Business

Why GAFA’s Interest in the Smart Home Actually Presents Significant Opportunity

GAFA's (Google, Apple, Facebook, Amazon) entrance into the smart home market presents two big changes for integrators: more customers but less product revenue.


Why GAFA’s Interest in the Smart Home Actually Presents Significant Opportunity
Here comes the rise of GAFA: Google, Apple, Facebook, Amazon.
Jason Griffing · May 16, 2017

A controversial blog post that surfaced on CE Pro last week has grabbed the attention of the industry. Bruno Napoli, the founder of Krika, published his piece alluding to the “doom” currently facing home technology specialists as a result of “GAFA” (Google, Apple, Facebook, Amazon) stepping onto the smart home field.

To no one’s surprise, the article has sparked some heated debate in the comments section, as well as across various industry forums and groups.

Bruno, who I happen to know personally, has told me that the intent of his piece was a positive one. In spite of its dire tone, his message is not one of inevitable annihilation of our industry as whole. Rather, Bruno perceives GAFA’s entrance into the smart home as a massive opportunity for those who are willing to adapt, and an only existential threat to those who aren’t.

Some readers agree wholeheartedly with the article’s message, touting a message of “adapt or die.”

Others seem to be dismissing the article’s message outright, derisively arguing that doom-and-gloomers said the same thing when Z-Wave and X-10 came out (hardly apt analogies I might add).

These arguments, of course, represent the extremes. Many industry veterans, myself included, come down somewhere in the middle: being decidedly bullish on the long term prospects for home tech pros but still willing to engage in a conversation about the potential threats that GAFA’s entrance into the smart home represents.

GAFA Will Create More Smart-Home Customers...

As with most market threats, this new reality also presents ample opportunities. GAFA’s marketing budgets will bring a substantial amount of attention to the smart home, often from consumers who may have otherwise had little awareness.

Let’s not forget that many of these consumers will have their interest in a connected home piqued, but will have no stomach for doing it themselves. And even those who attempt to go it alone will be greeted with a confusing landscape full of fractious standards and conflicting ecosystems.


Opinion: GAFA Spells Doom for Traditional A/V and Smart-Home Specialists


As a result, many of these consumers will seek out an experienced professional for help navigating this new breed of smart home products. Just as our clients do now, these consumers will need help with product selection, installation, setup and training.

Perhaps most significantly however, in light of the speed with which the market is evolving, these consumers will need help with the ongoing management of their connected lives. The market demand for such “Technology Managers” is only going to grow.

... And Push Integrators Toward Service Revenue

In spite of these growing opportunities, however, let’s not delude ourselves into believing that GAFA’s market entrance won’t upset the applecart in some segments of the market.

While certain product categories like architectural speakers, home theater, panelized lighting and automated shades remain the sole domain of home technology specialists, many others are under substantial pressure from GAFA.

However, this downward pricing pressure on products can easily be offset by growing service revenue and RMR streams. Developing a service strategy to meet the market’s growing need can generate predictable cash flow with high profit margins. Putting these plans in place, and backing them with offerings like 24/7 availability and proactive support, also cements the market’s perception of you as more than an installer, but an ongoing service provider they will increasingly need.

We are seeing these strategies work with integrators serving various market segments all over the country. But effective pricing strategies to meet the new market realities don’t stop with managing home technology.

It doesn’t take a large leap of faith to imagine that the CEDIA market could ride this new wave of smart home awareness into becoming full-service technology managers, offering management of personal tech like computers and phones as well. No one is better positioned to do this than the CEDIA integrator.

And while this is a model that needs to be approached carefully, OneVision’s previous life as an integration firm proved that it works, riding it to $100k+ a month in recurring revenue.

Now is the time to develop strategies for meeting the growing demand that GAFA is bringing to the smart home. As an industry, we are extremely well positioned to leverage their efforts to our advantage.

Our hard-earned expertise is becoming an increasingly valuable asset, and the high-touch, personalized service we can provide never commoditize. By acknowledging the significance of GAFA’s entrance into the market we can fully leverage the opportunities it presents.


For more information about service and using it to create RMR, visit www.onevisionresources.com/blog.



  About the Author

Jason Griffing is the Partner Development Manager at OneVision Resources. Have a suggestion or a topic you want to read more about? Email Jason at [email protected]

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  Article Topics


Business · Service & Recurring Revenue · News · Blogs · Amazon · Apple · Facebook · Google · OneVision · All Topics
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Comments

Posted by Joseph Kolchinsky on May 4, 2017

@PureCI - consider selling the value of your service the black box enables rather than selling the black box itself.  When you buy a security system you’re not paying for the hardware, you’re paying for the monitoring service and the peace of mind that comes with it.  The hardware is simply a means to that end.

