The connected home is already here and offers historically unparalleled marketing opportunities, with smart home systems set to generate more than $100 billion in revenue in 2020. So how is the technology shaping up, and what are the greatest growth areas to keep an eye on in 2016?

In our report How to create growth from the connected home, we identified four distinct areas that are driving consumer uptake of connected home devices and services. From security to home automation, they are at the forefront of commercialising the connected home, and are open to a wide range of industry players, from telco and energy utilities, to retailers, insurers, installers and integrators, as well as of course to device and technology developers.

Managing Security & Safety With The IoT

A market that has seen significant uptake already, the European home security and safety market has been forecast by MarketsandMarkets to achieve a CAGR of over 25.4 per cent over the next five years, driven by new and innovative developments in monitoring, the growth of digital door locks, wireless sensors and more sophisticated integrated cameras – the latter set to contribute the largest share of overall growth.

As sensor technology improves and production costs drop, market penetration will increase, and the added bonus of connectivity will combine to create totally new service models. For example, by integrating this wave of sensors with traditional monitored security operations, and/or with new social media platforms such as Life360 or

Energy Management Growth Area

One of the clearest growth areas, not only due to ever-more energy-aware consumers keen to control their home environment in a very granular manner, but also due to the varying levels of government regulation controlling the rollout of connected metering across Europe. Berg Insight, an industry analyst, forecasts that by 2019 the number of connected thermostats will grow at a compound of about 65 per cent in Europe and North America.

If you bear in mind that in Northern Europe roughly 60 per cent of household energy is consumed by central heating, it is clear why thermostats that can control energy usage will see such traction. There are other benefits too – several major European utilities are already finding that connected technology provision reduces customer churn, for example.

Controlling Home Automation

This is a broad category, capturing a wide selection of connected devices, from lighting, music systems, blinds/curtains and appliances such as new connected fridges or robot cleaners. Home automation is probably the most ‘visible’ section of the current industry, with new launches at key technology events hitting the headlines, creating an undercurrent of social buzz. That’s not to underplay the importance of the sector crossover here, with these devices networking into security and heating systems, for example.

Reducing Risk For Insurers

A less obvious example, but the insurance industry has shown increasing interest in the connected home market, partly due to the potential for process automation. The connected home will give the industry far more insight into patterns of behaviour and the frequency of possible threats to the home. New models already exist in the motoring sector, thanks to technology that tracks driver risk, and the home market is likely to follow this trend.

Tip Of The Iceberg

These four areas are just the tip of the iceberg however – connected technology is exploding, and the overall scale of the opportunity is enormous. Cisco Systems claims that the ‘Internet of Everything’ – connected products ranging from cars to household goods — could add up to a €17.3 trillion opportunity.

In spite of this vast opportunity, serious challenges remain. The end customer is no small a challenge in themselves, as gaining mass market acceptance has been a slow going so far.  Although early adopters and tech-savvy end users are well entrenched in these market areas, it will be an essential requirement to establish use cases for the above example areas – and more besides – to appeal to the wider market.

However, once that acceptance is achieved the underlying and most complex question will need an answer – how do we ensure privacy and trust in the companies and entities that control, manipulate, disseminate and store the data from IoT devices? Cisco again predicts that by 2020 the number of devices connected to the internet will be over 50 billion worldwide, which represents a significant rise in data volume and complexity.

Connected devices produce more reliable and up-to-date data than any market research institution ever can. Knowing about product success factors and shortcomings provides manufacturers with an entirely new basis for making business decisions. For instance, Wink, a start-up connected home platform in the US, has built a large part of its business model on the aggregation of data from OEM devices, which it then intends to sell back to the manufacturers to support their new product development processes.

We believe that in the coming decade the most entrepreneurial players will look to integrate this type of data within their existing customer relationship management (CRM) systems to create new customer insights and create new value by personalising advice and information. This could potentially open the door to deeper customer relationships, and the provision of more sophisticated and insightful services. As such, the relationship between consumers and providers could become more interactive. This is another example of why we believe an open ecosystem, with the possibility of collaborations between multiple players, is so important.

However, without a trusted platform or set of data standards entrenched in the IoT market, this level of ‘big data’ sharing could easily turn sour – an untimely breach, or a partner storing data insecurely could easily be catastrophic. We believe that agreeing industry-wide open platforms and standards in the immediate term is essential to medium and long-term success for the connected home industry.

In summary, the business potential of IoT is immense. Although current growth is focused on four key areas, this will soon expand into a whole new series of as-yet-unheard of services and opportunities. We believe that now is the time to set out some of the necessary groundwork that will ensure this industry delivers on this opportunity, for businesses, enterprises and – of course – consumers…