what they need/want. Too many companies are dreaming of products that suit their needs and not what the consumer needs.
Then services, everybody wants to milk it some more with services and too many services are pointless and harming the product.
And ofc they all want to “drive value up” by adding pointless hardware , but that’s done in every sector.

David Friedman

Adam – I think very astute article. Something to think about: when will it actually be LOWER TOTAL COST for manufacturers to create smart connected devices that add the additional cost of networking/connectivity? The costs of networking are coming way down, and we are seeing that the connected product actually offers the manufacturer much better ability to provide service and maintenance to the product, and of course to do firmware updates to fix bugs. These turn into real, quantifiable [and big] savings.

Soon manufacturers will also identify means to reduce other parts of the device cost, getting rid of unnecessary touch screens so that they can simplify the device UI, leverage the best that smartphones and tablets have to offer, and focus on beautiful design. Lots of great possibilities around the corner…

Adam Lesser

Thanks, David. yeah, I think some device manufacturers will consider the longer term ROI of making their device smart and weigh that cost against up front capital costs.

Nicholas Paredes

One could also argue that the simplicity and physical design of the Nest (and the GE Quirky air conditioner) are selling points. What exactly did the Nest connect to when it arrived? It intelligently controlled and displayed temperature and looked cool doing so. I was well aware that the Quirky AC was less than optimal. I also have an older and much more hideous GE air conditioner in the basement.

People miss the emotional needs of products. If smart products were a rational decision, we would all be waiting several years for them to work more seamlessly.

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