5 Challenges Facing the Smart Home Market

5 min readJul 27, 2015

Now is the time when things get interesting. By all accounts, the Smart Home market — and the even larger Internet-of-Things market — is still nascent. Everyday we hear about cool new connected devices, such as the wifi connected oven that will let you login and talk to your oven while at work, and we marvel at the possibility of living the Jetson’s life. It all has yet to go mainstream though. Technology has finally progressed to a point where the masses can now start to adopt this lifestyle, and it will be exciting to watch how this potentially disruptive technology impacts and influences the world around it.

Here are 5 things to keep in mind that may be hampering the growth of the smart home market:

1. No one really knows the market size

Without knowing how big or small a market really is, it can get difficult to identify where the opportunities really are. Depending on how you define the smart home market, you will get very different results when trying to measure its size. Some sources only define the market to be the devices themselves (such as a smart TV) and others also include services based on those devices (such as Netflix). Understandably, the divide between connected and non-connected devices is becoming blurred, leaving the definition of this market to the interpretation of the individual trying to figure it all out.

IoT Analytics published a white paper that shows this phenomenon. While one source predicted the IoT market size to be $300 Billion by 2020, another reputable source predicts it to be closer to $7 Trillion. Regardless of the actual number, one thing is quite clear: the market is expected to grow tremendously.

2. The technology is not quite there yet

Imagine your stereo system automatically playing Frank Sinatra when you open your garage door after dinner with your significant other. Sure, who wouldn’t be excited about your house playing wingman to further set the mood of a romantic night, but the reality is the technology is not yet simple or reliable enough to make it happen. If you want to set this up on your own, you have to understand funny sounding words like ZWave and Zigbee, mesh networking, and Thread protocol. There is no standard protocol or specification to this technology, and until that happens, real technological progress will be hampered. Product developers will be devoting their time porting their products to the many different protocols, and consumers will be confused about which technology to invest in. Therefore, there is still no dominant player in the market, leaving open the opportunity for one to emerge and shape the course of the industry.

3. Thieves can unlock your house… virtually

Cyber security related to connected homes will be a major issue. Although this does not seem to be a major priority since the market is small, we have already seen articles pop up warning us of the disasters that await when smart home technology hits mainstream. Who wouldn’t be afraid of the possibility of a hacker being able to unlock your entire house without ever needing to step foot on your property? A company providing smart home services in this market must be able to keep its customers safe and secure.

Smart Homes are Convenient But May be Vulnerable to Hack — Ins (source)

4. We need coordination, not just integration

There is already a race going on to see who can come up with the best hub. With Wink struggling, we may have already seen the first casualty of competing for a market that is not quite ready for mass adoption. The problem goes beyond lack of consumer interest, though. When it comes down to it, none of these hubs are unique from the other: each claims to do the best job of connecting smart devices together. Once the devices are connected, then what? Sure, it is nice to be able to sit on my bed and turn off all the lights in the house with one tap, but that novelty only goes so far. A truly smart house should be unique to each person living in it. For a smart device hub to really add value, it should make life easier on the consumer in ways the consumer never even considered.

For example, after living in bright and sunny Los Angeles for a few years, I don’t bother checking the weather anymore. I expect it to be sunny and 78 degrees all the time. On the few days when it is expected to rain, I would appreciate it if, as I was walking out the door, my house reminded me to take an umbrella. That would require coordination with a few different devices in the house to know about and to communicate with each other. Until that happens, smart homes will be more of a fun hobby than a solution that adds true value.

5. People are aware, just not ready to jump in

The rumblings we hear are that the smart home market is ripe for astronomical growth, but that consumers are waiting on something to really believe in these products. Ultimately, mass adoption of smart home technology will follow the same path as every other high-tech trend: early adopters followed by the mass consumers. As Geoffrey Moore wrote in his book Crossing the Chasm, “the rest of the herd […] gets a free look at how well the technology plays out without having to take any immediate risk.” Until the problems above are addressed, the risks may indeed be far too risky for the normal person to get engaged.

There are many other forces involved that will determine the direction of the smart home market. Part of the fun of being involved in any new industry is watching how the market will play out and seeing if any of these predictions actually come true. Whichever way this all pans out, we can be pretty confident that it will be an interesting ride.

This post was written by Nader who heads Business Development at Josh.ai. Previously, Nader was managing partner at GenYrator and before that he was Vice President / Supervising Execution Trader at Bank of America Merrill Lynch. Nader has an MBA from USC and a BS in Electrical Engineering from UT Austin. He likes to play volleyball, travel, and rock out to pop music.

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