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The ideal vision for the digital home is for an interconnected and interoperable network of
Personal Computers and a variety of communications and consumer electronics devices
working together in a seamless environment, enabling consumers to use and share digital
media and content, including video, music and games. However, current reality falls well
short of that vision. In most cases, the average consumer struggles with the complexity of
the various technologies at the heart of the digital home. Because many people realize only
a fraction of the potential functionality, they may also fail to appreciate the value of a highly
networked digital home. Under appreciation of the value of a digital home could slow or stifle
growth in the communications and high-tech industries. To respond, companies must put in
place compelling, new premium technical services to help consumers configure, connect,
and manage their digital homes.
For communications service providers, software vendors, and consumer electronics
companies, digital home services and products represent a substantial market opportunity.
According to one report estimate the 2007 revenues for the digital home device markets
were $268 billion, a growth rate of 38%. However, the digital home marketplace is also
seeing some troubling trends that could seriously impede economic growth. Consumers are
having trouble dealing with the technical complexity of digital home connectivity,
interoperability, and management. In the early days of the Video Cassette Recorder (VCR),
a standard industry joke was the fact that VCR displays constantly flashed their default “12:
00 a.m.” setting in millions of homes because even changing the time and date on the
machines was overly complex. Multiply that complexity by many factors and one begins to
see the challenge of the digital home.
A few “power users” aside, the average consumer does not have the technology skills to
setup a digital home: to connect the multitude of new consumer electronic devices and
networking technologies required to acquire, store, manipulate, and share pictures, music,
video, and other digital content. Numerous studies indicate that, because the various
technologies are currently too difficult to configure and use, consumers are only enjoying a
fraction of the potential functionality of a digital home. If steps cannot be taken to boost
consumers over the hump in terms of installing, connecting and using digital home services,
take-up will be delayed, cost will rise due to a high rate of returns for electronic equipment
and an increase in support calls, and revenue growth will be slowed.
If consumer electronics companies and service providers are to leverage digital home trends
as a means of pursuing profitable growth, they need to rethink their business models,
organizations, processes, and systems for helping consumers sort through the technical
complexities of the digital home. Part of the answer to helping consumers maneuver through
this complexity is in new approaches to making devices and networking easier to use and
manage. Another part is in rethinking the business model for providing in-home support.
Traditionally seen as a cost drain, in-home support can now be a means of generating
revenue and reducing churn by creating more satisfied customers.
The digital home is an interconnected and interoperable network of PCs and a variety of
communications and consumer electronics devices, ideally enabling a seamless environment
for consuming and sharing digital media and content, including video, music, and games as
shown in figure 1. The digital home is among the most dominant trends being discussed by
consumer electronics companies and service providers today – and, significantly, in the
broader information technology industry. A digitally connected home also opens up
possibilities for value-added services in a number of other areas. For example, digital
medical services is one offering being aggressively pursued by the health industry, providing
health services to those who may be homebound or otherwise looking for immediate
attention to non-urgent medical issues. Home security monitoring is also a rapidly maturing
market, as homeowners seek new technological methods of detection, tracking and
communications for security and observation purposes. Research and analysis point to
strong growth in the digital home market around the globe. Adoption of home networks and
broadband access rose in all major geographic areas. The number of households around
the world with data networking in place is now estimated at 80 million. Technology research
firms reports, for example, the Europe is in the midst of a home networking book thanks to
an increasingly competitive market for broadband services. After lagging behind other areas
of the world, growth rates in Europe now surpass those in North America and Asia, with
France and the United Kingdom in particular at the forefront of this growth and the projected
revenue numbers rare certainly impressive. Various estimates place the current global
market for digital entertainment content and products at above $200 billion annually.
Challenges to Broader Take-up
Technical complexity and device incompatibility prevent many consumers from setting up
and effectively managing their digital home. At the same time, all is not necessarily well when
it comes to supporting broader take-up of digital home services and generating revenue.
