thoughts,
industries.
January 2013
Smart Home:
Hope
or hype?
January 2013
Nicolas Clinckx
Partner
nicolas.clinckx@greenwich-consulting.com
+33 (0) 6 64 73 56 41
Yann Baffalio
Senior Manager
yann.baffalio@greenwich-consulting.com
Axel Duplan
Manager
axel.duplan@greenwich-consulting.com
Executive Summary
The Smart Home market is based on “home automation” and covers four distinct areas:
1. Security: alarms, presence simulation, remote information and intervention
2. Health: support for the elderly, home care
3. Energy efficiency: automatic control and regulation of all utilities (water, electricity, gas)
4. Comfort: ambiance, lights, interconnection of existing devices
For this report, we are mainly interested in energy efficiency services and comfort solutions.
Long proclaimed as the future housing revolution in the 90s, it is clear that home automation failed
to capture the imagination of the general public; it was hampered by technological complexity,
the prohibitive cost of devices dedicated primarily to comfort use, and low perceived added value
for customers.
The rise of environmental issues, encouraged by the environmental awareness movement and
the sustained increase in fossil energy prices, has led to a revival of the “Smart Home” concept.
Benjamin Ferrand
Senior Consultant
benjamin.ferrand@greenwich-consulting.com
Although today the penetration of Smart Home commercial offers remains confidential, several
factors are positively influencing the adoption of these solutions:
•T
he maturity of access technologies and the simplification of interfaces; even if the
technological silos between different home environments still differ widely, the development
of technologies and standardized protocols inherited from the telecom and computing
worlds is reducing this complexity. In addition, the proliferation of tablets and smartphones
at homes creates new multi-screen uses, allowing the simplification of client interfaces and
lowering equipment costs (not strictly dedicated to home automation usage but integrated
with existing devices)
•T
he need to reduce home energy consumption: the low return on investment of current
energy efficiency solutions (between 12 and 20% reduction on the total bill depending on
the quality of the consumption measurement) has not encouraged provision until recently.
The likely increase in energy prices and the impact of the economic crisis, however, should
improve the perceived value of these solutions and the quick return on investment for
customers in the medium term
•R
egulatory initiatives encouraging the development of the Smart Home market: the
European commission has set a 80% target of European homes to be equipped with smart
meters by 2020
• The proliferation of initiatives and partnerships around the Smart Home, involving major
players in the utilities, telecommunications and IT integrators
Thoughts, Smart Home: Hope or Hype ?
1
Our special thanks to the
following companies which
greatly contributed to the
development of this White
Paper by providing valuable
insights and testimonials:
• Alstom Grid
• Direct Energie
• General Electric
• Lyonnaise des Eaux
• Somfy
• Webhelp
Although today, an interest from the B2C sector can be seen as beneficial to B2B, the widespread
adoption of such technologies remains uncertain and conditioned by the removal of various obstacles:
• A lack of standardization of data transmission, collection and storage technologies
preventing the emergence of a reliable and consistent ecosystem
• An ecosystem of unstructured players often operating in silo
• Strong consumer inertia regarding the increase in energy costs and a lack of visibility
of Smart Home solutions: for example, Americans would be willing to undergo an
increase in their bills of $128 per month before considering the option of energy efficiency
improvement in their homes (Energy Pulse 2011)
•
Consumer distrust regarding issues of collecting and processing private energy
consumption data, which hampers, especially in France, the deployment of smart meters
such as ‘Linky’
Despite the obstacles outlined, Smart Home players have to meet two major challenges in order
to stimulate the market and develop attractive offers:
1. Adjust the value proposition based on the expectations and the maturity of customers
across user lifetimes
2. Build a viable business model and clarify the procedures of value repartition between
stakeholders
Five models exist among Smart Home players today: stand-alone equipment, stand-alone
service, Fremium service, equipment subsidized by the B2C service or by a third B2B player. The
trend is to develop the equipment subsidy model by the service.
Due to their control of the triptych device / software / service, and their central presence in the
home via internet box and mobile phones, we believe that telecom operators hold key assets to
structure the Smart Home ecosystem around their connectivity platforms. They are also equipped
to address the key issues of the value proposition and manage Smart Home customers at a lower
cost. However, their difficulties in integrating and leading the whole value chain by themselves
force them to develop the ecosystem by implementing logical partnerships: large operators like
AT&T or Deutsche Telekom for example have created standardized platforms open to partners
from other sectors (electricians, manufacturers, pure players).
Based on our experience in working with complex ecosystems which involves a multiplicity of
stakeholders like NFC, we recommend a three stage approach to implement a Smart home strategy
Build an aspirational
segmentation
Investigate
innovative services
