o2 smarthome

THE LAB REPORT

In the economic boom that followed the Second

World War, homes around the world saw an influx of

technology that would revolutionise the way we live;

creating large amounts of leisure time that would have

once been spent doing household chores.

Home appliances that we take for granted today would

have been an expensive novelty in the early part of the

20th Century, if indeed they existed at all.

But in the most part, little has changed since then.

While cheaper and more efficient today, devices like

vacuum cleaners, irons, kettles, washing machines and

dishwashers function in much the same way as they

did when they were initially conceived.

And as the productivity gains of new technologies

plateaued, consumer appetite for the next “time saving

gadget” waned. New entrants to the market were

often viewed as expensive and unnecessary.

THE SMART HOME REVOLUTION

Rob Smith

Rob Smith is Strategy and Insights Manager for the Digital Products, Innovation and Insight team within IT. He looks at emerging trends in business, society, and technology to identify opportunities for the O2 business.

New technologies could revolutionise how we understand, engage with, and serve our customers. In these special reports from The Lab, we take a look at how future technology trends could shape the way we do business at O2.

Smart home technologies could provide the biggest shift in how we live for over half a century.

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This report was published in Feb 2017

TECHNOLOGY

But real life implementation of the technology was

limited to enthusiasts and hobbyists, building DIY

systems using an array of component parts. Specialist

electronics manufacturers and retailers targeted their

products at these innovators and early adopters, and

they often required a high level of technical knowledge

to configure.

However, over the past few years this has started to

change, and smart home technology has become more

accessible to a wider portion of home owners.

This is due to a confluence of forces:

○ The ubiquity of home broadband & Wi-Fi – As of

2015 close to 80% of homes in the UK had Wi-Fi1,

making it easy to retrofit internet enabled devices,

without having to worry about installing an access

point to connect them.

○ The smart phone revolution – Whether

connecting over Wi-Fi or Bluetooth, the mobile

phone provides a simple way to interact with and

configure smart devices, through a mechanism that

is familiar to virtually everyone.

○ Simplification of the user journey – Entrance into

the market of mainstream technology companies

like Apple, Google and Samsung have helped to give

devices mass market appeal, by focusing on design

quality and ease of use.

This sits along-side the falling price and increasing

sophistication of the underlying technology, which is

making new devices economically viable to produce for

the first time.

Removal of the technical barriers to adoption has

coincided with an increasingly tech savvy target

audience, who are not intimidated by the proliferation

of new technology throughout our lives.

What is currently available?Globally, a number of service providers including AT&T,

Deutsche Telecom, SK Telecom and Telstra, have started

selling connected home ecosystems. Their offerings

focus on providing help and support as well as devices

from multiple different suppliers.

THE LAB REPORT

THE STORY SO FAR...The concept of home automation has been around for a long time and has been a feature of many popular sci-fi movies.

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3TECHNOLOGY

Phillips Hue - This range of LED light bulbs and strips can be controlled from your phone, to create different lighting effects depending on what you are doing.

Amazon Echo - The smart speaker from Amazon enables a range of other smart devices around the home to be voice controlled. The inbuilt virtual personal assistant, “Alexa” is also capable of responding to user questions and completing simple tasks.

Nest - Nest Labs was acquired by Google in 2014, and sells a range of smart home technology including a smoke and carbon monoxide detector and a smart thermostat.

Hive - (British Gas) – The Hive range of connected home products began with “Hive active heating”, a smart thermostat that enables you to control your heating and hot water from your phone. Other Hive products now include motion sensors and lighting.

Source: nest.com

Source: hive home blog Source: meethue.com

Examples of todays technologyOver the past few years, there has been a flurry activity in this space, with companies from a variety of

backgrounds launching new products and propositions. Some of the better known products include:

Source: androidcentral.com

4TRENDS

THE LAB REPORT

WHAT DOES THE FUTURE HOLD?The technology that we see today is really just the starting point for the connected home. Over the coming years we’ll see the emergence of some key trends that will accelerate adoption and forever alter the way we interact with our homes.

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TRENDS

Three big trends impacting smart home

1. ZERO UIToday we think of our smart phones as the centre of

our connected world, referring back to our screens to

control the devices around us. But our interaction with

many devices in the future will be screen-less2.

The concept of zero user interface refers to a world

where devices are controlled primarily by voice, gesture,

biometrics or even simple eye movements.

We already see this technology in existence today,

in devices like Amazon Echo and Microsoft Kinect,

but it will become more widespread in the future as

designers seek to remove the friction between user and

technology.

More human, intuitive ways of interacting will

become the norm and devices will become capable of

processing ever more complicated instructions.

2. TRULY SMARTMost of the technology that we refer to today as

“smart” isn’t really very sophisticated at all and

would be better described simply as “connected”.

But the tidal wave of advances in machine learning

and artificial intelligence that is already underway will

unquestionably change this.