Potentially serious impediments stand in the way. One set of obstacles has to do with
compatibility issues; the other concerns the ability of the average consumer to deal with the
complexity of setting up and managing a digital home technology environment.
Compatibility
Sending digital content from one device to another is still hard to do. For example, if you
want to get a video from your PC to the large Liquid Crystal Display (LCD) television in your
living room, ideally you would be able to download it directly via your home Wireless Fidelity
(Wi-Fi) network. IF you did not have wireless network connectivity to your TV, you might then
have to transfer the video from your digital video camera to your PC, burn a digital video
disc (DVD), and then put that into the DVD player attached to the television. If all these
components were from different manufacturers, the process could take hours and require
multiple conversion steps and, in the end, the DVD player might not even understand the
video-encoding format from your PC. Significant connectivity and compatibility issues must
be addressed.
Complexity
If you have ever been to the house of a friend who is a technology expert or power user, you
may get the impression that the sky is the limit when it comes to digital home capabilities.
However, the reality for the vast majority of consumers is that technical complexity is, at the
least, compromising their ability to reap the full benefits OF DIGITAL CONNECTIVITY. At the
most, it is preventing them from even getting out of the gate. Consider one recent study from
the Consumer Electronics Association analyzing whether HDTV owners are actually
receiving an HD signal. The study found that only 44% of HDTV owners actually receive HD
programming; 34% are definitely not receiving HD programming; 16% are not sure; and 6%
think they receive HD programming but likely are not. Try to imagine some other utility or
service where consumers experience difficulty even knowing if they are getting the service.
Whose fault is this? One might try to blame consumers themselves for not reading the
manuals. But no less a technology guru than Donald Norman – a computer science
professor and leading expert in information technology usability – reported recently that
even he had to hire someone to hook up his HDTV system. Norman said, “someone
complained, you’d need a degree, and engineering degree from MIT, to work this…’ I have
an engineering degree from MIT and I couldn’t work it”. It is not the consumers’ fault, Norman
says. It is that technologies and interfaces designed based on an inadequate understanding
of the technology limitations of everyday people. Service providers and consumer
electronics companies are bearing the brunt. As a result of consumer frustrations regarding
technical complexity, service providers and consumer electronics face a number of stiff
challenges in driving growth from digital home products and services. Consider just a couple
of data points, including the following:
1. Rampant connectivity problems: Millions of consumer each month report difficulties
with home Internet connectivity, security, hardware, and software. According to Parks
Associates Digital Home research, between 20 and 50% of all broadband service provider
calls are out of scope – that is, unrelated to the issues that a service provider should be
expected to resolve. At the same time, if those issues are not resolved, the customer will
simply stop using the carrier’s services. So whose responsibility is it, exactly, to fix home
networking issues? Home networking calls can take twice as much time to handle as
connection-only calls, averaging between nine and 25 minutes. This has profound cost
implications for providers. Customer service calls just for home networking problems could
cost broadband service providers in the US more than $200 million annually by the end of
2011.
2. High return rates: Robert Stephens, founder of the information technology service
and repair company Geek Squad (now a subsidiary of consumer electronics company Best
Buy), said that more than a third of the wireless routers and modems purchased at Best Buy
stores are returned because people think they are just too complicated. Recent Accenture
research confirms this. We found that the average return rate for consumer electronics
devices ranges from 11 to 20 percent. Of those returns more than two-thirds (68%) can be
characterized as “no trouble found”. That is, the device met the manufacturer’s
specifications but not the customer’s expectations – the consumer found no use for it, could
not figure it out, or otherwise found the purchase of insufficient value. In the US alone, the
total cost of consumer electronics returns was $13.8 billion, of which 20% was due to
processing costs of “no trouble found” devices. That is a huge cost drain.
A Premium for Digital Home Setup and Management
Clearly, consumers need help setting up and maintaining a digital home networking system.
But who will pay for such support? A presumption at the heart of the business model for
service providers and electronics companies has been that companies must subsidize in-
home support – configuration, setup, and management – simply as a cost of doing business.