Map the ecosystem
and assess the models
• Identification of current and
future customers’ needs
• Portfolio of initiatives
• Features of current solutions
• Previous experiences on similar
issues such as NFC
• F irst customer segmentation
on the basis of macro service
criteria to be tested
• Positioning vs. competition / new
entrants
• Identification of business and
industrial partners
• Identification of best practices
• Design of the value proposition
•Q
ualitative and quantitative
studies
• Assessment of possible business
models
• Association of customer profiles
with potential services
Successful strategy execution must be guided by a prioritising approach of the client’s value
proposition:
• The demand is currently greater from B2B customers compared to residential customers, especially
for energy-intensive industry types of businesses (data centers, process or manufacturing
industry...) that are constantly looking for levers to optimize their costs positions
• Corollary of the target retained, the services presenting the best return on investment are those
that will be adopted most widely
• A minimal partnership with a “Utilities” player seems necessary, since telecom operators will not
be able to propose by themselvers all the key services for companies
Thoughts, Smart Home: Hope or Hype ?
2
I. A suitable environment for the emergence
of Smart Home
Long proclaimed as an important development in home technology,
home automation has so far failed to convince the general public. Four
environmental trends, however, show that Smart Home is ready for takeoff.
1. Maturity of technologies and simplification of interfaces
The IP protocol has become the standard for communications industry, both for content (Internet,
IPTV, VoIP ...) and for M2M (machine-to-machine).
The number of connected devices in the home has increased dramatically: an average of 25
in 2010 as compared to only one in the 1970s. The data associated with this digital customer
experience became accessible in mobility thanks to the latest generation of mobile networks (3G
/ 4G), smartphone and tablet applications and the emergence of cloud computing.
The wide availability of connected devices, combined with a lower cost of computer components
(CPUs, connectivity) and mechanical components (sensors, actuators), should allow faster
development of home automation: instead of developing dedicated controllers, companies can
rely on the ecosystems of existing tablets and smartphones.
In addition, the development of “all-electronic” devices (e.g. replacement of mechanical gas
meters and water meters with electronic ones) allows the grafting of a connectivity layer on
existing services at lower cost.
This overall simplification of Smart Home technologies allows an easier sale of these services to
the general public, an easier interaction via touchscreen terminals, an ubiquitous access through
mobile devices and a “plug & play” experience related to smart meters.
2. Need to reduce energy consumption in homes
The need for governments to review their energy mix to reduce dependence on fossil energies and
nuclear technology in favor of alternative energy sources (hydro, wind, solar) drives them to develop
smart grid and consumption management technologies. Germany is particularly sensitive to these
issues since its choice to exit nuclear power.
As a result, people are now increasingly aware of the issues of sustainable development and the need
to reduce energy consumption for the greater good.
Moreover, the inevitable increase in energy prices combined with current economic difficulties should
significantly improve the perceived RoI from Smart Home solutions for consumers, overcoming their
traditional reluctance. The annual “Energy-Info“ survey published by the CRE1 shows that 80% of the
French public consider energy as an issue of major concern (vs. 75% in 2011 and 70% in 2010) and
almost all (97%) of the respondents expect to see energy prices rise in the coming months.
If households suffering from fuel poverty (19% of French households in 2012) are not the core target
of very expensive Smart Home solutions, this concern for reducing energy expenditure should be of
relevance to all households regardless of their social and economic levels.
1 - Commission de Régulation de l’Energie, Energy regulator in France
Thoughts, Smart Home: Hope or Hype ?
3
3. Regulatory initiatives
Construction standards include maximum limits for energy consumption – several recent standards and
labels (BBC standard, RT2012 in France) have set strict consumption targets (50kWh / m² / year). The
RT2020 is geared towards the development of constructions with positive energy.
Likewise, governments are under pressure to legislate the housing industry to meet their Kyoto Protocol
commitments. The European declination, the Climate and Energy Package, sets a target of 20%
improvement in energy efficiency (compared to 1990) and 20% share of renewable energies in energy
mix. To fulfill these commitments, governments are setting up public aids encouraging owners to equip
themselves.
These goals cannot be achieved passively (using building materials/ optimised architectures). The use
of active technologies instead becomes necessary to control and optimise the use of resources for
housing.
EU regulation requires the deployment of smart meters: the target of 80% of European households
equipped by 2020 was recently confirmed by the European Commission which estimates the
necessary investments to be around 140 billion euros.
4. Proliferation of initiatives and partnerships around Smart Home
