the inevitable bundling of home automation

This past summer I listened to a podcast from Harvard Business School IdeaCast where Marc Andreessen and Jim Barksdale discussed the topic of bundling business services. The conversation is worth checking out if you haven't heard it yet. You can listen to the podcast or read a transcript here

The basic idea is that businesses can make money by either bundling services together or by breaking out better versions of previously bundled services. One example from their conversation was the record industry. Before MP3s were widely available people had to purchase entire albums to get copies of the few songs they really cared about hearing. MP3s came along and made it possible to selectively acquire (legally or otherwise) the individual tracks you liked from an artist. Keeping up with that many individual unbundled tracks turns out to be a pain, so people are starting to turn to new bundling services like Spotify, Pandora, and Beats Music to conveniently re-bundle their music. 

I hadn't thought about that concept very much since hearing about it in July until this past weekend when I was killing a few minutes of time at the local Best Buy here in Champaign, Illinois. Most of the store hadn't changed from the Best Buy that I went to when I was growing up back in Texas, but there was one notable difference. 

The area that  got me thinking about bundling was located about halfway back in the store. Sandwiched between the dedicated sales areas for Apple and Samsung there was a single aisle of home automation products. 

I wasn't surprised that Best Buy had these products on display. My last company was developing a small piece of home automation technology so I knew that major retailers were starting to pickup more and more of these devices. The thing that struck me about the display was how confusing it was to quickly understand how all of these things worked together.

A hasty count revealed that there were 15 different brands selling upwards of 40 different products on this single aisle. Many of them touted the fact that they worked with some specific standard. Dropcam told you that it worked with Nest (not surprising given the acquisition this summer) and Peq seemed to work with Kwikset. Beyond that there was nothing about how to get everything working together. I know about the chipsets that most of these products are using and I was still confused about what worked with what. 

Then it struck me - this is how average people are going to be buying, or more likely not buying, home automation products. If by some amazing stretch of the imagination one of my non-tech obsessed friends decided that they wanted to purchase a home automation system they would probably start on an aisle like this one or at an online store with a similar selection. I can't imagine how frustrating this buying experience would be for an average consumer. 

That's when I thought about bundling. From where I was standing in  Best Buy it was pretty clear that the home automation isn't going to take off until there's an easy to use bundled service that does everything. Average people are going to need a fully integrated software and hardware solution - not a mismatched collection of devices running off of multiple hubs and smartphone apps. 

From what I've seen so far it looks like there are two or three major plays (and countless smaller options) for a bundled solution. The first one that I thought of was SmartThings.

SmartThings Hub

SmartThings Hub

SmartThings got their start in 2012 as a Kickstarter campaign and later went on to be acquired by Samsung. Their system incorporates a wide array of devices and they have a vibrant community of developers building new applications and hardware all the time. From what I've tried SmartThings is the best complete solution on the market today. Will and Norm from Tested just posted a pretty extensive review of SmartThings if you want to learn more. 

After SmartThings there's a mishmash of different systems being offered by everyone from Staples to HomeDepot to Lowes.

Home Depot's Wink Hub

Home Depot's Wink Hub

Most of these options are trying to do a combination of working with everything and pushing custom built modules for sensing or control. So far I have been underwhelmed with most of these options, but they are all less than two years old at this point, so there's lots of room to improve. 

No home automation bundle conversation would be complete without talking about Nest.

Nest Protect and Learning Thermostat 

Nest Protect and Learning Thermostat 

Nest was started by a bunch of former Apple employees in 2010. Their first device was a thermostat that learned your schedule and adjusted the temperature accordingly. They went on to launch a smoke alarm and were acquired by Google earlier this year. Right now you can't have a fully realized home automation system with just Nest devices, but I don't think that Google would have acquired them if they didn't have plans to launch a more comprehensive solution down the road. 

I'm convinced that these bundled solutions are going to be the recipe for initial success in home automation. Until there are a few dominant players we'll probably see several startups and large companies trying to start their own ecosystems. Once the dominant players emerge we will see an explosion of startups launching niche devices for home automation systems. Eventually there might be a common standard that will allow companies to launch independent, unbundled devices to satisfy specific needs. 

In the meantime I think that startups that build independent devices are going to struggle with adoption. Customers aren't going to want to mess around with five separate hubs  and eight different apps on their smart phones. Betting on a single unproven ecosystem or integrating with every hub on the market are both equally risky strategies for small companies. We'll need to find a way to hit critical mass with a couple of bundled solutions before the most interesting products will start to emerge.