Four (Or More) Opportunities For Smart Home Tech Disruption

As cost, consumer demand and design capabilities shape the direction of smart home technology, where do new business opportunities lie?

What’s in the walls of a home? What used to be wood and insulation with a few electrical wires is now becoming a complicated mess of connected devices, a central nervous system controlling every action in the home, using data and algorithms to try to outsmart the occupants. Trying to understand their next move, their next need.

While consumer demand for convenience and comfort is driving this elaborate home network, the delivery of these systems is becoming exponentially more difficult as the technology evolves. Builders and developers have to consider the lifespan of the technology along with how it marries with the product’s brand and the consumer’s experience.

Purchasing managers from major builders and developers are trying to make sense of this puzzle, which becomes more difficult as new software and hardware are being introduced faster than they can design and build homes.

But, maybe the bottom line is what the consumer wants, which continues to change as fast as the technology evolves. Right now, the experience is cumbersome. Consumers have many different smart home technologies that all are operated by separate apps, so they may have 10 apps to control everything in their home. In some cases, this poor user experience can be overcome by the utility and function of the technology.

Ideally, future systems should be collectively controlled by a singular app, talking to each other and working in tandem to create the perfect home environment. When the home owner unlocks the front door, the security unarms, lighting changes, the music turns on and the shades lift. Wearable devices are also on the horizon and can change the experience to be more personalized, especially when it comes to health, and may be able to limit or reduce the challenges that consumers have had so far with voice control.

“Building security management and access control is our number one priority,” says Bill Greene, vice president of design management at JPI, a privately held real estate investor with more than 342 projects and 100,000 units. “Smart home technology specifically in our residential units is running a close second.”

His process is intricate. JPI works with low voltage consultants and subcontractors to help design and price systems for its projects, relying on them for the latest technology at the design phase, which changes rapidly enough that it could be outdated by the time the product is installed. To keep pace, Greene has to constantly update the scope during the design and construction process.

“Consumer demand is high, but smart technology is not yet a required amenity from our prospects,” said Karren Hollinger, vice president of corporate initiatives at national multifamily developer and manager AvalonBay. “It’s starting to be more of a requirement, especially on locks.”

Hollinger says that AvalonBay’s approach to adding technology is very judicious and risk averse, sticking to only institutional solutions with maturity and success in single family or other markets.

Even while locks are one of the most popular smart home features, they are the riskiest in terms of security and liability. With smart locks, there is a data trail. One of the features of locks that AvalonBay is discovering is the growing desire for multiple third parties to access an apartment for dog walking, cleaning, or food delivery. This push of consumer demand could pull design forward with smarter and more customizable technologies. 

Hollinger says that smart lock manufacturers are tuning into this trend and asking for functionality input, trying to discover what is on the horizon and how to make the locks smarter as a conduit for new business.

As the National Association of Home Builders reports, smart technology has a ton of challenges, including no real consensus on standards governing any part of the design or performance of the devices; no consistent regulatory or legal direction; a lack of product assessment of anything leading to product failures; too few commitments from developers to patch and update software; a neglect to consider for security risks; and a lack of installation quality controls.

While building costs and regulatory issues are infamous for adding cost and time to projects, it may help unravel some of the complication behind the smart home technology.

Walt Zerbe, senior director of technology and standards at CEDIA a leading global technology association, says that the first step to becoming regulated is to focus on privacy. Europe currently has the General Data Protection Regulation, or GDPR, which the state of California in adopting in some manner, a state forever leading the real estate industry. The California version of the GDPR may be even more stringent than the European regulation.

“The other thing to mention is that there has always been a tradeoff for privacy versus convenience,” Zerbe says. “Does something like Nest really need to be connected to the internet? That’s a choice that someone makes for convenience versus security. It’s the potential hack.”

Zerbe’s team at CEDIA is working on a standard for recommended installation of devices that will address some of the security and privacy issues. It will be imperative to offer firewalls when ports are open and manage and monitor devices in the home. Networks will need to become more sophisticated, so they can be locked down.

But what does that do to price and will buyers be willing to pay?

“It will be two to three times the price of what is being installed now and it will need to be custom installed and managed,” Zerbe says. “The new network recommendation side of IoT will be a critical part for both security and reliability.”

Maybe the increasingly popular subscription model will start appearing in more aspects of smart home technology. This Amazon Prime, Netflix, Uber model will start infiltrating apartments and homes. Greene says that most of the software-based technology that JPI specifies offers ongoing upgrades, but has required subscription fees of around $10 per month per door. This has become a limiting factor to how much technology they can add in a unit.

Is there an opportunity to disrupt insurance as well?

With the advent of more technology inside the home that could sense damaging water leaks, catch a break in or a carbon dioxide leak, the insurance game could change as well. Home insurance providers are looking at ways to offer incentives for certain monitoring devices like a smart security system, water systems or fire control. In addition, as wearables become more functional, life safety will be an opportunity.

That’s not the only aspect of insurance that would be knocking on housing’s door. Currently there are debates about ethics of self-driving vehicles; MIT even created the web site Moral Machine to understand human perspective on moral decisions made by machine intelligence. Is this in the cards for housing? Will smart home technology advances mean our homes are making decisions for us on when to take medication for instance, or letting someone in our home, or maybe even reading or saying something inappropriate to our children?    

With so many opportunities for disruption, the future promises to be very exciting.

This post first appeared on Forbes.com. To see the original, click here.