Although the market remains above all driven by a number of small startups, there is a recent trend
of participation from bigger players from telecoms or utilities, and the birth of larger partnerships.
We can mention the following initiatives, which may help boost the market in the coming years:
• Launch of the “Digital Life“ platform by AT&T
• Launch of the Qivicon alliance by Deutsche Telekom, including EnBW, Miele, eQ-3 and Samsung
• Joint-venture between Swisscom and Asoka to provide Home Energy Management services
• British Telecom and British Gas initiatives in Smart metering
• Deployment of “Linky” Smart Meters by EDF
• Ijenko, Direct Energie and Ademe for the Modelec initiative
• Lines of home control equipment: “In One“ by Legrand, “IHC” by Schneider, “Tebis” by Hager,
“Tahoma” by Somfy or even “Blyssbox” by Castorama
• “Plug & Play” equipments by Withings or Ijenko
New Energy Systems having integrated large amounts of intermittent
renewables, Grid operators are facing the need to connect with every
consumer – B2B or B2C – owning potential flexibility resources, in order
to balance renewables through intraday. In parallel, standardization
continues to mature through strategic initiatives such as the ETSI-CENCENELEC. In this context, the Smart Home return on investment will
be shortened by new revenues streams coming from early adopters,
smart eco citizens who have chosen renewables and EV in their eco
cities. The new resulting eco-system will integrate utilities, critical
energy management vendors such as Alstom and Telecom operators.
They will altogether design end to end integrated architectures with
lowest cost of ownership.
Laurent Schmitt, Vice President - Smartgrids Solutions Alstom
Thoughts, Smart Home: Hope or Hype ?
4
II. A market in silo characterized by many
technological obstacles
and insufficient cooperation
Since the emergence of the Smart Home concept, two major problems are
hampering its widespread deployment: a lack of structure in the technological
ecosystem - which is split into several competing standards - and the in-silo
nature of the players operating in the ecosystem. This silo logic prevents to
build an attractive solution for the end user and reduces the perceived value
of the Smart Home product; only the removal of these barriers will actually
allow the market to take off.
1. The customer’s place of residence is structured around four separate
worlds
If “All IP” has become the norm, home equipment devices communicate with each other through
different technological means because of the disparity in connectivity needs.
This disparity helps to maintain a home network structured around several fragmented worlds:
•T
he world of IP access
Telecom operators, through their internet box, represent the main gateway for the client’s
home connectivity services via traditional technologies (WiFi, Bluetooth)
•T
he world of Multimedia
Its main characteristics are related to entertainment usage performed by the customer.
Players in the world Multimedia are in competition with telecom operators for the provision
of some services (TV, VoD, music, ...)
•T
he world of Utilities (multi-fluids)
This world covers the management of water, waste, gas, electricity and HVAC
•T
he world of safety, comfort and health
This world concerns the users of proprietary standards for communication between sensors
and the security / health centers (which themselves are connected to a network owner).
General public solutions are being developed on the basis of a merger with the world of
Utilities: management of brightness, openings, remote security and monitoring, Telehealth
2. These four silos form a proprietary technological ecosystem
Each of these worlds develops its own technological solutions: e.g. Zigbee or HomePlug for comfort
and security, Widi for multimedia, OPEN ADR for tertiary and industrial sectors.
Moreover, each of these technologies is available in several versions, often incompatible: it is possible
that two devices compatible with the Zigbee protocol might not fit together if the implemented standard
is not exactly the same. This fragmentation in technological standards contributes to the opacity of
Smart Home offers from the consumer’s viewpoint.
Thoughts, Smart Home: Hope or Hype ?
5
3 types of companies in these silos will compete to get hold of the customer relationship by positioning
themselves as the main intermediary for Smart Home:
• Utilities companies access consumers through their smart meters and consumption sensors
• Telecom operators distribute their own box and connectivity services
• Players in the world of Multimedia develop dedicated devices (Xbox 360, Apple TV ...) which
often have advanced connectivity features
For the moment, the logic of industrial partnership is limited and unclear for the consumer.
Figure 1 – The four silos of the home universe
Smart home environment
IP access
Multimedia
Utilities
(multi-fluids)
Confort,
Security &
Health
Progressive influence of IP technologies
Primary
technologies
• Wifi
• DLNA
• Radio waves
• Zigbee IP
• Bluetooth
• Widi
• Wifi
• Zwave
• Ethernet
• Airplay
• Homeplug
• Femtocell
• Miracast
• Bluetooth
Low Energy
• Dash7
• OPEN ADR
EnoCean
• SEP 2.0
• 6LOWPAN
Examples
of players
Horizontal
integration
through
partnership
Primary bill
3. A partnership strategy should be formalised between the home
management players
In each one of these silos, ecosystems are already built. They must be coordinated in order to provide
a unified user experience.
The key success factor in providing a consistent Smart Home offer lies in a partnership strategy:
• Providing a complete offer allowing the mutualization of costs
