Smart home is hard. I know because I have led a smart home platform company and we had our shares of wins and losses. I see most telcos struggle and I have some ideas why.
It has long been touted that communication service providers (CSPs) will be the second coming for the smart home. A.D. Little, one of the top global consulting firms, in its 2012 report Catching the Smart Home Opportunity, Room for Growth for Telecom Operators stated that “smart home services are poised for strong growth and represent an attractive opportunity for telecom operators to expand their services and revenue stream”. In 2015 the company published another report, stating “why telecom operators are best positioned to unlock untapped potential in smart home”. ABI Research published a report in 2018 prophesising that “smart home will be a $11.2 billion opportunity for telcos in 2022”.
With all these powerful prognostications of a potential pot of gold, why are Deutsche Telekom and Comcast, so far the only soundly successful CSPs in the smart home sector?
What problem are you trying to solve?
For the most part, this is still not always clear to the service provider. We have all learned over the years that selling “home automation” is primarily meaningful to those who have a certain amount of wealth or tech early adopters; in other words, geeks. The average consumer is worried about, “are my kids coming home safely from school when I am at work” or when they are older “are they coming home at the time they said they would”, or “how can I make sure I am not coming home to a dark house” or “how can I help my older parents stay at home longer so I don’t have to put them in assisted living”.
Consumers have real problems that require real solutions, but typically need a more complex set of devices and configurations to make effective. The question for CSPs is: which of these things is most important to my customers; how do I articulate it to my customers; and how can I successfully execute this with excellence?
Have skin in the game
In addition to Comcast and DT, some have made some significant investments in the space, such as Orange and AT&T. However, many, if not most, have tried to put their toe in the water with the most nominal amount of resources and commitment they think they can get away with. They treat the sector and opportunity like they do their more mature markets. They know how to sell mobile phones, televisions and broadband plans and in those cases, they are often just the conduit for the hardware provider to do most of the work and the CSP to just provide a channel.
Since most consumers don’t know what these products are and what they do, there is effort required on behalf of the service provider to educate the customer, train their internal stakeholders, invest in understanding what disease they are truly trying to cure for their customers, and market that cure to their customers, etc. Smart Home is hard, and requires investing, learning, evolving and investing some more.
Fear of failure
The drive for “perfection” has resulted in many service providers getting overwhelmed by analysis paralysis. It’s common among CSPs to take more than two years to do a platform vendor bake-off, run RFPs, test solutions, rethink what they are offering, test more solutions, rethink the strategy again, and then after years of thinking, pick a partner and take another six months to a year to launch a pilot. And then, after all that, they still don’t know how to sell it to their end customer. All along, procrastinating in a painfully thoughtful way, and letting companies like Google, Amazon, Alarm.com and others take their customer, own that relationship, their data and their share of lifetime wallet.
While this is probably not unique to the service providers, large corporations are nonetheless not always great at groupthink. Typically, the decision to launch a new offering to customers requires alignment with procurement, operations, marketing, sales, training, customer care, and so on. It is challenging in large, layered organizations to get everyone on board with the laser focus needed to be successful in an emerging category.
I worked with one CSP that had a great product and product marketing team “driving” the strategy. Smart, focused and committed. Their vision was solid and clear. But somehow, it broke down when it was “executed” by departments not involved in the core strategy. The strategy group wanted to solve a specific problem around connected smoke detectors and other safety devices.
However, by the time it was implemented in this CSP’s retail stores, it was literally merchandised as just a hodgepodge of products on a shelf without a clear rhyme or reason of what problem they were solving for the consumer. And of course, the sales teams didn’t understand how to explain to the customer what the benefits were either. So, when it came down to it, they preferred to spend 15 minutes selling customers a phone broadband plan than spend the 45 minutes required to qualify and explain to customers how these smart home products would benefit them.
Good at selling devices, not solutions
These may explain to some extent why smart home is hard. It is still not a “take out of the box, put it on a table and it does everything you expect it to do without much effort” kind of a product. Yes, there are single devices that solve simple problems that are getting significant traction in the market. Ring doorbell cameras, Nest thermostats, and Amazon Echo devices have become mainstream in many homes and can be designated as smart home successes. But when putting together something with multiple devices, creating scenes, triggers, schedules, alerts, and creating the ecosystem of devices designed to coordinate with one another to solve a larger problem, this is still, for the most part, not a simple, DIY product or process.
Is it too late?
The majority of service providers who have waited are now challenged with an increased competition which heightens the problem even further. “How can we enter now and differentiate ourselves”, is the current dilemma. So, rather than being able use past experiences to learn, fail, pivot, iterate and evolve, they don’t have the benefit of that learning. They are now starting from scratch and attempting to figure out where they can fit.
Is my offering “me too”? Is my offering inferior? All reasonable concerns, but they can paralyse the service provider into waiting longer and even further exacerbating the issue that got them in this bind in the first place.
Why should you care?
Why should a CSP or other service provider care about any of this? There are different reasons for different service providers, but all are important
- Missed opportunity for additional service revenue. There is constant pressure on commoditised products and services and the opportunity to add adjacent products and services could greatly benefit the overall business outlook
- Understanding more about their customers. The data that comes from understanding what your customers are doing with their solutions, how this affects their lifestyles so we can support them better, and how to have closer partnerships with our customers are critical missions in today’s market
- Not letting your partners or competitors know more about your customers than you do. This is a risk of adopting solutions when you share or give over the customer relationship to the product provider. Does a service provider want Amazon, Google, Apple, SmartThings or SimpliSafe to “own” the relationship with their customer? Have their mindshare and captured relationship? I don’t think so
The research companies and analyst firms who predicted the boon opportunity for service providers weren’t wrong. It was just harder to get there than they expected. The prescription is not that complicated, but it does take effort.
- If you don’t have the internal expertise, find it
- Invest. You won’t get from here to there for free
- Fail fast. Only a very few have gotten it right so far. Learn what works for you by trial and error
- Focus everyone involved in developing and executing the same mission
- Have a high level sponsor who pays attention
- Start now
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