Interview: Dr. Gunther M. Wagner
Deloitte GmbH Wirtschaftsprüfungsgesellschaft, Director Technology Strategy & Architecture
The range of so-called Smart Home products is constantly increasing. But how does the consumer react? Are the offers being used extensively? To find out, you conducted an extensive survey of over 2,000 German consumers as part of the "Smart Home Consumer Survey 2018". How widespread are Smart Home solutions today and how great is the continued interest?
I cannot tell you whether the consumer really uses the products. In our study, we investigated which components the user has bought or plans to buy in the next years. But the study is an indication of how Smart Home use or adoption from three years ago has developed.
We addressed this question in our last Smart Home study from 2018. Just to name a few examples: In the area of lighting, alarm systems, heating and even loudspeakers, there has been a drastic increase compared to three years ago. The use of loudspeakers has grown by 67 percent; the use of smart luminaires has risen by 50 percent and the use of smart alarm systems has also risen by 67 percent. These are all indications that there is a significantly greater penetration of Smart Home components among the population in Germany.
Why do consumers want a Smart Home or not for whatever reason? What are the motives for using and being interested in Smart Home products?
When it comes to Smart Homes, the consumer's desire for comfort comes first. In 2015, just under half of those surveyed stated this; in 2018, 56 percent of the participants in the study said so. Users like being able to control household appliances via an app, for example, and no longer have to walk to the device or switch. Security is the second most important topic this year. This primarily refers to security systems such as alarm, camera and emergency systems. In third place comes the desire to reduce heating and electricity costs with 38 percent. At this point one certainly expects more than one can actually achieve with Smart Home products. But that is my personal opinion. If you constantly turn a heater up and down, then I'm unsure whether you can actually save heating costs.
Somewhat behind with 20 percent is the desire for additional entertainment possibilities and fun to use.
In summary, one can say: Additional comfort, additional security and a reduction in heating and electricity costs are the three primary reasons that users have given as added value for Smart Home solutions.
What role do data protection and data security play? Is there any concern about the so-called "Smart Home" data hunters?
They definitely exist. The paradox is, just like using a smartphone, that if a cool app is available to the user and used, then the concerns about data protection are pushed into the background. But if gaps in data protection come to the surface, as was the case with Facebook a few months ago, things will look different again. The issue of data protection is very important to German consumers in particular. But if the manufacturer manages to guarantee security at least within his area and also handles the data securely, users are still willing to share more data with the manufacturer than they may be aware of at that moment. If, for example, they work with Amazon Alexa solutions today, then all flows via the backend data in the USA. As a user, you have to be aware of this. If the convenience of the solution prevails and the users like the application in everyday life, then the entry barrier is usually very low in terms of data protection.
The study asked to what extent Germans are willing to share data. The question goes in the direction of the use of intelligent speech systems or Smart Home solutions that run in the cloud and are shared across the cloud. The survey showed that, from the consumer's point of view, the willingness to share data has once again fallen significantly compared to 2015. In 2015, 35 percent of respondents were generally unwilling to share data. According to current figures, this is now 40 percent.
By contrast, the willingness to share data with only one particular provider has increased somewhat. This shows that certain, trustworthy providers can certainly communicate the protection and security of the data to consumers.
Is it possible to say that data protection is basically slowing down developments in the Smart Home sector in Germany? Or would that be too risky to claim?
I think that is too far-fetched - data protection is always an issue. If you drive a connected car, if you are online with your mobile phone, if you bank online - data protection always plays an important role. In Smart Home applications, data protection plays no smaller or larger role than in other application areas.
If you ask me why Smart Home ist not growing much faster, then the transparency of the solutions and the variety of providers certainly play a more important role. There is a large number of suppliers and users ask themselves who they can trust in the end. Users are also faced with the question of which solutions can be expanded and with which, for example, they can move. Retrofitting the Smart Home solution is also a big issue. Can different manufacturers be combined with each other? What is the platform on which I am installing? In my opinion, the major providers of Smart Home solutions are still not making enough use of the aspect of buying recommendations via friends, acquaintances and neighbours. But it is precisely the recommendation that generates the interest of future Smart Home users and makes the purchase decision - perhaps also the selection of the supplier.
I see this as a great challenge in the marketing of suppliers.
Which concepts for operating and controlling the Smart Home are currently popular? How important are intelligent language assistants?
The systems of the big Internet companies are already the ones that are most noticed on the market at the moment. On the one hand, this is good to make the topic more popular. But smaller players, who do not have this market power and perhaps offer the better solution, will fall somewhat behind as a result. This raises the question: Who has the better product and who markets their product better?
We have also addressed the topic of voice control in our current survey. As a result, it can be said that voice control is certainly in demand, but not to the extent that one might expect. We explicitly asked how important it is for consumers to use a voice assistant. Only 12 percent of the respondents consider language assistants very important, 25 percent of the survey participants think it is important, for the rest of the consumers a control via language is rather unimportant. Overall, only 37 percent of respondents consider language assistance to be important. At the same time, we asked how important control via the smartphone or tablet is. Almost 70 Prozent of respondents use these media to control their devices. That's okay, but the use of Smart Home products via apps is currently even more in demand.
Not only the products for Smart Home are innovative, but also the services may have to change. Do consumers want more services or additional services? And how should companies adjust to this?
In my opinion, this is something like the chicken-and-egg problem. The users don't think of much when it comes to new services. They appreciate above all if the services are fast, simple and target-oriented. Manufacturers are forced to act proactively.
An example of this: Assisted Living - Assisted and partially assisted living in old age. Due to the demographic change in the population, this topic is also very important in Germany. I think that if companies come onto the market with intelligent offers in this respect, users would also adapt them. But I don't know whether the users themselves would come up with the idea.
Another example: security solutions. They show, for example, whether a window is tilted or the door is locked. This is not necessarily bought by the users themselves, but by their grandchildren for their grandparents or children for their parents. At this point I would like to see more creativity from the companies.
Companies should not rely so much on consumers, but should score points in the market with their own creativity and innovation. That does not mean pushing products that are not accepted by the market into the market with power. I am thinking in particular of the refrigerator, which virtually fills up by itself. This example has been with us for 10 to15 years now and has not or perhaps not yet really been a smash hit.
The most important thing with all products is that the more comprehensive the Smart Home solution, the more important it is to have a service that users can call or contact in the event of a fault. If, for example, you can't get into the house or the music can't be switched off, then a 24/7 service is indispensable. In my opinion, the point of support in the event of a malfunction is essential for acceptance in the market.
We live in a time when many things are leased, financed or rented. How do consumers of Smart Home applications feel about this? From your point of view: Would users be more likely to rent or buy?
This is exactly what we asked for in our survey. At the moment, 65 percent of our customers still prefer one-time purchases compared to subscription or rental models. The result also fits my perception. I know very few rental models. At this point, the industry still lacks creativity. The situation is quite different in the automotive industry. Who still buys a car today? In the past, it was quite normal for a car to be paid for in full as a one-off purchase. Today, there are completely different financing options through company leasing and special offers.
I believe that in order to bring Smart Home more to the market and possibly also to be able to market higher-value solutions, suppliers will have to take financing models more into consideration.