Q&A: How to Create a Valuable Smart Appliance
The CEO of an IoT solutions startup offers tips for defining, designing, and launching a connected product.
Appliances embedded with sensors, software, and Wi-Fi connectivity are poised for exponential growth, according to recent reports.
One study, published by IHS Markit in October 2018, estimated that the global market for smart home devices would reach $116 billion in 2022, representing a compound annual growth rate of 46.8% from 2017. Meanwhile, acceleration in the global market for all things Internet of Things (IoT) has raised the number of IoT devices currently in use to 17 billion, according to an August 2018 report from IoT Analytics.
Riding this wave of innovation is Breadware, an IoT product and development solutions company headquartered in Reno, NV. Though only three years old, the startup has grown in parallel to IoT adoption by carving out an essential niche in the marketplace: helping customers design, develop, and launch their own IoT products.
appliance DESIGN spoke to Daniel Price, CEO and co-founder of Breadware, about how smart appliances and systems are continuing to evolve.
appliance DESIGN: What is Breadware’s role in the growing IoT ecosystem?
Daniel Price: We’re here to help companies build and launch connected products. We go through getting the product into the supply chain, ramping up manufacturing, and going through all of the quality tests and verifications. After the product is launched, Breadware can continue to support the customer in terms of handling the manufacturing backend, but the customers are the ones who ultimately own their product.
The thing about this space right now is that it cuts across many different industries, as well as many different company types. We’ll work with startups who are launching a connected product that is their whole business all the way up to Fortune 100s that are creating a new appliance or a new product and seeing if it fits in their business model.
That said, companies will come to us at a variety of positions in the development process. Sometimes they’ll come to us before anything has been done, but they’ve received a mandate from their board to look into connectivity and the IoT—that’s entry point one. Entry point two is when a company already knows what they want to build, but they haven’t built a prototype yet. They come to us with pretty clear goals, but we help them figure out the specifics of their product definition and ramp that through. The third entry point is when the product has gone part of the way through development, and then the company realizes that they don’t have the right development resources to get that product all the way into the market.
Ovie, one of Breadware's clients, offers a smart food storage system for leftovers in the user's refrigerator. Once the leftovers are placed in the smart container, the user enters information regarding the leftovers into Ovie's mobile app. The app and Alexa will regularly remind the user of how many days they have left to use the leftovers and suggest recipes to use with them. Source: Breadware
What we emphasize in getting started is clear project definition and clear project architecture. These products are going to be different than traditional appliances or traditional products because they have software embedded in them. There are many disciplines involved. You have hardware, electronics, mechanics, and industrial design; then you have firmware, app development, Cloud connectivity, and networking—and it’s very common that an appliance manufacturer doesn’t have all these disciplines in-house. So, while a company might have defined some of their product, there may be some gaps that they haven’t even thought about yet.
What are customers typically looking for when they come to you?
Typically, they want to know three things. They’re often familiar with product development, but they’re new to connected product development, so they want to understand 1) how long it’s going to take to get this particular product that they have in mind to come to market; 2) what the whole budget will be, from R&D to manufacturing updates they’ll have to pay for; and 3) what they will be paying per unit once the product is at production at some volume. These are questions that we can’t answer immediately but that we can help customers get some clarity on, so that they can make informed decisions on how they proceed.
Wearables like fitness trackers and cardiac monitoring devices represent a fast-growing sector of the IoT. Source: Breadware
Do you also guide toward the possibilities of creating new revenue streams?
When I look at the appliance market, there are three reasons why these companies are building connected appliances. One is exploring new revenue streams: How do we sell the appliance and, in addition, sell some software service, or sell some consumable, monthly subscription? You could have this long tail revenue in addition to the product sale. It’s very new to the appliance market to be able to charge that when you look at the home setting, because the home setting doesn’t have that monthly maintenance cost that you see in the commercial space.
Number two is that smart appliances create new relationship models with the customer. Historically, you’d sell an appliance and the only data point you’d get as feedback was if the customer brought back the appliance later and tried to claim the warranty. But now, with a connected product, you’ve got this direct connection, one-on-one, with the customer. You know what features they’re using, which allows the R&D department to better be able to create new products for the customer in the future. You know how frequently they’re using the product, and you know if they’re using it differently in different parts of the world.
The third reason is establishing strategic partnerships, whether that’s with Amazon, Target, or a specialized company, so that these appliance companies don’t have to recreate all of the verticals themselves. Instead, they can provide that high-level customer value through a connected web backend and leverage strategic partnerships they’ve made along the way to create a whole ecosystem.
What are you encountering the most in the consumer home space?
We’re seeing a lot of devices around medication adherence. That’s a popular one right now: How do we live safer and healthier? We’re seeing a lot of devices around access, like how you open and close your garage door or front door. We’re seeing a lot of devices that are creating more intelligent products in the home, from smart appliances to smart kitchens, smart laundry rooms, and smart bathrooms. A lot of these devices will leverage consumables and reordering for data models, so you never run out of laundry detergent or dish soap, because your device knows when it’s low and it reorders. We’re seeing a lot of pet tech, actually: What’s the wellness of your dog? Where is your dog? How much did he eat and drink water today? Does he need a diet change?
It’s amazing to see the types of products that are being connected, classified, and qualified, and to see the new value streams that are being created from them.
This seems to slot nicely into the subscription economy that’s so popular with 18 to 34-year-olds today. However, with this in mind, how can OEMs create smart products where the data collected is actually useful and valuable to the end-user?
Also, to your question: What are appropriate products to connect to the Internet? What value is provided to the company and to the consumer, and how do you find the balance?
McKinsey [& Company, a management consulting firm] did a study—back in 2015, but still very relevant—that was a 150-page thesis on all things IoT. They studied IoT deployment in different settings: in the home, on the human body, in cities. And they found that, across the board, the user knows that they’re giving something up when they’re using connected devices. They know they’re giving up data, information.
So, the value proposition to the end-user needs to be 10 times the ROI, based on what they pay for it. There has to be a really strong value proposition of that connectivity to the end-user; and if there is not, then that product is not going to sell.
There are reams of failed IoT products where data was collected, but it was just noise—because that data had no value when fed back through a consumable reordering package, through targeted information, or through some means for the user to make their life better. That’s hopefully what it comes down to.
Right. And for some products, IoT connectivity isn’t necessarily a value-add. Do you ever turn customers away for this reason or others?
Absolutely. We’ll turn customers away if we feel that the product doesn’t have any market fit. We’ll turn customers away if we don’t feel comfortable ethically with what the product is trying to do. And we’ll turn customers away if we don’t feel that the product, when it’s all said and done, will be fully safety-compliant.
The IoT has created a bit of a gold rush. There are a lot of great ideas that are coming to bear, and some of them that really aren’t so great. We’re aware of this, so we try to leverage what we can to help the companies that we see becoming commercial successes. One of the ways we approach this, though, is that instead of turning a company away, we try to steer and guide them based on our pulse on the market, and help them modify their idea so that it might be a better fit.
How can OEMs make data-collecting appliances more attractive to the end-user, particularly those concerned with privacy and security?
Consumers aren’t necessarily opposed to giving up their data; we do it all the time. We’re okay with giving up parts of our information if we know how it’s being used and we trust that that’s the way it’s being used. So, we encourage all customers at Breadware to be forthright and transparent about what the product does and what data it collects. Creating this external transparency on the software of a product is a new type of marketing, and a very important type of marketing, for an IoT product.
This interview has been condensed and edited for length and clarity.