These advances will underpin a revolution in home

appliances, making them truly smart for the first time.

Ultimately, smart eco-systems will take over some of

the thinking from their human masters, proactively

making decisions on their behalf as to how best to run

the home. This will include devices becoming self-

configuring; with new devices instantly recognising the

larger eco-system they are part of and finding their role

within in.

Smart thermostats like tado° are already moving in

this direction, automatically using your phones GPS to

detect when you’re not in the house and turning the

temperature down. It will also look at the weather to

make sure it is heating the house in the most efficient

way depending on the outside environment.

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TRENDS

3. INTEGRATED, INTERCONNECTED &EMBEDDEDMost existing smart home solutions involve installing

modern devices into often decades-old buildings. But

as IoT technology is still in its relative infancy, there is

a lack of standardisation and many of these devices

function in fairly standalone manner. Sales of point

solutions have led to a proliferation of connection

hubs and a requirement for multiple disparate apps to

control them.

As the technology matures, interconnectivity between

devices will improve, removing the need for duplication

of components and creating a web of devices around

your home that can automatically talk and interact with

one another.

Standardisation will also help to drive adoption,

and we’ll move to a scenario where technology is

embedded into the very fabric of the building. As

opposed to door sensors stuck to the door frame,

they’ll come as standard, built into the doors. And we

won’t need to buy smart plugs, because every plug will

be smart from the moment pen is put to paper on the

first designs for the building.

WHAT WILL ALL THIS ENABLE?As the technology becomes more sophisticated, smart

home systems will proactively take on complex tasks to

support and enhance our daily lives:

○ Monitoring the power consumption in your home to

decide the optimal time to use certain devices, and

proactively switching between energy suppliers and

solar power to control costs

○ Home appliances triggering alerts when components

need repair, automatically scheduling time with a

certified engineer and ordering the relevant parts,

without need for assistance from the owner

○ Lights automatically coming on, the kettle

automatically boiling and your car heating up when

the system detects that you’ve woken up in the

morning

GRADUAL ADOPTIONWhile the proliferation of technology

throughout the home is somewhat inevitable,

it will take many years before the sci-fi vision

of home automation and virtual assistants

becomes widespread.

The typical lifecycle for most home appliances is

long; in some cases over 10 years3, and people

don’t tend to upgrade early due to the large

cost and perceived lack of benefit.

In the short term, devices that can be retrofitted

to existing purchases will gain the most

traction, while other devices will be replaced

and upgraded as part of their usual lifecycle.

We’re already seeing this with the popularity

of things like smart plugs, lightbulbs and

thermostats. But the full benefits of the smart

home revolution won’t be realised until other

appliances start to catch up.

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LEARNING TO LIVE WITH IOT

THE LAB REPORT

TO THE DOUBTERS OF THIS NEW WORLD

Critics have questioned the usefulness of existing

smart home solutions, suggesting that in many

cases they are incredibly expensive for the limited

incremental benefits they offer.

A recent Huffington Post article quite rightly asked

“is saying ‘Alexa turn on the light’ really better than

just turning on the light?”4

Even if your answer is “no”, this apparent

uselessness doesn’t make it a bad product.5

In fact, sales of Amazon’s Echo products suggest

that Alexa will do very well.

We expect smart home technology to exist in

parallel with, rather than replacing traditional

fittings around the home like light switches.

But if the instruction had been “Alexa, turn on

the light if I’m not home before it gets dark” then

things start to get a bit more interesting

One of the ongoing questions of the burgeoning Internet of Things age seems to be “why would my kettle even want to talk to my toaster?” And if we’re brutally honest, we’re still not 100% sure, but as the cost of data capture continues to fall exponentially, and our ability to process it increases at the same rate, we look set to find out.

At £99 Nest Protect could easily be branded just

an incredibly expensive smoke alarm (compared

to as little as £10 for a standard model).

But as the cost of the technology falls and

disposable incomes rise6, people will be more

likely to pay for the improved safely features

and convenience, even if the benefits are only

marginal.

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LEARNING TO LIVE WITH IOT

In a 2015 survey by Barclays Bank7, 61% of respondents said they are worried about internet-connected technology within their home being hacked.

Many people have expressed concerns about the

security of the large number of connected devices that

are entering our homes. As we become increasingly

reliant on this technology, we also expose ourselves

to the threat of being hacked, personal data being

compromised, our privacy being violated or even being

put in the way of physical harm.

If we can turn our plugs sockets, irons or kettles off

using our smart phones, presumably that means that

someone else could turn them on?

Similarly, there have already been reports of baby

monitors being hacked.8

Device manufacturers have a responsibility to ensure

that their products provide the necessary levels of

encryption to make intrusion suitably difficult in the

first place, as well as mechanisms to promptly detect

intrusions should they occur.

But there is also an onus on the end users to protect

their devices, ensuring that they use suitable passwords,

and that their security software is up to date.

