How to Overcome Smart Home Downsides

Wall Street Daily Greg Miller | Jun 29, 2016

Over the past few weeks, I’ve featured a mini-series here on the Smart Home and how it could be on the cusp of widespread adoption.

As you probably know by now, Smart Homes are the latest in a string of “Smart” things to enter our lives – after smartphones, smartwatches, smart meters, smart cars, and more.

When applied to the home, greater automation holds the promise of more convenience and flexibility for owners, as well as saving them money.

But as with any new technology or innovation, it’s important not to get carried away by the promise or potential, until we know that there’s merit to the idea, and that obstacles can be overcome.

And with smart homes, there are some concerns that manufacturers and service providers will have to address in order to bring the Smart Home to the mainstream.

~ Cost

When it comes to getting consumers to “buy in,” cost is a key factor. Take’s (AMZN) Echo device, for example. It costs $180 in the first room you locate it in, and $90 for each additional room. And that’s before it’s connected to a single Smart Home device! When you have hubs for each application, plus actual products, a homeowner has spent some serious money.

However, a few of these products can save users money and have a decent payback period.

For example, the Nest thermostat claims it will save many times its initial cost.

And the Notion sensor system that I profiled is working with insurance companies and may be able to trigger rate decreases eventually. But those decreases would need to be pretty impressive to offset much of the cost to install the sensors in the first place.

Smart Home costs will have to come down before widespread adoption occurs.

~ Complexity

For many people, the truth is that some Smart Home applications will never be worth the money. For example, automated window shades are a neat feature and might help sell a new home, but are unlikely to be essential enough for people to retrofit to their existing homes.

Unnecessary complexity has slowed the adoption of Smart Homes. However, products like the Echo and Google Home are being designed to solve this problem. I don’t think complexity will be as much of a barrier to Smart Home adoption for long.

~ Obsolescence

Any time people buy a product with significant technology content, obsolescence is always a concern. Consumers are already on a treadmill of replacements for their PCs, smartphones, televisions, and more.

Obsolescence is a concern in the Smart Home world, too. For example, one of the most popular enablers of Smart Home technology is a company called IFTTT – which stands for “If This, Then That.” For lack of a better word, it’s a collection of simple “recipes” that enable devices across different platforms to communicate. For example, you might have a recipe that tells your house not to water the grass if it’s about to rain.

IFTTT is a terrific company making simple solutions for many Smart Home (and other) applications. The problem? Right now, the company has no revenue model. It will eventually need to find one, or partner with another firm, otherwise it will go out of business, and leave many applications in the dust.

~ Security

This may be the biggest worry among potential Smart Home customers. The fear is both well-grounded and baseless at the same time.

It’s true that if something is on the internet, it’s vulnerable to hackers. Anyone who claims otherwise just isn’t being realistic.

On an individual basis, though, this fear is overblown. It’s true that if the right vulnerabilities surface at the right time, a dedicated hacker might be able to disable your security system and even open your Smart Lock. But it’s difficult to do – much more difficult than breaking into a house the old-fashioned way.

Similarly, someone could theoretically mess with your sprinklers, but who’s going to bother doing that?

The real fear is hackers playing with entire systems without caring about individual homes. At some point, a hacker will block the cloud infrastructure of a Smart Home provider, disabling that provider’s devices. This will be annoying, but other things go wrong in regular, non-smart homes.

~ Privacy

Privacy is related to security, but is a more legitimate fear. The information that Smart Home providers receive will be valuable to someone – like advertisers or other companies. Providers will be sorely tempted to sell your information to those companies.

This is a valid concern, but the silver lining is the potential for devices to combine with Big Data to create new insights about consumer behavior. In turn, this could save consumers money, or help generate new products and services.

Likewise, it could be the government.

I’m not a believer in a dystopian future, where the government follows everyone’s every move. But it’s indisputable that the government has in interest in information about households and people’s movements – and it occasionally casts a wide net to collect that information.

For example, the government already works with utility companies to identify homes with unusually high electricity usage in order to target suspected drug operations. And until recently, the government thought it could track a car’s movements without a warrant.

The younger generation tends to have a more casual attitude towards privacy than older folks, but Smart Home providers are still going to have to provide some guidelines about how they use the massive amounts of data they receive – as well as reassurances that they’ll stick to those guidelines.

The government will have to get involved, too. Just because some use of data can be shoehorned into the Constitution doesn’t mean it’s proper.

The good news is that none of these downsides are fatal to Smart Homes. There will be problems, but there are problems with any new service. We remain convinced that the Smart Home revolution is finally here – and here to stay.