The other day I was speaking to one of my best friends. He was telling me about a company he was consulting with that builds a home appliance. Traditionally, they’ve sold their appliances through resellers. Lately, those resellers have been posting those appliances on Amazon, performing a task that the appliance manufacturer felt they could do themselves. So they went to my friend’s consulting firm to help them with their e-commerce strategy. Makes sense.

As this company (and many others like them) has been pursuing a digitization effort, they’ve also gain an interest in the concept of the Internet of Things – where your physical devices have software running on them and are potentially connected to the cloud/internet. Naturally, that appliance company wanted to provide a cloud connected home appliance for their customers. Sorta makes sense.

Now – as those appliances get connected, its important for that manufacturer to provide another experience beyond the what they previously provided – they need to provide an digital version of the appliance (what many call the digital twin), so consumers can see the current status of the home appliance and perhaps even control that appliance. What more control can they provide beyond what already exists? How do they deliver a differentiated digital experience?  The company’s decision, along with many of their peers, is to help make the rest of the home connected. This company wants to provide a hub, where any other home appliance or other appliance this company makes can connect to. This manufacturer thinks the hub has a lot of value as they can capture more data, develop a differentiated digital experience, create lock-in on the rest of the home appliances they sell, and create a whole new business line. Now, this doesn’t make sense.

In fact, there are many other connected home interfaces that have tried and failed to provide a hub based experience: Nest, Philips Hue, and Sonos, all have failed to expand beyond their own devices. How can a home appliance manufacturer enter an already crowded graveyard? Building another “platform” or “hub” for other devices to connect to won’t work.

To provide a connected home experience, you need a combined experience of connecting hardware and software. Hardware is used to connect to the physical world, and software is used to provide that digital experience. A home appliance company has expertise in hardware, but not software. I as a consumer don’t see value in getting my appliance manufacturer be the hub to my digital experience. Hardware manufacturers are designed to develop a new product at best once a year. Many software companies are constantly updating software. To get a once a year software update on my connected appliance is too slow to keep up with the activities occurring in the IoT space, and it is a significant cultural change to begin deploying updates continuously versus yearly.

Providing a vertically integrated application that controls a single device in your home won’t work – imagine having an app for each appliance/device in your home – it’s a nightmare. Several other companies have developed methods to provide another layer on top, such as SmartThings, Apple HomeKit, and Amazon Echo. Each provides a method to control each of  connected home devices, but at the end of the day they’re still an app on top of an app, and are fighting a battle to provide value to the device manufacturers who want to know how people are using their appliances, and don’t provide a differentiated experience for each appliance. Appliance manufacturers don’t want to play nicely, creating a messy ecosystem and interface to manage and control each of these devices. As a result you have a clunky method of interacting with your devices and the layer on top providers trying to enforce specific protocols to work.

What device manufacturer’s need to create is a method to integrate with many/any of the protocols that IoT platform providers are providing. Let Google, Amazon, Apple, Cisco, Samsung, Qualcomm fight that battle (and even smaller players like Eero). They each have a proven track record of providing hardware, software, security, analytics, and easy user experiences to make things work. To compete with those players with a lot of cash on hand is near impossible. Instead these device manufacturers need to focus on the following:

1. Make sure they are compatible with the various protocols that require connection to the major hubs (not directly to the internet – too many security issues in connecting directly to the internet (look at the heartbleed hack).
2. Provide deep integration to these hubs – a huge value add is allowing these apps to make something happen easily: saying “Alexa open my garage door” vs “Alexa, tell _____ to open my garage door” while gets brand recognition, makes this a huge piece of friction. Deep integration is a huge value add
3. Focus on value-add software based updates – provide additional functionality via the cloud, adopt a SaaS based business model for your devices in providing greater value to your business and you have a whole new line of revenue (look at how Rolls Royce is selling its Aircraft engines, they sell miles flown not a large upfront cost)
4. Take the mechanics of your solution and see if there are other opportunities to provide a new solutions in a connected home (e.g. a smart garage door can start providing automated window openings)

Focusing of differentiating around your device versus competing in the market of connected hubs is a safer, more clear bet. Those who make their devices connected, and not waste time on new interfaces or new hubs/hardware will be better poised to build on their existing business. Not focusing on your core hardware will leave you vulnerable to the Raspberry Pi’s or the Arduino’s bypassing your hardware and eliminate any new potential revenue from your connected device, and instead commoditize your device into just an unconnected, frustrating device to work with.