Of course hackers and cyber criminals are not the only

thing to be concerned about. There is also the risk that

law enforcement agencies will try to get hold of your

personal data.

In a recent court battle in the US, Amazon refused to

give access to data captured by one of its Echo devices,

which prosecutors believe may provide evidence in a

murder investigation. But is it simply a matter of time?

Even if you have nothing to hide, you might not want

investigators9 listening to your private conversations.

“Alexa, please take the stand…”

SECURITY AND PRIVACY CONCERNS

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OPPORTUNITIES

THE LAB REPORT

OPPORTUNITIESFOR O2With the launch of O2 Home last year, we have already established a presence in this space, and plan to expand aggressively over the coming years, delivering both innovative new products and excellent service to our customers.

As the technology continues to evolve there are several

trends that we could monitor, and at the right time

look to incorporate them with our offering:

FOCUS ON SERVICE AND SECURITYWith fierce competition amongst manufacturers, and

consumers facing an overwhelming range of options,

curating a small selection of high quality devices and

focusing on the service element is likely to be a winning

combination.

○ As there are high levels of concern about the security

of connected devices, there could be an opportunity

for home antivirus and network monitoring solutions

that alert users to suspicious activity on the network

and provide information as to how to resolve it.

○ When we start to move into an era of automated

purchasing, with our smart homes taking

responsibility for management of our finances

consumers will look to a trusted brand to ensure

their details are safe, and that can help them if

things go wrong.

ROBOTICSThe internet of things is blurring the lines between

our digital and physical lives, enabling us to digitise

and process information about the world around us.

Advances in robotics will enable this trend in reverse,

empowering machines to take action in the physical

world. Robot vacuum cleaners10 and lawn mowers are

already widely available, and other devices are likely to

become more common place over the next few years.

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OPPORTUNITIES

DATA MONETIZATIONThe proliferation of sensors throughout the home

presents a new opportunity to capture massive

amounts of valuable data about how we live. This data

can be harnessed in a number of ways, creating new

revenue streams and business models:

○ Set up a marketplace enabling customers to sell their

data

○ Leverage data to sell insurance products

○ Help customers to make sense of the data to

optimise their own lives (as part of subscription

service)

○ Subsidise device cost in exchange for permission to

use customer data

ENERGY EFFICIENCYIntegration of smart meters into the home ecosystem

will allow far more intelligent optimisation of how we

power our homes, giving people granular visibility of

how they consume energy for the first time.

○ Solar power and energy storage – Solar panels

and energy storage solutions will enable the most

efficient and cost effective use of power. Harnessing

solar energy during the day and storing it for later

use, or selling it back to the grid, will become a

reality for the majority. Energy storage will also allow

intelligent systems to purchase energy at times when

the price is lower.11

○ Sound, light and air pollution – As the capabilities

of smart home systems expand and merge with

other systems like health, capturing data about the

environment around us will become important. Is

sound or light pollution disrupting our sleep? How

does the volume of your entertainment system

respond to an increase in background noise?

Furthermore, particularly in built up cities, people will

look to air quality monitors and purifiers to remove

potentially harmful toxins from the air around them.

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OPPORTUNITIES

In the future, artificially intelligent technology will permeate everything we do.

But we won’t refer to it as “smart” in the same

way that we don’t refer to things today as being

“electric”. It will become so ubiquitous that we won’t

expect anything less.

Our network of connected devices will proactively

and intelligently use data to optimise our lives,

starting initially with our homes, but quickly

extending to our cars, our health and wellbeing, our

schools, our place of work and our social lives.

We believe we are at the start of an exciting journey

and that we’re uniquely positioned take advantage of

the technology trends that will play out over the next

decade.

1. UK Internet Statistics - OFCOM http://bit.ly/2mytV6g

2. “Zero UI” – Fastcodesign.com http://bit.ly/2cw4NJf

3. How long do kitchen appliances last? – CBS News http://cbsn.ws/2mRc1aJ

4. How smart homes are becoming rather stupid – Huffington Post http://huff.to/2kNLCtU

5. The Bad Product Fallacy – Andrew Chen http://bit.ly/2kR07jy

6. Disposable income statistics – ONS http://bit.ly/2m0bXrz

7. Barclays Digital Homes Report http://bit.ly/2m0gZo4

8. Baby monitors hacked – The Independent http://ind.pn/1PLomnI

9. Amazon resists Echo murder evidence call – BBC http://bbc.in/2mowWln

10. Robot Vacuum cleaners – The Independent http://ind.pn/2lF4trLww

11. Time Variant electricity pricing – Environmental Defence Fund http://bit.ly/2mykjZc

REFERENCES

Please send any queries about The Lab Report to [email protected] Want to send us an innovative idea for us to look into?

Check out The Lab’s Front Door

This Lab Report was created by Rob Smith (strategy & insights), Jez Sherwin (creative director),

Tim Newton (designer)

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