How home appliance manufacturers can maximise their role and revenues in IoT

HOW HOME APPLIANCE MANUFACTURERS CAN MAXIMISE THEIR ROLE AND REVENUES IN IoT SPONSORED BY

INTRODUCTION The arrival of the Internet of Things (IoT) is radically altering the businesses of home appliance manufacturers as new opportunities open, widening their potential far beyond simply selling appliances to consumers. The excitement is understandable. A white goods manufacturer can move from selling a fridge or a washing machine to being able to provide value added services to customers. These include consumption monitoring, automated supply of consumables, effective preventative maintenance and gathering information to aid research and development.

That list only scratches the surface, home appliances are set to become part of a wider smart home ecosystem, enabling greater control and flexibility for users.

However, so far smart home efforts haven’t taken off as expected. Consumers in most markets haven’t quite come fully onboard with the concept yet and, although many are buying smart appliances, much of the focus is on entertainment products rather than devices and appliances to enable the smart home.

This is borne out by research from consultancy firm Deloitte which has reported that more than half (52%) of consumers in the UK own some form of connected device for their home. The majority of these are connected entertainment devices such as smart TVs. Penetration of connected appliances and other devices such as smart lighting systems are much lower. The survey also found that two-thirds (70%) of consumers do not intend to buy an IoT product in the next 12 months.

However, that is symptomatic of an early stage market and it is significant that 30% of Deloitte’s respondents are considering acquiring IoT-enabled products. Other markets reflect this willingness to buy. The recent results of a survey by the Internet of Things Observatory at the School of Management of Milan Polytechnic in Italy found that 79% of interviewees stated they are willing to buy products for the smart home. The research showed that one in five consumers already owns at least one smart object inside their home and, among those affirming they intend to buy a product for the smart home, about 25% are going to do so within twelve months.

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Figure 1: Consumer ownership of connected devices

60%

48%

50% 40% 30%

28%

26%

20%

Smart thermostat

Connected car system

Surveillance security system

Wireless speakers

Video streaming device

Base: UK consumers 18+ (n=4003) Source: Deloitte research, May 2016

Games console

Smart home

Smart TV

Connected entertainment devices

2%

2%

2%

1% None of these

3%

Interactive robot

3%

Smart lighting

3% 0%

A home appliance

10%

Wearables/fitness device

11%

10%

In China, the IoT market has been predicted to reach US$121.45bn by 2022 in a report from MarketsandMarkets. Agricultural apps dominate but the smart home market in the country is likely to expand to US$22.8bn by 2018, reports Juniper Research.

The world market, therefore, is reaching a tipping point at which more and more home appliances become connected. Delay is partly because of consumers waiting for their appliances to need replacement and partly because the benefits of IoTenabled appliances seem unclear to the market. Early concepts, such as a fridge that orders milk, seem to add little value to consumers who have concerns about the increased cost of IoT-enabled appliances and the potential need to engage in additional service relationships with connectivity providers, for example.

As the smart home appliance business model becomes clearer, home owners will start to see the potential benefits of IoT-enabled appliances as part of a wider smart home picture. For consumers, success is all about how it benefits them so appliances that help them save money through more efficient energy consumption or that makes their lives easier will unlock the mass market.

However, achieving those attributes presents a series of challenges to home appliance manufacturers. They are no longer in the fridge or washing machine or oven business. Their devices need to offer home owners a wide range of functionality and, because of the long lifecycle of many home appliances; they need to be ready to accommodate future applications where possible.

IoT IS CHANGING THE GAME FOR APPLIANCE MANUFACTURERS Differentiate your products The emergence of IoT provides home appliance manufacturers with an opportunity to differentiate their products. There’s an opportunity for makers of products that have seen only incremental innovation over decades, such as electric kettles, to move beyond the usual attributes of being faster and quieter and take new approaches to customers. It’s important that home appliance manufacturers view this as an opportunity to do something that differentiates them rather than simply replicating the current level playing field of appliance offerings.

