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Connected Homes December 2022/January 2023 Viewpoints

2022: The Year in Review

By Guy Garrud

Overview

Two running themes through 2022 have been the need for greater interoperability in connected-home technologies and the need for ongoing support to keep many smart-home devices from becoming functionally useless. These factors are especially important for building consumer trust in smart devices that serve ever‑more-important roles. Replacing a now‑defunct smart light bulb is an annoyance, but a smart lock that ceases to function is a major issue. Key developments in the regulatory space in 2022 aimed to improve the long-term trustworthiness of consumer-grade Internet of Things devices, especially for smart homes. Second, the release of the delayed Matter standard promises to enable at least some level of interoperability between devices, irrespective of manufacturer or how the devices communicate. A third element of improving user trust in connected-home technologies is improving cybersecurity. The US government announced a new labeling scheme in 2022 that seeks to highlight which devices are, overall, more secure. It's still very early to tell what scale of impact these new standards will achieve, but they are receiving buy‑in from major players in the connected-home space.

Several much-discussed connected-home applications remained nascent during 2022, but 2023 may see more concrete steps toward their achieving real-world use. Foremost among these applications is so‑called Metaverse technologies—broadly, next-generation augmented and virtual reality (AR and VR). Ironically, the company making the most media noise in this space (Meta, formerly Facebook) lags significantly behind existing VR platforms in terms of technological maturity. Nevertheless, 2023 will likely see Meta's taking further steps toward developing more sophisticated products and building out its potential offerings to general at‑home users. Other key developments in the next 12 months will likely be iterative progression on existing trends. In particular, new approaches to data protection and cybersecurity will begin to see real-world use and could be important enablers for building public trust in connected-home solutions.

Key Developments Identified by SBI in 2022

  • Voice Assistants' Struggles. Voice assistants have become both a flagship product and a centralized linchpin for many connected-home ecosystems. However, two of the major players in the space have announced budget and potentially job cuts in their voice-assistant divisions. Both Amazon.com's Alexa and Google's Assistant have reportedly struggled to achieve meaningful levels of monetization. Losing support for major voice assistant platforms would radically degrade the ease with which many connected-home systems operate.
  • Focus on Consumer Cybersecurity. The US government has announced a planned "national cybersecurity certification and labeling authority" similar to existing schemes that label products to indicate their relative levels of energy efficiency. Regulators hope the new body will enable general users to make more informed decisions when purchasing smart-home and other internet-connected devices.
  • Movement beyond Passwords. A major human factor behind cybersecurity threats from proliferating connected-home devices is the time and effort in setting devices up with good levels of security. The FIDO (Fast Identity Online) Alliance is coming closer to enabling widespread rollout of passwordless identification and is backed by major technology companies, including Apple, Google, and Microsoft.
  • At-Home Virus Testing. The covid‑19 pandemic has normalized the concept of disease testing at home. A number of companies are hoping to capitalize on this development by creating multipurpose at‑home biological-testing systems that could detect a range of diseases and biological phenomena. Imaginably, at‑home testing could become a core part of future opportunities for home health and wellness.
  • Making a New Standard Matter. Efforts to create a truly connected home have been thwarted repeatedly by a chaotic smorgasbord of incompatible standards. Forty percent of technical problems that connected-device owners report stem from a failure to make devices work together. But a long-awaited standard—Matter—developed by some 220 of the industry's most important companies promises to reinvent the connected-home market.
  • Smart-Home Exercise after the Pandemic. The pandemic saw a boom in the smart-home exercise industry, when people had to forgo the gym and work out at home. Although the market shows continuing signs of growth, some big players have seen a post-covid‑19 drop in demand. Whether the sector will become mainstream or remain the preserve of fitness enthusiasts remains a question.
  • Repairable Smart-Home Products. The world is on the cusp of a sea change that could eventually spell the end of disposable electronics, ushering in a new era of repairable products. The shift will have major implications for the smart-home sector in terms of providing components that are repairable and for how smart sensors see use to monitor performance integrity.
  • Future of Streaming Services. Following a long honeymoon period, the gloss appears to be wearing off the streaming industry. Greater consumer choices and a customer base that is seeing its disposable income hit by the rising cost of living are deterring subscribers. But alternative funding models that could include advertising and mobile-only subscriptions might arrest the decline.
  • New Protocol Addressing Privacy Concerns. Privacy concerns remain a major barrier to connected-home technology adoption, but researchers hope that a new protocol will be able to guarantee privacy. The ability to prove standards of privacy would be a major benefit to the connected-home sector, although a lack of uptake by the industry could hamper widespread commercial use.
  • Shutdowns of Smart-Home Software. Growth in the smart-home sector is contingent on consumers' having confidence that providers will provide continuing support. High-profile cases of providers' shutting down software on short notice have reduced that confidence. The sector will have to work hard to ensure that smart-home-technology buyers see systems as having longevity; progress toward standardization should also continue.
  • Amazon's iRobot Deal and Smart-Home Consolidation. Amazon has proposed acquiring iRobot, which would provide the online retail giant with a significant foothold in the home-robotics market and also lead to greater consolidation of the smart-home sector. Although the deal could help boost confidence in the industry's future, it could also lead to further privacy concerns for consumers.
  • Smart Tech and Domestic Abuse. Smart technology has opened up a world of possibilities, but not all of these possibilities are innocent. High-profile cases of devices' seeing use to facilitate stalking and abuse could create barriers to widespread adoption. But opportunities exist for a new generation of smart technology that can help counter such criminal and unethical use.
  • Smart Home, Smart Remote. Smart-home technology includes myriad devices and apps that a smartphone usually controls. Integration of mobile devices with home gear is common, but confusion about how everything fits together can be off‑putting for some consumers. A new unifying remote could change that response, paving the way for a new range of ultra‑user-friendly controllers.