However, the research suggests otherwise. That consumers are actually willing to pay to
have a provider remove some of the technological complexity of the digital home from their
lives as shown in figure 2a & 2b. Fairly impressive majorities of consumers surveyed in
Accenture’s Digital Home Survey indicated their willingness to pay for premium services such
as in-home installation, technical phone support, backup, and remote monitoring services.
The numbers of consumers is rapidly approaching 50 percent who would be willing to pay a
provider a monthly fee to manage their digital home.
A prevailing attitude in the industry has been that in-home support is a drain on profits, but
the research suggests otherwise. Consumers understand the value and importance of their
broadband services, wireless in-home networks, and home entertainment systems. They are
frustrated at their inability to put a full suite of services in place themselves. If consumers
buy a two or three-thousand dollar HDTV and spend another thousand dollars on receivers,
cables and other devices, they want to make sure they are getting high definition content
from their set-top-boxes, gaming stations, and Blue-ray player and they are willing to pay
just to get these devices functioning properly. So are companies ready to step up and
provide premium technical services for the digital home? Here, the answer is less
convincing. In the consumer electronics, industry, isolated examples do exist of companies
that provide flexible, pre-integrated solutions to help consumers manage the complexity of
their digital homes. Independent services such as Geek Squad and Firedog provide setup
and maintenance services in customers’ homes. Geek Squad, for example, offers a variety
of in-home services, including mounting and setup of flat-panel TVs, diagnostics and repair
of home networking systems, and setup of home wireless networks.
In general however, companies are not stepping up to provide either the usability and plug-
and-play features that would make a digital home network easier to setup and manage, or
the in-home setup and maintenance services that would raise the comfort level of average
consumers in their ability to create a home network.
Key Technology Trends and the Digital Home
These three technologies can be defined in detail and are as follows:
• Continuous Access to People and Content: The increasing availability of powerful and
easy-to-use mobile devices, coupled with new computing and networking technologies, leads
to the ubiquity of communication and access to applications and data anywhere, anytime.
Because the same devices and applications are used, the lines between personal and
professional computing, and between desktops and mobile devices will continue to blur. This
continuity of usage will allow service providers to better track and profile user through
search history, group filtering, mining of social networks, and location monitoring. Based on
that, they can deliver highly personalized information and advertising.
• Social Computing: As part of a broader shift from technology to people, social
computing has moved away from structured collaboration and communication to social
networks. Just like the Web has evolved from being a transactional medium to becoming a
communication and now a predominantly social medium, early signs indicate that enterprise
software is following a similar path. Major vendors (e.g. Oracle, Microsoft) have already
begun to incorporate social computing capabilities (e.g., unified communications, content
sharing, and social networks) into their enterprise software suites. At the same time,
consumer-oriented social network services sites (e.g., Facebook) continue to evolve into
platforms, where user experiences are further enriched through applications from third
parties, including users themselves. Initiatives such as Google’s Open Social promise to
break down the “walled gardens” among social networks and make them the identity fabric of
the Internet.
• User-Generated Content: The proliferation of social networking and content
aggregation sites, combined with the wide availability of consumer multimedia devices (e.g.,
digital camcorders, camera phones, MP3 players) and software, has led to a huge explosion
of user-generated content in the form of videos, photos, blogs, podcasts, and social tagging.
This new source of content, which will likely continue to grow at a brisk pace, is bound to
transform the individual experience with media, entertainment and learning. For example,
YouTube videos are already beginning to replace instructional manuals on tasks ranging
from computer repairs to fixing a leaking faucet. More significantly, the power shift from
traditional distribution channels (e.g., TV networks, classrooms) to content aggregation
players (e.g., YouTube) will lead to a more level playing field.
Keys to success
The following keys to success go well beyond basic technology capabilities, based on the
trend addressed here; companies should consider the following keys to success when it
comes to providing premium technical services for the digital home.