Manufacturers should consider how their products and portfolios fit into the wider smart home, whether they have an opportunity to lead device integration and services, and how they can add real value to users rather than just offering technology for technology’s sake.

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Optimise product development IoT connectivity enables appliances to report back to the manufacturer about how they are being used and what maintenance issues are arising. Appliances will therefore be able to feed future product development with real life insights into consumer usage. However, at this early stage of the market mass volume doesn’t exist so home appliance manufacturers should consider likely consumer wants.

These can then be addressed either in the original product development or as a later upgrade. IoT enables software upgrades to be completed over the air so new apps and features can be added to products while they are in deployment.

A further product development point is to remain focused. By doing so, appliance manufacturers can more rapidly bring to market a few IoT-enabled features that meet immediate customer needs and help differentiate their offerings. There is a danger that in trying to bring out the complete IoT-enabled appliance, makers could lock themselves into years of development and as a consequence arrive late to market for the early applications.

If one accepts that this is a landgrab phase and those earliest to market with compelling apps on one appliance are likely to win custom for other appliances, that could be fatal to the appliance maker.

Focusing on the early apps, while allowing for a future upgrade path, enables home applications to get out to market with a simple offering of appliance plus a small number of IoT-enabled apps. This will avoid bewildering customers, shorten time to market and cement the idea of the manufacturer as an innovator in the market place.

CASE STUDY 1: IOT TECHNOLOGY HELPS MAKE AIR CONDITIONERS SMARTER TCL Group, one of the largest consumer-electronics enterprises in China, is collaborating with Ayla Networks to make household appliances and HVAC systems smarter, using the Internet of Things. Three IoT-enabled air conditioning products, announced in 2016, are the first products of the partnership.

TCL was founded in 1981 and, after 30 years of development, the company achieved global sales of US$9 billion in 2014. To ensure continuous growth, company executives recognised, the company must keep innovating, and so it looked to the emerging Internet of Things. TCL extensively vetted several IoT platform vendors, and ultimately decided Ayla Networks could transform its conventional household product line into internet-enabled devices.

The appliance manufacturer was impressed by Ayla’s track record of helping manufacturers to send secure, reliable connected products to market with minimal time, cost and effort.

“The Internet of Things will be everywhere in the next decade. With Ayla, we knew our products would be connected to the Internet quickly and securely allowing our customers to view, manage, and control all the TCL products in their home through a mobile application” says Shubin Li, the TCL Air Conditioner general manager at TCL.

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By using Ayla’s Agile IoT Platform, TCL has been able to: • Unveil three new smart products: a split air conditioner, a mobile air conditioner, and a dehumidifier.

• Use Ayla’s over-the-air (OTA) communication services to remotely upgrade their products’ firmware in the field. In addition, the products push information to end-user applications, with the ability to match the language of each user’s mobile phone.

• Enable a feedback loop between their connected devices and the company’s database to paint a clearer picture of how customers using their products.

THE BENEFITS TCL has achieved a series of benefits by using Ayla’s Agile IoT Platform. The realworld use data enabled by Ayla is allowing TCL to improve product performance – such as energy consumption – on the fly. It is also helping TCL increase product reliability by alerting users to product maintenance and preventing malfunctions. This superior product service is attracting new, tech-savvy consumers in new markets and TCL is using its secure connection with users to build a direct relationship with them.

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IMPROVE THE CUSTOMER EXPERIENCE The home appliance customer experience has traditionally been one of going to a retailer, choosing an appliance and having it delivered. Some retailers offer installation services, some don’t. The direct relationship between the manufacturer and the customer is interrupted by the retailer but IoT has the potential to give power back to the manufacturer.

Ways that manufacturers can strengthen their relationships with users include: preemptively managing maintenance so faults are addressed before they become performance affecting issues; providing access to new applications during the life of the appliance; and advising customers on how to run their equipment more efficiently.

Ultimately this may need to a new business model where, instead of buying an appliance, a customer might pay a monthly subscription for the appliance and a range of additional IoT-enabled services.

