by Peter Kusnic
October 18, 2018
Silicon Valley has a vision for the future – one of an algorithm-based, data-centric world in which electronic devices communicate with each other (known as the Internet of Things, or IoT) and determine for their users the best course of action to lasting health, happiness, and overall wellbeing. If big tech knows one thing, it is that machines are better than human brains when it comes to objectively weighing data to make well-reasoned decisions, and as the explosive growth of algorithmic technologies such as social media indicates, many consumers – whether consciously or unconsciously – think so too.
Some industry insiders call the concept underlying smart technology ambient computing – or the total automation of home, office, car, and virtually everywhere in between. Others call it the next big-tech blockbuster whose impact may ultimately exceed that of smartphones, or even the internet itself – so rich are the possibilities at this nascence of the smart home market.
However, with smart speakers always listening and wearables like FitBit tracking your every move, some consumers have been reluctant to admit such nosy devices into their lives. It’s no wonder, with near-daily news stories about data breaches, ransomware attacks, and the security vulnerabilities inherent in IoT devices enabling hackers to wreak havoc on users’ lives.
But more persistent than security concerns is the perception of IoT devices as niche, novelty, or simply not worth the extra expense compared to non-smart, commodity-type versions of a product, be it a thermostat, smoke detector, or lightbulb. It is this connotation that Silicon Valley is fighting to break through a range of marketing tools, as well as product and service development strategies, to varying degrees of success.
According to a recent forecast by the Freedonia Group, the US smart lighting market is expected to see rapid annual growth of almost 25% through 2025, driven in large part by:
Gains will be checked, however, by slower uptake in the residential market, where the potential for savings is less than in nonresidential applications due to extreme disparities in energy consumption.
Therefore, producers have underscored the novelty and convenience of smart lighting products in their marketing to residential end users. For example, Philips Hue and other smart lighting manufacturers hold up the remote controls of smart lighting products to illustrate the convenience and potential for energy savings, while simultaneously stressing the novelty of smart lighting’s ability to:
While practicality for businesses is first and foremost a matter of saving money, the lighting industry’s view of residential practicality seems to focus on consumers’ busy lives, their comings-and-goings, and the dreadful inconvenience of flipping light switches.
The goal? Make smart lighting cool, convenient, and – ultimately – essential.
However, convenience and cool factor are not enough to rally mass demand for a new technology. The benefits must also be sufficiently monetized in order to greatly reduce if not neutralize the high initial cost of investment.
For example, by emphasizing the cost- and energy-saving benefits of smart and connected thermostats as a practical reason to spring for one, manufacturers in this IoT market segment have significantly increased their penetration of the overall thermostat market – with the help of utility companies, homebuilders, HVAC contractors, and nonprofit organizations, a growing number of which offer rebates, discounts, and other financial perks to end users who install certain approved devices.
Indeed, the purported benefits of smart and connected thermostats are real, and register almost immediately after uptake with the next month’s energy bills. However, other smart products with commodity roots – including lightbulbs and fixtures – have been a somewhat tougher sell, just as more energy-efficient albeit starkly more expensive LEDs have been slow to enter consumers’ homes after a century of incandescent and fluorescent domination, regardless of the potential for savings.
In other words, old habits die hard, and incentives are key to attracting consumers to new technologies, such as smart lighting.
Although the potential for energy savings of smart lighting is well known – with some products receiving ENERGY STAR certification from the EPA and DOE – the extent of the benefits of these products tends to manifest only when paired with complementary devices, such as smart and connected thermostats and security products.
In fact, industry leaders in the smart home market are working to expand their suites of devices, optimize their efficiency, and maximize their capacity to enact solutions by making them increasingly interdependent (e.g., installing certain devices unlocks certain system features, etc.). For example:
Therefore, the savings potential of smart lighting is dwarfed by that of more affordable related products, such as LEDs, the environmental impact of which is ultimately greater than smart lighting alone can engender. Grouped with smart shades and drapes, occupancy or ambient temperature sensors, thermostats, and other IoT products, however, the savings of smart lighting solutions compound.
As consumers uptake other IoT devices with more immediate returns on investment, expanding integration of smart lighting will become inevitable.
For more detailed analysis of this and other IoT markets, check out The Freedonia Group’s series of smart home studies:
Peter Kusnic is an Industry Studies editor at the Freedonia Group, where he also writes and edits blogs.
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