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03/26/2013

Connected Consumer Devices Are Likely to Benefit the Consumer….Indirectly and Last

I was intrigued by a recent article in Bloomberg Business Week that asks in its headline: Do You Really Want to Talk to Your Kitchen?  This article takes a brief look at the home automation industry and how it might finally be on the verge of rapid growth.  Start-ups like SmartThings are making the design and use of connected devices easier, which may in turn result in wider production and adoption.  

But as with much of today’s expanding coverage of connected devices in the mainstream press, the article misses a number of major points and creates some misconceptions.  First, it implies that connecting devices will exclusively benefit the consumer.  Yes, the ability to remotely operate appliances and control them from your iPad may have some consumer benefit, but we see bigger benefits with the adoption of connected devices.  The consumer benefits – while still real – will become indirectly derived.

Take the lowly washing machine.  As implied by the Bloomberg article, there may indeed be someone who wants to start a load of laundry from the office or wants to know that it’s time to put the clothes in the dryer.  That said, we think these people are few and far between.  Instead, consider the advantage of having your washing machine continuously track and report usage data to Whirlpool.  If that were the case, the local service technician would know in advance – even before you know - when your machine wasn’t functioning properly, or when cumulative use had been sufficient to predict failure of a key part.  Over time, reporting like this will shift the entire appliance repair industry from emergency repair calls to scheduled-maintenance calls.  It is also likely to enable a variety of new business models for the appliance industry.  For example, manufacturers will sell or bundle low priced maintenance contracts along with the sale of each new machine. In-turn they will sell the data generated by the machine to local technicians who actually perform the work and get paid for their service.  Is there a consumer benefit in all of this?  Yes, your washing machine is likely to last longer, be repaired less often and in some cases, never have to be replaced.

The same reporting will also provide the washing machine manufacturer with unprecedented insight into how its products are used, greatly aiding and accelerating the product development process.  Focus groups and expensive surveys of consumer usage, which try to approximate what consumers are doing at home, are going to be replaced with real data. This information is going to be continuously fed back into the product development organization, enabling innovation to occur at a faster pace and with a higher degree of certainty than ever before.  There hasn’t been a lot of innovation in the area of washing machines that we’re aware of, but that will change when the connected washing machine becomes the industry standard.  Again, consumers will benefit because washing machines will be improved and last longer, a benefit that makes the ability to monitor the spin cycle on your iPhone seem frivolous.

Whirlpool might even be able to take a cue from GE, who has begun selling jet engines based on how much they are actually used, instead of a large up-front charge.  You will still own the washing machine, but you will have the option of paying for it by the washer load.  Perhaps you will even buy it from a company that specializes in the delivery, usage reporting, and maintenance of washing machines.  If it sounds like washing machines as a “managed service,” a concept very popular in IT, it should.  New, more flexible pricing models will be a true benefit that results from connected appliances.

Our point is simple: yes, connected appliances will benefit consumers.  But the remote operation of items in your home is a very small part of the story.

 

 

 

 

 

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