So if you’re having trouble selling Krika/Ihiji/Domotz/OvrC Pro/Bakpak as a blackbox line item on your proposal (which, to your point, may be questioned and commoditized over time), then put a line item on your proposal for “Basic Remote Support”. This is a service you are likely already providing at no charge whenever your clients call in with a “help, my music system isn’t working” or “Netflix is frozen” type of question. But I believe it’s a service clients value and will pay for if presented correctly.

The specific price of this line item is up to you - but it should at the very least cover the cost of your troubleshooting platform/device (if you have trouble selling it as a separate line item) and be a palatable number relative to the cost of the project.  If you’re submitting a $5,000 proposal then a $250 fee for “Basic Remote Support” is appropriate.  If you’re submitting a $50,000 proposal, then $1,000 is appropriate.

And if a client rejects this line item then it might be worth reconsidering whether you want to do business with this client in the first place.

Happy to chat if you want to follow up on this strategy.  [email protected]

Posted by Joseph Kolchinsky on May 4, 2017

Steve (@S1szt) - you’re absolutely right.  The future of the industry isn’t service ONLY, it’s distribution, installation, AND service.

The problem is that almost no integrator today is positioned to provide excellent service and that needs to change -
with or without RMR.  But at the same time, to your point, integrators absolutely need to focus on their businesses and become better integrators driving efficiency throughout the organization.  We preach this to our partners every day and it’s exactly why we came to market with our service.  We partner with integrators providing a turn-key service platform enabling them to continue to focus on cultivating leads, selling projects, designing systems, and installing them efficiently while we provide basic support, the training/developing of their service team, and the marketing/sales of premium support memberships.

The goal of becoming a service-oriented integrator is to provide the service your clients increasingly want/need (instant, 24/7 basic support with prompt advanced support when necessary).  If integrators don’t focus on service then they will lose clients to integrators (or GAFA-companies) who do that.  We are seeing this play out with our current partners today who routinely win new projects at a premium to their competitors simply because they provide free 24/7 basic support.  But RMR is an important byproduct of all this and is accretive to margins - meaning, it significantly contributes to profits without adding complexity to the business.

It sounds like BRAVAS and OneVision should work together to make our shared integrators the best ones in the world.  We’ll enable them to become excellent service providers overnight while BRAVAS focuses on streamlining their businesses operationally.  And if we make some RMR along the way, then all the better.

Posted by jasongriffing on May 4, 2017

PureCI - I agree completely that the tone of piece lent itself well to the types of responses it got. As I mentioned, I know Bruno personally and, while I want to be clear that I’m not apologizing for the post, I do happen to believe that his heart was in the right place. He doesn’t believe what he posted in order to sell more Krika, he invented Krika because he believes what he posed.

We had Bruno on the HomeTech podcast (find us in iTunes) this week. Episode will air tomorrow (5/4). It was a spirited debate. Would encourage you to check it out if you want to get a better feel for his personality and where he’s coming from.

Thanks for taking a moment to comment.

Best,
JG

Posted by jasongriffing on May 4, 2017

Steve - thanks for the thoughtful comment. Your point is well taken - yes, the new market realties present ample opportunities. Lots of ways to skin a cat here. I’ve been watching from a distance and am excited to see what you, Paul, and the rest of the BRAVAS team are able to accomplish

Posted by PureCI on May 4, 2017

My issue with that article was that it seemed like they were trying to poke the bear to get a reaction and they did. I felt like Bruno was trying to impose fear into integrators in order for them to look at other ways they can make money, and in his case it’s by purchasing and implementing his Krika devices into our systems. In my personal opinion, telling other Integrators that their Jobs will be obsolete very soon is not a good way to get more of us to purchase there equipment for potential RMR.

It’s obvious GAFA has more money then the rest of the world combined, but I am not really fearing my job. I have a hard time accepting Krika’s devices because one of them is a Raspberry Pi that, after having Krikas technology installed and implemented, costs over 10x the original price of a Pi if not more. How do I charge a client $400-$700 on top of my original quote when they can look at the back of there rack after and see a Raspberry Pi logo on the power supply itself? Most clients wont know what it even is but those who do will lose faith in us and start wondering if all of our other products are marked up 10x-15x the original cost. I always look at it that if we do a good job, they might tell 1 or 2 people. If we do a bad job, or leave the customer feeling like we took advantage of them, they will tell 10-20 people. People love telling nightmare scenarios to other friends, if someone had some bad plumbing or electrical done and they’re friend requires the services, most likely that potential customer would be like “You know who you definitely shouldn’t use??”

My point is, if you’re going to write an article like that and look at getting a reaction out of us, don’t be shocked if the reaction you get is a negative one. We see some of our margins already shrinking due to Amazon, Best Buy and other sites, we don’t really want others in our industry who claim to support us, telling us to enjoy our jobs for as long as we can because we won’t be needed in this industry. We’re Technologists, if anything we jumped “all in” years ago and have years upon years of experience in this field and while those who haven’t embraced IT in this industry might struggle to keep up, those of us who did might just start to shine.