Areas to Monitor Highlighted by SBI in 2022

Macro/Dynamic Issues (Frequently Featured)

  • Standards

    Standards are critical for electronic communications. The choice of a standard can make or break a company. New devices with new capabilities must conform to the standard to work with the old devices. Standards are also critical for establishing economies of scale and driving technology progress and product-release cycles.

  • Data Privacy

    Attitudes about privacy constrain AI and big-data activities. In recent years, privacy regulation has become more stringent, and consumer awareness of privacy issues has increased. Areas such as education and health care attract particular attention. Even so, many consumers still freely share data and click through privacy permissions.

  • Applications for Enthusiasts

    Mainstream markets may not adopt all innovations that enthusiastic niches love—for example, remote control of appliances, monitoring of home-security cameras via cell phone, connected health- and fitness-monitoring gadgets, and network-attached storage—but innovative households can show other households the possibilities of home networks.

  • Strategic Strongholds

    Companies often seek to create and leverage strategic strongholds through supply chains, value networks, content libraries, and user touch points to maintain business advantages and expand their reach. However, the value of strategic strongholds is always shifting as new technologies emerge and customers' needs change.

Micro/Semi-Stable Issues (Sometimes Featured)

  • Big Tech Power

    Big Tech companies wield immense power through the massive scale of their digital platforms and their ability to centralize and leverage data. Because of their influence, Big Tech companies can create massive disruptions when they enter new markets, and they can dictate pseudo industry standards.

  • Cybersecurity

    Cyberattacks are increasing in frequency and severity. Networked cyber-physical systems require extensive security measures, because attacks against such systems could cause significant damage. Hackers constantly find new vulnerabilities; therefore, organizations must continually monitor and improve their systems.

  • At-Home Health Care

    The development of telemedicine, low-cost health-monitoring devices, and disposable diagnostic tests could revolutionize health care by incorporating health care into daily life and people's homes. The covid‑19 pandemic spurred many companies to renew their interest in the development of at‑home health care, but success is uncertain.

  • The Metaverse

    Sci-fi stories popularized the idea of a metaverse, which merges physical and virtual realms into a shared persistent connected space. The development of a metaverse akin to the World Wide Web is far from certain, but even company-controlled metaverses could have a significant impact on how people socialize and have various experiences.

  • Postpurchase Monetization

    The initial sale of a smart device is not the end of potential revenue. For instance, smart TVs make money from serving targeted ads, and internet-protocol cameras often come with cloud subscriptions. Understanding how to provide a competitive product and generate postpurchase revenue is increasingly important for device manufacturers.

  • Privacy

    Internet of Things devices can generate large amounts of data about individuals and their behaviors, which many companies may try to take advantage of. So far, concerns about privacy have not influenced consumer behavior significantly; however, sentiments could change, and government regulations could force companies to respect privacy.

Look for These Developments in 2023

  • Metaverse advances. Significant advances in next-generation AR and VR are unlikely in the next 12 months, but important developments, particularly in the hardware space, may come from prospective players such as Meta and Apple. Monitor existing players in the space such as VRChat for signs of their developing more expansive cohesive virtual worlds.
  • Walled gardens broken down. If the Matter standard achieves significant market penetration and proves to work somewhat smoothly, companies may have to shift their business plans away from previous walled-garden approaches. In particular, watch for developments in free‑to‑use and open-source approaches that could potentially challenge the Big Tech ecosystems.
  • Home robots. Big Tech companies' reducing their efforts on voice assistants present a major obstacle to developers of home robots—specifically, finding applications beyond providing portable smart speakers. Robot vacuum cleaners are a very mature technology, whereas other potential applications such as cooking, cleaning, and retrieving items are far more complicated, placing any potential robots well outside the budget of even relatively wealthy smart-home enthusiasts.
  • Social trends. The World Health Organization has suggested that 2023 may see the covid‑19 pandemic's no longer having an emergency classification, reflecting that global responses to the virus have shifted more to a pattern of adapting to and living with the disease. As part of this shift, patterns of home working are becoming stabler, with some amount of remote and hybrid working remaining in place for millions of white-collar workers globally. Watch for connected-home services' targeting people who work in‑person jobs such as in retail and manufacturing.