This year may go down as the last year that companies tossed connected devices out into the market without a plan for the long-term business model required to support it. Or at least I hope it is. This was a focus of a conversation I held last week in San Francisco at the Target Open House with the makers of several consumer connected devices.
Roy Vella, who is in charge of building the U.S. market for Hive, brought up the idea that when thinking about a business model or even lifecycle for a connected device a company should start with time. As in, how long would the business support the device? Hive sells a series of smart home devices for a monthly service charge.
Vella said the planned life of a product is an essential element in figuring out how much it will cost to support it. More than that, it also gives the manufacturer a clear sense of its responsibilities while providing consumers a clear sense of what they should expect.
I’ve talked about giving connected products an expiration date before, but I hadn’t really thought much about the power that comes with setting a time limit on a connected product. It makes the product look more like a service, and it also sets expectations throughout the supply chain.
The supply chain needs these expectations. I had a conversation ahead of the event with a chip company executive who was bemoaning the fact that one of his clients wanted a security update for a six-year-old connected product. But, as a consumer, my six-year-old connected light switches better get security upgrades, because they are now installed inside the wall.
Which brings us back to the cost of supporting connected devices. The concept is that instead of a piece of hardware, people are now buying a service. If you are in the enterprise or industrial world and reading this, you’re likely nodding along and wondering why it took so long for the consumer device makers to wake up to this.
For example, it’s common to negotiate support for that massive MRI machine software so the vendor services it and supports the software for a set amount of time. In some cases, the supply chain isn’t totally on board as witnessed by medical equipment vendors who are not updating bugs in their older gear, but the idea has been there for decades.
This is controversial in the consumer world because most companies don’t sell their devices as services, a point that June CEO Matt Van Horn was quick to point out. When people buy the June oven, they are buying an oven, not the service of being able to heat food perfectly.
But you can’t have connectivity without costs. Van Horn’s solution is to sell recipes as a service and to sell additional gear for the June oven. This could work. As a June oven owner, I asked Van Horn if I would be profitable as customer even if I never subscribed to the recipe service or bought any more gear.
He told me that cloud costs generally decline over time, which isn’t a real answer. I think we need to get to the point where the maker of a connected device can deliver that real answer. And as consumers, we need to rethink what we’re buying when we buy a connected device. Does that mean I need to pay an annual fee for “access” to my oven? Probably not, but it does mean a manufacturer has to have a real plan when I ask, how long will this last?
Currently consumers are relucent to buy or even refuse the odd smart gears because most of them are better to have or useless toys. It’s not a fundamental thing to count in lifecycle service. What the industry need is a new minset. What new services are customers eager to possess? What services can be delivered for old gears if we add some flavor like connected and cloud? People like them, naturally they’d like to open their wallets. The more you care, the more in cost, the more value of the service. Smarthome is not good enough for a market explosion. What on-earth do the customers popularly want???
I think the idea of giving devices an expiration date is just like depreciation of computer assets over 5 years on a company’s balance sheet. It would be useful in many ways.