• Removing the interoperability constraint related to the in-silo nature of the various markets
• Establishing a partnership to build on existing initiatives of each partner
Smart Home should not be limited to a simple technological rupture.
The concepts of “single point of contact” and “end to end management”
will be strong differentiators allowing a significant improvement in the
customer experience.
Alexandre Fretti, Director of Business Unit - Webhelp Paris
Thoughts, Smart Home: Hope or Hype ?
6
In order to structure these various markets and several communication
technologies, Smart Home players have to meet two challenges:
1. How to address customer needs across all the steps
of the journey?
Figure 2 – A Smart Home solution should take into account
the needs throughout the customer journey
Customer
needs
Verbatims
Install
and train
Use
Protect
Replace
Sustainability and
interoperability
Simplicity
Reliability
Management
of obsolescence
Will it work with the
devices / systems that
I already own?
It’s too complicated
for me!
What do I do if it
breaks down?
What does this give
me in addition to my
equipment?
This solution is not
reliable
How can I access data
/ information related to
this equipment?
Is it possible to have a
remote guidance?
I already bought
something of this kind
and I never used it
Who will come to help
me if it is
not possible to fix it
remotly?
I want to buy a new
equipment,
but technology
changes very often
What do I / can
I do with my old
equipment?
How do Home Management solutions manage
equipments throughout their lifecycle?
2. Which business model and which methods of value distribution have to
be adopted between players?
In order to trigger the Smart Home mass market, it is necessary
to aggregate it around open international protocols, enhance the
widespread flexibilities on capacity markets and lower equipment
installation costs, while favoring “plug & play” and scalable solutions,
using a mobile apps model.
Rodolphe de Beaufort, Smart Grid Solution Sales Director - GE Energy | Europe
& North Africa
Thoughts, Smart Home: Hope or Hype ?
7
III. A yet undeveloped market with limited
consumer demand
The inevitable increase in energy prices in the medium term should boost the Smart Home market,
at least in measuring and controlling energy consumption. The Regulatory Commission of Energy
(CRE) estimated in 2012 that the annual bill for a typical French household will increase from €874
in 2011 to €1,307 in 2020.
However, we observe that consumers do not yet fully perceive the value of these services: in the
case of a subscription type formula, costs are immediate (installation cost + monthly fee), while the
resulting savings on energy bills are both uncertain and spread over time.
In France, according to a study conducted by OVUM in May 2011, only 17% of homes eligible to
Smart Energy offers (with an electronic meter), showed an interest in this kind of service. Germany
(29%), the United Kingdom (28%) and the USA (26%) today seem more interested in this type of
offer but consumer interest remains limited overall.
Figure 3 –Interest from eligible households (with a compatible
meter) for a “Smart Energy” offer
31%
30%
29%
28%
26%
17%
13%
Spain
Australia
Germany
UK
USA
France
Japan
Source: OVUM survey (May 2011)
On the other hand, there is a strong consumer inertia vis-à-vis the increase in their electricity bill:
Americans are willing to undergo an increase in their energy bill by $128 per month before considering
investing to enhance energy efficiency in their homes (either passively – catering, isolation, or actively
– via Smart Home type of solutions).
Thoughts, Smart Home: Hope or Hype ?
8
Greenwich Institute estimates based on demand and the Smart Home services price elasticity, a
french penetration rate of 20.3% for Smart Home offers by 2020.
Figure 4 –Smart Home offers
(% penetration of households) – France
37,0%
28,1%
20,3%
14,0%
9,3%
5,8%
0,0%
2013
0,7%
1,8%
3,4%
Smart Home Penetration
2014
2015
2016
2017
2018
2019
2020
2021
2022
Source: Greenwich Institute (November 2012)
If the business development of Smart Home services seems limited in the short term, the global
market (including Smart Metering and sensors markets) would still represent $44 billion worldwide
in 2016 (ABI / Berg Insight, May 2012).
Thoughts, Smart Home: Hope or Hype ?
9
IV. In order to maximize value creation for all
players, a business model needs to be found
As part of a bundled offer, Smart Home adoption offers four incentives for
operators, irrespective of their home market:
1. Increase customer lifetime by increasing barriers to terminate or to churn
2. Increase sales:
• Increase direct sales on service delivery, equipment and consumables, and indirect
sales on related services (including insurance)
• Increase or maintain direct customer ARPU by reinforcing the commitment and the
content of the offers
• Increase or maintain indirect ARPU by customer knowledge data mining
3. Reduce operating costs by improving the planning of energy production, and use of the
networks in order to optimise their sizing, better manage daily operation and maintenance,
and smooth the load
4. Optimise CAPEX by reducing investments in capabilities of production/ storage/
reprocessing and even by translating them into OPEX (e.g. energy production)
This value generation will be specific to each player and to the business model they will adopt
in the partnership.
Figure 5 –Value generation is player-specific and the overall
business model should incorporate these specifications
Equipment
manufacturers
Operators
Telecom
Utilities
Facility
management
Metering /
Actuators
Sales