Posted by S1szt on May 3, 2017

Paul Starkey & I read Bruno’s article and responded yesterday in our weekly “Tuesday Morning Coffee” (we’re trying to think really big here)...

Just read again about the end of CI’s… GAFA (Google, Apple, Facebook & Amazon) is taking our valued jewels and storming the (mass) market with talking pods, wireless nodes, IOT and Mrs Jetson’s robot.

Hold on, soothsayers.  We see investment money lined up behind groups like CSC (Control 4, SAVANT and CORE – ok, not quite as glamorous). We see Manufacturers, trying to grow their future, finding niches and new categories to expand their kingdoms. And what if there’s magic in a consumer distribution model?

Wealthy people will still need Waldo to design and install their massive home tech systems. From lighting, shades, to in-wall/ceiling audio, video, theater, “hello I’m home” and whatever the heart or mind desires.

Why wouldn’t a manufacturer want to capture the value from the plant to the street? Meaning: why not have 25 or 50 or multiples of 100 locations where people can experience and get the systems designed, installed and serviced for them?

Our vision is a network of Bravas Studios that make much more money, per revenue dollar, than the manufacturers make. Our 24 locations will do $90M in 2017 and make some $13M – about the same that Control 4 reported on $202M in Revenue.

Please stay with us… a 100-location network of companies creates a $400M distribution arm that purchases some $160M in goods. At $50M in earnings with a 30X multiple, you have $1.5B bolt-on to any of the aforementioned CSC.

You might want to join them. Take advantage of formal sales training resources, tech training resources, business coaching resources, marketing that generates more customers and all the things most CI’s can’t afford today…

Owners, you get to realize maximum value in your business, and hang around if you wish.  The winner here dominates the marketplace: bigger and better than any second or third place finisher. And look…

Not a spec of RMR required.

What is required is a standardized management system proven to produce results. If there is a 10-digit future for any CI (or group of CI’s), this appears the most likely path.

Message to CI owners: find that standardized, money-making system. It will bring you significant profits today. It will be even bigger in the future.

Posted by S1szt on May 3, 2017

Paul Starkey & I read Bruno’s article and responded yesterday in our weekly “Tuesday Morning Coffee” (we’re trying to think really big here)...

Just read again about the end of CI’s… GAFA (Google, Apple, Facebook & Amazon) is taking our valued jewels and storming the (mass) market with talking pods, wireless nodes, IOT and Mrs Jetson’s robot.

Hold on, soothsayers.  We see investment money lined up behind groups like CSC (Control 4, SAVANT and CORE – ok, not quite as glamorous). We see Manufacturers, trying to grow their future, finding niches and new categories to expand their kingdoms. And what if there’s magic in a consumer distribution model?

Wealthy people will still need Waldo to design and install their massive home tech systems. From lighting, shades, to in-wall/ceiling audio, video, theater, “hello I’m home” and whatever the heart or mind desires.

Why wouldn’t a manufacturer want to capture the value from the plant to the street? Meaning: why not have 25 or 50 or multiples of 100 locations where people can experience and get the systems designed, installed and serviced for them?

Our vision is a network of Bravas Studios that make much more money, per revenue dollar, than the manufacturers make. Our 24 locations will do $90M in 2017 and make some $13M – about the same that Control 4 reported on $202M in Revenue.

Please stay with us… a 100-location network of companies creates a $400M distribution arm that purchases some $160M in goods. At $50M in earnings with a 30X multiple, you have $1.5B bolt-on to any of the aforementioned CSC.

You might want to join them. Take advantage of formal sales training resources, tech training resources, business coaching resources, marketing that generates more customers and all the things most CI’s can’t afford today…

Owners, you get to realize maximum value in your business, and hang around if you wish.  The winner here dominates the marketplace: bigger and better than any second or third place finisher. And look…

Not a spec of RMR required.

What is required is a standardized management system proven to produce results. If there is a 10-digit future for any CI (or group of CI’s), this appears the most likely path.

Message to CI owners: find that standardized, money-making system. It will bring you significant profits today. It will be even bigger in the future.

Posted by PureCI on May 4, 2017

My issue with that article was that it seemed like they were trying to poke the bear to get a reaction and they did. I felt like Bruno was trying to impose fear into integrators in order for them to look at other ways they can make money, and in his case it’s by purchasing and implementing his Krika devices into our systems. In my personal opinion, telling other Integrators that their Jobs will be obsolete very soon is not a good way to get more of us to purchase there equipment for potential RMR.

