Navigant Research Blog

Gauging Apple’s Smart Home Strategy

Neil Strother — September 27, 2016

Home Energy ManagementLike a circling hawk, Apple has been hovering above the smart home/Internet of Things (IoT) home marketplace, waiting for the right moment to pounce. That moment arrived when Apple released iOS 10 to the public early September 2016. The iOS 10 update includes a dedicated Home app, which is given prime screen real estate on the iPhone. It is a clear sign that Apple is ready to drop down to earth and fully engage, and even compete, in the emerging smart home market.

To be sure, Apple was not absent entirely from this particular marketplace prior to the update. The Cupertino, California-based company first announced its HomeKit platform more than 2 years ago. In the meantime, Apple has quietly waited for new compatible hardware products to become available so the platform could flourish. Currently, several dozen HomeKit-friendly devices are on sale, such as the ecobee3 smart thermostat, a smart lock from August, and Philips Hue wireless light bulbs. Apple expects nearly 100 more similar products from multiple vendors to come out before year’s end, which would further extend its ecosystem.

The essence of Apple’s Home app is its ability to integrate disparate devices in a single application, and do so in quintessential Apple fashion with an easily understood interface that hides complexity in the background. No longer does a user need to juggle several third-party apps to control devices. Instead these can be managed with just one app, as long as the device has the required works-with-Apple seal of approval. This is par for the course for the company that likes to maintain a proprietary world. However, a wireless thermostat or smart plug not part of Apple’s realm would have to be manipulated with a different application.

Apple’s Home App

Apple Home

(Source: Apple)

Amazon Echo’s Smart Home Skills

Alexa home

(Source: Amazon)

Much has changed since HomeKit’s unveiling. Competitors have seized the opportunity to forge ahead, Amazon in particular. The online retail giant has scored a hit with its voice-controlled Echo device, which can connect easily with many of the same devices (e.g., Philips Hue bulbs and ecobee3 smart thermostats) that work with Apple’s Home app. Moreover, Alphabet-Google is about to launch its voice-activated Google Home device to compete directly with Echo. Formidable competitors have taken some market and mind-share ahead of Apple, and the market for smart home/IoT functionality will be intense.

Early Market

Still, there is an upside for Apple. The market is early-stage, and millions of customers have yet to buy products or use connected-home devices. Competitors have helped pave the way and validate a market that has been elusive for many years, primarily targeting people with the money to pay for expensive devices and professional installers, or do-it-yourself geeks willing to fiddle with complex devices and systems. Mainstream adoption appears to be just around the corner.

Savvy energy market stakeholders are paying attention to all of this. Devices and applications that residential and commercial customers adopt can have an important effect on lives and businesses. Witness the growth of bring-your-own thermostat programs offered by utilities (see Navigant Research’s Bring Your Own Thermostat Demand Response report). Utilities need to stay current with what customers are doing behind the meter to automate premises and help them use energy more efficiently. It is a smart strategy for customer engagement, since disregarding trends is risky in a world where Silicon Valley heavyweights and disrupters see ways to leverage a transforming energy market (see Navigant’s Navigating the Energy Transformation white paper). Apple is not the only bird in the sky seeking new markets and growing revenue opportunities.

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