-

ARPU







-

-

-




Churn
OPEX
Capex

services providers
Electronics Construction
device
-





No opportunity
-
Consulting
/ IT
Assistance
/ Insurance Customer
/ Security Relationship
-

-


-


-

-








Some opportunities

Strong opportunities
Thoughts, Smart Home: Hope or Hype ?
10
Numerous economic levers can be used by Smart Home players:
• Sales increase lever
Smart Home will allow consumer electronics vendors to increase sales for four reasons:
• Tracking the end of the product life by retrieving information about lifecycle and
maintenance (targeting the customer during critical life moments)
• Limiting the commoditization of products
• Accelerating product renewal
• Increasing sales of service delivery and consulting for installation and use
• ARPU increase lever
All players may consider Smart Home as a lever to maintain or increase ARPU:
• Sales of additional services
• Development of customer support and installation services
• Development of the B2B segment via partnerships
• Churn reduction lever
On the same way that convergent packages (fixed + internet + mobile) launched by telecom
operators have extended customer lifetime (~2x as compared to traditional internet offers),
the addition of a new service pillar based on Smart Home may bring value to the telecom
operator by reducing customer churn.
• OPEX reduction lever
Telecom and utilities operators can implement a thorough production planning, better
manage their network and smooth their load cycles. For exemple, Ijenko, Direct Energie
and Ademe are partnering in the Modelec initiative to test new load cycles optimization
technologies. The principle lies in shutting down non vital consumption of subscribers
alternately and for a really short period of time.
• CAPEX reduction lever
For a utilities operator, Smart Home is an opportunity to reduce CAPEX through two primary
levers:
• Optimised management of fluids
• Overall equipment efficiency dedicated to production sites and network
The energy provider aims at optimizing electrical consumption with two
main objectives: reduce the client bill and support the community in
smoothing consumption peak. The electricity provider is responsible
for load vs capacity balance and has to be a key player in load shedding
programmes. Identifying a ‘Nega-Watt’ business model (while avoiding
starting additional power plants during peaks) with proper financial
compensation for load shedding is at stake to boost the Smart Home
ecosystem.
Martin Bertran, Strategic Marketing and Communication Director – Direct Energie
Thoughts, Smart Home: Hope or Hype ?
11
Five business models exist today among Smart Home players. The main
trend is the development of a model of service-subsidized equipment
A Stand-alone equipment (e.g. Blu-Ray, The Energy Detective sensor …)
B Stand-alone service (e.g. SIM only phone package, power supply)
C Freemium service:
C1 Without equipment subsidy (e.g. Somfy home automation)
C2 With equipment subsidy (e.g. Fox alarms)
C3 Without equipment (e.g. Powermeter by Google)
D Equipment subsidized by a B2C paid service (e.g. ISP Package)
E Equipment subsidized by a third B2B / B2C free service (e.g. Voltalis)
Figure 6 –5 major business models, whether including
the equipment or service or not, can be identified
on the Smart Home market
Service
Free
Paid
a
C1
Free
E
Not
included
Equipment
Paid
Not included
D
C2
B
C3
Figure 7 –The trend is to spread the model of service-subsidized
equipment to all Smart Home worlds
A: Stand Alone Equipment
B: Stand Alone Service
C: Freemium Service with
or without equipment
D: Equipment subsidized
by B2C paid service
E: E
quipment subsidized by
a B2C free service (paid
by a third B2B)
Multimedia
Security
& health
Fluids & White
products