It’s obvious GAFA has more money then the rest of the world combined, but I am not really fearing my job. I have a hard time accepting Krika’s devices because one of them is a Raspberry Pi that, after having Krikas technology installed and implemented, costs over 10x the original price of a Pi if not more. How do I charge a client $400-$700 on top of my original quote when they can look at the back of there rack after and see a Raspberry Pi logo on the power supply itself? Most clients wont know what it even is but those who do will lose faith in us and start wondering if all of our other products are marked up 10x-15x the original cost. I always look at it that if we do a good job, they might tell 1 or 2 people. If we do a bad job, or leave the customer feeling like we took advantage of them, they will tell 10-20 people. People love telling nightmare scenarios to other friends, if someone had some bad plumbing or electrical done and they’re friend requires the services, most likely that potential customer would be like “You know who you definitely shouldn’t use??”

My point is, if you’re going to write an article like that and look at getting a reaction out of us, don’t be shocked if the reaction you get is a negative one. We see some of our margins already shrinking due to Amazon, Best Buy and other sites, we don’t really want others in our industry who claim to support us, telling us to enjoy our jobs for as long as we can because we won’t be needed in this industry. We’re Technologists, if anything we jumped “all in” years ago and have years upon years of experience in this field and while those who haven’t embraced IT in this industry might struggle to keep up, those of us who did might just start to shine.

Posted by jasongriffing on May 4, 2017

Steve - thanks for the thoughtful comment. Your point is well taken - yes, the new market realties present ample opportunities. Lots of ways to skin a cat here. I’ve been watching from a distance and am excited to see what you, Paul, and the rest of the BRAVAS team are able to accomplish

Posted by jasongriffing on May 4, 2017

PureCI - I agree completely that the tone of piece lent itself well to the types of responses it got. As I mentioned, I know Bruno personally and, while I want to be clear that I’m not apologizing for the post, I do happen to believe that his heart was in the right place. He doesn’t believe what he posted in order to sell more Krika, he invented Krika because he believes what he posed.

We had Bruno on the HomeTech podcast (find us in iTunes) this week. Episode will air tomorrow (5/4). It was a spirited debate. Would encourage you to check it out if you want to get a better feel for his personality and where he’s coming from.

Thanks for taking a moment to comment.

Best,
JG

Posted by Joseph Kolchinsky on May 4, 2017

Steve (@S1szt) - you’re absolutely right.  The future of the industry isn’t service ONLY, it’s distribution, installation, AND service.

The problem is that almost no integrator today is positioned to provide excellent service and that needs to change -
with or without RMR.  But at the same time, to your point, integrators absolutely need to focus on their businesses and become better integrators driving efficiency throughout the organization.  We preach this to our partners every day and it’s exactly why we came to market with our service.  We partner with integrators providing a turn-key service platform enabling them to continue to focus on cultivating leads, selling projects, designing systems, and installing them efficiently while we provide basic support, the training/developing of their service team, and the marketing/sales of premium support memberships.

The goal of becoming a service-oriented integrator is to provide the service your clients increasingly want/need (instant, 24/7 basic support with prompt advanced support when necessary).  If integrators don’t focus on service then they will lose clients to integrators (or GAFA-companies) who do that.  We are seeing this play out with our current partners today who routinely win new projects at a premium to their competitors simply because they provide free 24/7 basic support.  But RMR is an important byproduct of all this and is accretive to margins - meaning, it significantly contributes to profits without adding complexity to the business.

It sounds like BRAVAS and OneVision should work together to make our shared integrators the best ones in the world.  We’ll enable them to become excellent service providers overnight while BRAVAS focuses on streamlining their businesses operationally.  And if we make some RMR along the way, then all the better.

Posted by Joseph Kolchinsky on May 4, 2017

@PureCI - consider selling the value of your service the black box enables rather than selling the black box itself.  When you buy a security system you’re not paying for the hardware, you’re paying for the monitoring service and the peace of mind that comes with it.  The hardware is simply a means to that end.

So if you’re having trouble selling Krika/Ihiji/Domotz/OvrC Pro/Bakpak as a blackbox line item on your proposal (which, to your point, may be questioned and commoditized over time), then put a line item on your proposal for “Basic Remote Support”. This is a service you are likely already providing at no charge whenever your clients call in with a “help, my music system isn’t working” or “Netflix is frozen” type of question. But I believe it’s a service clients value and will pay for if presented correctly.

The specific price of this line item is up to you - but it should at the very least cover the cost of your troubleshooting platform/device (if you have trouble selling it as a separate line item) and be a palatable number relative to the cost of the project.  If you’re submitting a $5,000 proposal then a $250 fee for “Basic Remote Support” is appropriate.  If you’re submitting a $50,000 proposal, then $1,000 is appropriate.

And if a client rejects this line item then it might be worth reconsidering whether you want to do business with this client in the first place.

Happy to chat if you want to follow up on this strategy.  [email protected]