GENERATE NEW REVENUE As outlined above, many appliance manufacturers are confined to generating revenue from wholesale sales to retailers. Some have the ability to generate revenue from consumables and servicing. However, IoT-enabled devices open up a new stream of revenue sources from recurring service revenues to one time app purchases or upgrade sales.

Much of this may be in the form of small incremental charges but for a white goods manufacturer, the value of adding these to the device revenue and opening the door to becoming the appliance IoT ecosystem enabler for the entire home is of great appeal.

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UNLOCK INVALUABLE DATA A further revenue stream yet to be explored and certainly subject to customer opt-in is the data that appliances can collect. These data range from how frequently a smart kettle is boiled to how often a fridge is restocked, what temperature it is run at, when a washing machine is operated and on what programme, and how HVAC is utilised.

The data has internal value to the appliance maker but also to other organisations such as supermarkets, utility companies, washing powder makers and even insurers.

The insights all form part of a highly granular vision of the customer, their lifestyle and their wants and needs. The advanced players could even have a lead role to play here.

CASE STUDY 2: WATER SOFTENER COMPANY ENHANCES DEALER SERVICE An original equipment manufacturer (OEM) of residential water softeners, sold under recognizable brand names, which are available throughout the United States from all the major retailers plus a lucrative dealership channel, has enabled its dealers to proactively monitor and service the water softener appliances remotely.

The OEM had already decided to create cloud-connected models for its water softeners using Ayla Networks’ Agile Internet of Things (IoT) Platform. Dealers would be able to proactively monitor the connected devices and service them remotely, to achieve significant increases in efficiency, time saving and service revenues.

However, the OEM was concerned about the privacy of the data generated by the connected water softeners and about how much data a dealer could and should obtain on their customers’ installed units. Because most of a home’s water supply flows through the water softener, the unit could collect data revealing information about the number of people in a household and their water usage patterns, perhaps even their vacation schedules.

Concerned about this level of data, the OEM wanted to put in place controls that would allow an end customer to determine how much information their connected water softener shared with dealers on an ongoing basis. At the same time, the OEM did not want to hinder the dealers’ ability to be notified about certain events that would help them detect or avoid problems with the installed units. The OEM wanted the dealer to have enough data to remotely troubleshoot or resolve issues.

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The Ayla cloud team built a sophisticated role-based access framework that is configurable with granular access control rules. The framework allows the OEM to define roles and the privileges associated with each role. Each user in the system can have one or more roles, even down to having different roles for different devices. For example, Jane Doe can be the owner of one device, while having restricted privileges on another device. The OEM defined a ‘Dealer’ role and identified the subset of data from the water softener that this role can have access to during normal operations. In this way, dealers are notified only when a unit reaches certain critical thresholds that would be of interest from a service standpoint. When a service event occurs, the dealer can request access to the unit from the customer. Alternately, the customer can grant greater access to the dealer for a specific duration of time. During this time, the dealer gains enhanced access to the unit for easier troubleshooting. Once the problem is resolved, the time-based access can expire or can be explicitly revoked by the customer, and the dealer falls back to a lower level of access.

THE BENEFITS As a result of Ayla’s role-based access framework, the water softener OEM was able to navigate the delicate balance between exploiting the capabilities of a connected device and addressing the key privacy issues that arise out of it. The OEM has put the control of devices firmly in their customers’ hands – without diminishing dealers’ ability to provide a superior level of service.

Using Ayla’s framework, the OEM built a dealer portal allowing dealers to monitor and manage their customer base and installed devices. With this portal, dealers are offering a level of service that was previously hard to achieve. In addition, the OEM built its own support portal based on the Ayla Service API that provides a view into dealers’ activities and into each dealer’s customers and water softener units.

The OEM used a comprehensive, flexible, and configurable solution from Ayla that not only meets the manufacturer’s stringent privacy requirements, but also provides for future changes to access control policies. The portals built using the Ayla API have increased productivity and revenues for both the OEM and their dealers, while enhancing customer satisfaction.