1. Make It Easier to Extend and Integrate Devices: A key to making the digital home a
reality is better hardware and software integration and improved interoperability among
devices based on standard technology protocols and consistent user interfaces. Web
services and other interfaces and protocols will be critical in making components of the
digital home “speak” effectively to one another.
2. Design Effective Packages of Premium: After years of avoiding the truck roll, the
industry is starting to rethink the business model for providing in-home support. In past,
charging a $100 fee to perform an in-home call for service was prohibitive, undermining the
business case for value-added digital home services. Today, if one can charge $150 for in-
home services, a company gets the extra margin, but also something more: the ability to
deepen customer relationships, getting to know their real needs in a way that enables a
company to up sell or cross-sell additional profitable services. Such a recommendation is
easily made, but in fact companies must rethink their existing business models,
organizations, processes and systems if they are to offer support services that help
consumers manage complexity of digital home technologies. Instead of regarding customer
service as a drag on bottom-line profitability, companies must determine how to transform
the consumer experience by embedding services in their offerings. Developers believe that
enormous benefits – from improved differentiation to greater brand loyalty and new revenue
streams – await companies that can achieve this transformation.
3. Provide an Easy-to-use “soft panel” for Configuring, Interacting with, and Managing
Devices and Services in a Consistent Way, Including a Device/Services “Dashboard:
Because it is increasingly difficult to pack both functionality and usability into a consumer
electronics device, an emerging paradigm is to use “soft panel” controls as part of what
Accenture calls a “trivergence” architecture – where the device is technically separated from
the data and the controls. The most obvious example of a soft-panel solution is the Apple
iPod. The iPod relies on a network to download content, but rather than asking a consumer
to perform complex manipulations of data on the small device itself, Apple enables a user to
use a PC to control and manipulate the content via a soft-panel interface. Another example
is Vonage, which maintains a self-service. Vonage has no field force, so these self-
installation and self-service capabilities are critical to the company’s success. Soft-panels will
become increasingly important components of the total solution-enhancing usability of digital
home features.
4. Provide More Effective, End-to-End Service Management for Devices and Services:
Making technology work for the consumer can be an expensive proposition. Home visits are
a potential drain on profitability. To be successful, companies should incorporate
troubleshooting and repair mechanisms into their solutions and provide better
instrumentation to the service provider’s management systems. Accenture research
highlights the potential damage of providing poor customer support. Consumers in our study
said they are often frustrated with how long it takes to fix problems as well as with the
qualifications of the services representatives. Companies need to re-engineer the entire
customer support chain to make it more responsive to consumer needs. For example,
service providers have historically operated with siloed departments and device-centric fault
management approaches. Today they need to manage IP services such as video or music
on an end-to-end basis. Such a capability starts with intelligence embedded in the solution
or on-board support. It includes appropriate instrumentation for management applications
and moves up the chain with on-line support, phone support, field support, and, finally
returns or repair. Companies will need to rethink their business models, enabling them to
implement and then manage digital home services on behalf of their customers. Managed
digital home services can help by delivering better configuration management, offering the
capability for remote diagnostics and troubleshooting and providing end-to-end service
monitoring and management. Not only does this require better instrumentation and
management tools with end-to-end service views, but it also typically requires that service
providers re-engineer their organizations and processes to support a more service-centric
model.
5. Pursue Alliances and Partnerships: The combination of hardware, software, access,
connectivity, content, field support, and proactive/reactive services may be too much for one
company to handle on its own. Intelligent partnering and collaboration between hardware,
content, and service companies is essential.
Conclusion
As the technical complexity of the digital home increases consumer electronics companies
and service providers must increase their capacity for both reactive and proactive customer
support. A combination of effective design and use of interoperable technologies will go a
long way toward helping consumers use their digital home services more effectively. At the
same time, companies will need to rethink their business models, enabling them to
implement and then manage digital home services on behalf of their customers.
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Excitement in the Air: The Growth of Digital Home Technologies
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