calendar 15.02. 2016

The networked home – what's important now

Digitisation is advancing – and is unstoppable. The way we live and communicate has long since changed fundamentally. We stream music and films from Spotify and Netflix, book accommodation online at AirBnB and conduct our bank business on our smartphone. However, innovative technologies and new providers are also revolutionising current business models in classic branches of industry and changing existing industry boundaries.

The car industry is the best example: after over 125 more or less stable years, companies such as Apple, Google and Uber are stirring up the industry. With connected cars, the entire industry is being restructured with players from new sectors who previously never competed with the car industry.

Just like the car industry, the construction and housing industry is also one of the pillars of the German economy: with an almost 20% share of gross domestic product. And just like the car industry, the construction and housing industry is also facing far-reaching changes. Just as the (mobile) networked vehicle is shaking up the car industry, the (stationary) networked home will change the rules in the construction and housing industry.

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Naturally, we have to make distinctions: not every new gadget that was recently presented at the Consumer Electronics Show in Las Vegas will make a difference. But all in all, digitisation will also have a tremendous impact on the construction and housing industry. In particular, the falling price for sensors is leading to ever faster automation and networking of devices, building installations and buildings – to the benefit of owners and residents alike. After all, intelligent living potentially offers many advantages: greater convenience through personalised heating and lighting systems, increased security through burglar alarms or health monitoring, e.g. for the elderly, savings and energy efficiency through smart electricity meters and smart living space control and entertainment, for example through networked loudspeakers.

Just as the networked vehicle is shaking up the car industry, the networked home will change the rules in the construction and housing industry.

The oft-cited automatically brewed coffee for breakfast with freshly baked rolls at the same time is merely one step on the way to the completely networked home. In a few years time, we may well laugh about the question which we have all asked ourselves just after leaving home: “Did I remember to switch the oven off?” The connected building will, in future, do this for us – it will automatically detect whether someone is still in the building and automatically switch off all unnecessary technical appliances if there is no longer anyone at home.

The market potential is substantial. It is estimated that in western Europe some 50 million households or 27% will be equipped with smart systems by 2019. Consumers will then spend over EUR 12 billion on the relevant appliances and applications every year.

Who will make the money? Suppliers outside the industry in particular are already positioning themselves to conquer apartments and houses. For example, Google has bought Nest, the US company specialising in smart home appliances, Apple has developed the HomeKit platform, Samsung has purchased SmartThings and Amazon has launched the voice command loudspeaker, Echo, on the market.

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What can construction and housing industry companies do to arm themselves for this fight? Typical success factors have emerged in the car industry and other comparable industries: the key factor is not to see the digital revolution primarily as a threat but as an opportunity and deal with it in a constructive manner.

To this end, every company must first get an overview of what changes it will face: what new (digital) invaders are there? Which points in the value added chain could they attack? What are the company’s own strengths, what are its potential weaknesses? Proceeding from this, companies should then develop new and sustainable (business) ideas – with focus on the customer and an understanding of the possibilities of new digital technologies.

The key factor is not to see the digital revolution primarily as a threat but as an opportunity and deal with it in a constructive manner.

Developing and successfully implementing innovative ideas is easier said than done. Well established companies in particular must, as a rule, first create the right conditions. Alongside organisational changes, such as the elimination of rigid departmental boundaries, what counts is changing people’s minds and focusing more than ever on speed, agility and the courage to take risks. The failure of new ideas should be accepted – the important thing is to try out something new and, if successful, systematically scale it up.

In short: more Silicon Valley is what’s needed. Any company that takes this seriously must not only pursue individual projects but tackle digitisation on a large scale – right across all company departments. Not least of all, this requires the targeted development of digital capabilities in the entire organisation. The major car suppliers, for example, now employ just as many software engineers today as the pure “digital players”.

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The example of the car industry also shows that data are another success factor. Whoever gains control over the ever growing data pool will secure a crucial competitive edge and therefore the opportunity to develop completely new business ideas. Whoever conquers this interface will also occupy the key access point to customers.

One thing is for sure: not only connected cars but also connected buildings are one of the future fields of growth. The sock that notices when you fall asleep in front of the TV and sends a signal to stop the film may sound like a bit of a joke. But the smart home with its wide-ranging possibilities is well on the way to permanently changing the construction and housing industry.

Picture credit: grasundsterne