Ø
Ø
Ø


new

Thoughts, Smart Home: Hope or Hype ?
12
Players willing to structure the ecosystem around partnerships and a
common business model should rely on key technical levers:
• Provision of open enablers, or even standardization of APIs so that each partner can integrate
their own solutions
• Upstream analysis of all players’ needs to prevent the development of technologies in silo
The large number of players and business models to assemble, as well as the technological
complexity of the required services, induce that the market will take time to structure itself. Also,
operators could prioritise the Enterprise market, where volumes and stakes are higher and
where the initial investment is easy to monetize. The experience acquired in the Enterprise
market can then be harnessed in order to address the residential market.
To accelerate the establishment of these partnerships, software vendors can become key players
in the communication between stakeholders, by organizing their coordination and providing their
expertise in technological interoperability issues.
Thus, the final integrator will depend highly on the target and the positions of the players in their
respective markets:
• Enterprise market: Building constructor / Equipment manufacturer / Facility management
• Services and Utilities market: Operators of environmental services and energy services
• Residential market: Telecom operator
Although only one player would be able, financially and technically, to
integrate all Smart Home silos, they would neither be in the right position
nor have an interest in offering the full range of Smart Home services to
the consumer market. To achieve real success in developing this market
on a large scale, it is crucial that each player of the Smart Home value
chain – vendor, operator or integrator – learns to work with the others,
adapts to the specific economic models of the partners, their business
expertise and their mastery of the customer relationship.
Emmanuel Joumard, Home Automation & Controls Business Group Director Somfy | France
Thoughts, Smart Home: Hope or Hype ?
13
V. Telecom operators can build on key
assets to play a central role in structuring
the ecosystem in a B2C perspective
In ten years, telecom operators have managed to establish themselves in
the home as a central link to the world of entertainment, whilst providing
equipment, connectivity and service at the same time. Mastery of the triptych
“device/ software/ service” is one of the telecom operator’s key assets and can
be used to structure Smart Home players around a packaged offer targeting
residential customers.
1. The telecom operator is well-equipped to address main dimensions of
the value proposition
• Construction of offers: powerful marketing departments and expertise in launching offers
• Point of entry for home connectivity: the telecom operator covers all technological elements
and is an essential gateway of services through the Box
• Data ownership: experience developed in sharing customer data with retailers and providers
of contents
• Exclusive partnerships: experience gained in building partnerships and managing partners,
for distribution, customer relationship operations, design and sourcing of equipment/ content
• Mastery of norms/ standards: in France, because of the Box penetration, the telecom operator
has the ability to disseminate standards using the compatibility of the Box at the regular
renewal of the communicating equipment, during the deployment of a new generation of box
• Positioning on the value chain: ability to implement different types of partnerships, manage
multiple services and identify opportunities related to new entrants/ pure players, in a fastmoving world
• Business model: expertise in the subsidy business model, with high customer acquisition
costs, and depreciation over its lifetime
• Mastery of the mobile universe (for some operators): ability to provide control and remote
management services for installation via mobile
Telecom operators can build upon their Box services and their business model to provide Smart
Home offers
Figure 8 –a native and increasingly advanced presence of isp box
in the housings
Viewing functions
on home screens
Zigbee or Wifi
synchronization between
the meter and the ISP Box
IP Network
Management of existing
electrical network
Smart Home Equipment
Source(s): Operator’s data
Thoughts, Smart Home: Hope or Hype ?
14
Figure 9 –a broadband customer business model that is able
to integrate a smart home solution
Given the margin per Broadband customer, a fixed telecom operator has the ability
to provide a standard Smart Home offer (including some home automation) without
surcharging these new customers, in exchange for a 24-month commitment.
Broadband
Very high
broadband
Client
acquisition cost
250 €
500 €
Smart house solution