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A GROWING MARKET FOR SMART HOME APPLIANCES While automation devices – except safety and security devices – accounted for 60% of the global market in 2015, they will grow to comprise 80% of the market in 2020, predicts IHS Markit. The automation devices that will contribute most to market growth are plugs and switches, appliances, air conditioners and lighting. For these four types of devices, global annual shipments are projected to increase from 15 million in 2015 to 300 million in 2020. In terms of total smart home penetration, the firm estimates that while just 6% of North American homes had a smart home system in 2012, 28% will have one installed in 2020.

Units (000s)

Figure 2: World market for connected home devices 2015-2020

2015 Safety and Security

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2015

2015 Climate Control

2015 Consumer Electronics

2015

2015 Lighting and Controls

The smart home market continues to expand, with 47 million connected smart home devices shipped globally in 2015. The market is projected to broaden at a compound annual growth rate of 60%, reaching 477 million devices in 2020, according to IHS Markit.

Gartner predicts a typical family home could contain more than 500 smart devices by 2022, but now, most consumers see ‘smart home’ as a nebulous term without a clear value proposition.

This demonstrates that while growth is slower than originally expected it is coming. However, home appliance manufacturers need to exercise caution and avoid costly development of IoT solutions that do not have specific applications or add clearly identifiable value to the consumer. To an extent, the market has been held back by impractical ideas that are of little appeal to consumers. Ayla Networks has come up with a list of the seven biggest mistakes manufacturers make which are listed below. The list, with full explanation of each point can be viewed here: http://info.aylanetworks.com/ayla-ebook-7-mistakes-iot-now

THE 7 BIGGEST MISTAKES MANUFACTURERS MAKE WHEN LAUNCHING IoT PRODUCTS • • • • • • •

Designing an IoT solution without identifying a specific use case Choosing hardware before choosing your IoT cloud Failing to budget enough time for the project Over engineering the first version of your IoT product Neglecting to make OTA (over-the-air) communications a priority Doing too little field testing Approaching the IoT like a new feature rather than a whole new category

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10 BEST PRACTICES FOR HOME APPLIANCE MANUFACTURERS • • • • • • • • • •

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Clearly define your use case Prioritise security and scalability from the beginning Design for end-to-end configurability Use open standards-based IoT solutions Make your connected products easy to install and use Design for secure OTA (over-the-air) system updates Include RBAC and other management controls Start thinking about your appliances from a service perspective instead of a product perspective Product hardware still matters. Stick with proven hardware solutions Work with a leading IoT platform

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CONCLUSION There are many challenges for home appliance manufacturers in ensuring they play a significant part in smart home monetisation. However, there are compelling advantages, as outlined in this paper. Nevertheless, substantial organisational change is required for manufacturers to be successful. Ultimately this may involve changing from a product to a service model and the challenges that will entail. These should not be underestimated and manufacturers currently have insufficient experiences of the demands of providing ongoing services to users. For them to fully participate here this will have to change.

Manufacturers are currently limited by the dominance of the sales channel which is the touchpoint at which most consumers interact with manufacturers.

Retailers are still likely to play a part because users want to interact with appliances they buy before committing to them so manufacturers will have to think carefully about the role of retailers in the future.

Finally, simply recreating the functions of their device with reporting capability won’t be enough to be compelling for consumers. Manufacturers of home appliances need to find additional value propositions for their IoT-enabled offerings. These must enable users to save money through efficiency gains or save time from better fault management to be truly attractive. To achieve either interoperability is vital because, while manufacturers might like to imagine smart homes will be a single vendor environment, most will involve products from different vendors and different technical generations.

For the smart home to deliver on the promise it holds for consumers, appliances must be able to operate with other systems and data repositories.

An IoT platform that takes account of this fundamental requirement while securely protecting the data of manufacturers and consumers is what is needed, along with marketing and market education, to move the smart home appliances market on from being composed of single vendor point solutions into an integrated internet of things that provides real value across the entire ecosystem. www.aylanetworks.com

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