extra charge
+
+
130 €
130 €
MCV broadband client
20 €/month
25 €/month
ROI
ISP client smarthome
19 months
25 months
(+ 6,5 months
standard client)
(+ 5 months
standard client)
Source: Greenwich Institute (November 2012)
2. The telecom operator has the key functional elements required
to manage Smart Home customers at lower costs
Telecom operaters have developed an Information System and technical elements required
for the management of home equipment installation and then the implementation of a remote
source delivery
• Training of sales force, distribution of information on technical products
• Reception and training of the customer to use and manage sophisticated equipment
• Network agency and extended distribution channel
• Ability to manage multiple configurations based on a client’s technical eligibility
• Remote management of the client
• Customer support during his life time at home and remotely (call centers, intervention force)
• Mastery of channels and customer contact data (email, mail, SMS, relay point, boutiques,
IVR, call centers, telesales...)
• Billing and management of contentious clients
• Exchange logistics and After-Sales Service management
• Contact with the customer at critical moments (purchase/ renewal of devices, moving) and
customer risk management
• Customer satisfaction and complaint management
Thoughts, Smart Home: Hope or Hype ?
15
3. However, the telecom operator lacks legitimacy when
it comes to the content of Smart Home services
The telecom operator has neither the expertise nor the legitimacy from a client perspective to
provide an integrated Smart Home offer
• Insurance / security / health: customer risk and disaster management, network of
partnerships with the experts, insurance premiums/ investment management, equipment
reliability, intervention forces management, legal responsibilities, security of customer
data…
• Energy / Utilities: provision of service delivery, (production, distribution/ routing, sizing…),
optimisation of customer consumption, after-sales service, failure management, pricing
• Technical support: home network set up, configuration of miscellaneous equipment,
troubleshooting/ home intervention....
The development of new information and communication technologies
will significantly change our businesses and revolutionize the way we
operate and manage our services. The challenge for Water companies is
to ally operational expertise in the water sector and the development of
new ICT in order to develop effective and innovative services to increase
customer satisfaction and to provide relevant tools for consumption
management and natural resources and Environment protection.
A company like Lyonnaise des Eaux provides a Smart Water offer, which
represents the starting point for all these new services. To do so, we
capitalize on an integrator role on the entire Water value chain to develop
specific offers with different levels of service adapted to each segment
and customers’ expectations.
Pierre Andrade, Deputy CEO - Lyonnaise des Eaux
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VI. Greenwich Consulting : our methodology
to implement smart home
The partnership strategy necessary for Smart Home implementation can only
be carried out through successive waves given the number of players needing
co-ordination. This strategy should be guided though the prioritization of
customer value propositions around 4 pillars outhired previously.
1. Prioritising customer segments
Customer type and prioritisation based on their ability to pay, regulatory impacts and potential
market evolutions. For example:
• First, initial prioritisation of Enterprise clients, more palatable to energy consumption optimisation
services, by selecting high-energy consumers
• Second, targeting niche markets: very large consumers, “technophiles”
• Finally, covering existing homes encompassed by the energy retrofits regulations by integration
of sensors and optimising consumption in energy scoring
2. Prioritising equipment
• Consideration of the customer added value provided by the features with respect to the cost of
equipment needed to supply these features
• Prioritisation of the value of the Stand-alone equipment, the equipment provided with the
functionality and the devices providing this functionality if purchased separately
• Consideration of the equipment lifetime in the economic analysis
3. Prioritising fluids
• Prioritisation of fluids (utilities) to be added into the package offered to the customer
• Consideration of expected developments in the value perceived by the customer around the fluid:
volatility of unit price, total value perceived by the customer, target supply (house/ apartment ...)
4. Prioritising services
Prioritisation of services to be included in the service proposal made ​​to the customer:
• Consumption monitoring and management/ optimisation
• Acessibility of the interface and display devices
• Customer journey and support
• Service settings (alert thresholds, modalities of alert, control functionalities,...)
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Based on our experience in working with complex ecosystems which involves multiplicity of
stakeholders like NFC, we recommend a three stage approach as shown in figure 10
Figure 10 –Greenwich Consulting approach to conduct Smart Home
Reflection and implement a strategy
1
2
3
Build an aspirational
segmentation
Investigate
innovative services
Map the ecosystem
and assess the models
• Identification of current and
future customers’ needs
• Portfolio of initiatives
• Features of current solutions
• Previous experiences on similar
issues such as NFC
• First customer segmentation
on the basis of macro service
criteria to be tested
• Positioning vs. competition / new
entrants
• Identification of business and
industrial partners
• Identification of best practices
• Design of the value proposition
• Qualitative and quantitative
studies
• Assessment of possible business
models
• Association of customer profiles
with potential services
1. Build an aspirational segmentation
Identify the pair segment/ demand for some services by adopting a structured and quantitative
approach.
• Define a first segmentation
• Target customers to study
• Conduct a qualitative and quantitative study
• Consolidate and analyze results
• Build the pairs segment/ appetite for some services
Step two is to nourish the first phase in order to work on a limited list of services to be tested.
Only a thorough understanding of customer expectations will allow building appropriate offers.
2. Carry out an assessment of potential innovative services
Categorize the range of possible services within the Smart Home system:
• Perform an international benchmark and identify successful models/ services
• Identify and assess initiatives already undertaken through interviews
• Evaluate and categorize the identified services
This phase should be conducted in parallel with customer segmentation to iterate the process
of segmentation and to nourish qualitative and quantitative studies.
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3. Map the ecosystem and assess models
Define scenarios then conduct experiments:
• Identify the ecosystem of each pair segment appetite
• Position each pain in the ecosystem
• Identify the best strategy of integration in the ecosystem
• Define the business models adapted to address each of these identified cases
• Build scenarios and prioritise them
The three key success factors for building an approach
to frame a Smart Home offer are:
1. Adopting a customer-focused approach
2. Building legitimacy on the topic by identifying the best partnership models (investment
allocation, value-sharing, ownership of the customer base,…)
3. Using a wave approach on the market place by prioritising equipment, fluids and the most
profitable solutions
Today, players from different horizons position themselves on this market but offer solutions that only partially meet customer expectations. To
propose a value-added offer, companies need to implement a more segmented approach based on customer types, by investigating their deeper
needs and better understanding their willingness to pay for such services
with regard to the expected benefits
Nicolas Clinckx, Partner - Greenwich Consulting
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thoughts,
The critical challenges raised by our
clients are continuously evolving,
requiring a specific and comprehensive
approach.
Greenwich Consulting thoughts address
structural issues that are reshaping the
telecommunications, media and utilities
markets.
All our latest publications are available
at www.greenwich-consulting.com
ABOUT GREENWICH CONSULTING
Greenwich Consulting Group is a management consulting firm structured into
sector-based companies: Greenwich Consulting for the Telecommunication,
Media and Utilities and Wight Consulting for the Financial Services.
Our aim is to be Agent of change: we focus on the most impacting drivers of
industry change and seek to create sustainable competitive advantage. Greenwich
Consulting is the leading sector based management consulting firm globally
within our niche. With about 200 professionals, Greenwich Consulting Group
is serving clients across more than 100 markets in all continents. Greenwich
Consulting Group is a unique success story in Europe, with a 35% compound
annual growth rate (CAGR) in revenue over the last 10 years.
For more information,
please visit www.greenwich-consulting.com
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Copyright 2013 Greenwich Consulting Group
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