Continental Automated Buildings Association
Information Series
IS 2005-16
The Digital Home: Is it Really Here?
You're Kidding, Right?
www.caba.org
The Digital Home: Is it Really
Here? You’re Kidding, Right?
Reprint Date: April 2005
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The
Diffusion
Group
The Digital Home: Is It Really
Here? You’re Kidding, Right?
A TDG Research Topic Paper
Author: Michael Greeson
© TDG Research 2005
TDG Research
5800 Granite Parkway
Suite 300
Plano, TX 75024
972.731.2553
www.tdgresearch.com
[email protected]
Actionable
Intelligence for New
Consumer
Technologies
A TDG Topic Paper
The Digital Home: Finally Something Worth Thinking About?
Introduction
As the 2005 Consumer Electronic Show completes its annual media circus,
industry leaders will have (once again) evangelized their company’s “cutting
edge” technologies and will have (once again) announced a variety of
consumer electronic products that, while interesting in a Jetson-esque sense, will
have little applicability to the lives of ordinary consumers.
Among the most widely-hyped concepts of recent CES productions has been
the “digital home,” a seemingly boundless concept that has been expanded to
include everything from Internet-connected refrigerators and talking toasters to
robots that wash windows on command. Everywhere you turned on the show
floor, and everywhere you looked in the press, the concept of the “digital home”
was being tossed about with abandon. As with any temporary industry mantra,
the concept means much more to those in the consumer electronics industry
than it does to the consumer. That said, there exists widespread disagreement
among the industry itself as to what the phrase means.
With confusion so
rampant, how can we expect to turn the concept of the “digital home” into a
vision that has meaning for the ordinary consumer? A meaning so compelling
that the consumer products and services associated with the “digital home” are
perceived as more useful, more valuable than those that do not.
Defining the “Digital Home” Landscape
Before we can engage in a meaningful dialogue about the nature of the “digital
home,” we need to define our terms. Although most of us are aware of the
importance of this exercise, it is amazing how seldom we follow through with it.
(1) What is meant by “digital”?
Denotation – “(E)lectronic technology that generates, stores, and processes
data in terms of two states: positive and non-positive. Positive is expressed or
represented by the number 1 and non-positive by the number 0. Thus, data
transmitted or stored with digital technology is expressed as a string of 0's and 1's.
Prior to digital technology, electronic transmission was limited to analog
technology, which conveys data as electronic signals of varying frequency or
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A TDG Topic Paper
amplitude that are added to carrier waves of a given frequency. Broadcast
and phone transmission has conventionally used analog technology.1”
Connotation – To be perfectly blunt, most consumers don’t know precisely what
“digital” means but they strongly associate the term with more expensive
products and services that have little unique value but may offer incremental
improvement over preceding technologies (in this case, analog).
Comments – Let’s stop with the engineering lingo and try to leverage or improve
the consumer’s perception of what “digital” implies. “Digital” should mean
easier to install, configure and use; more enjoyable to engage; creating a “oneof-kind” experience; etc.
(2) What is meant by “home”?
Denotation – “A place where one lives; a residence. The physical structure within
which one lives, such as a house or apartment.2”
Connotation – No doubt more emotive in essence, consumers perceive a home
as not just a dwelling place together or physical structure within which they live,
but an environment in which they spend a lot of their private (that is, not
working) time or perhaps share time with others within their social spheres (such
as family and friends). It is for many a place of refuge, a place in which they can
escape the “outside” and call their own space.
Comments – There’s a “house” and then there’s a “home.” The denotation
refers to the physical structure (more like “house”), whereas the connotation
refers to the psychological and social aspects that the physical structure
occasions. Without abusing semantic privileges, I simply mean to suggest that
the concept of the “digital home” has an important emotional quality that is
lacking from our currently discussion of the “digital house” (which is really what
the industry has been talking about for the last 20 years).
(3) What is meant by “digital home”?
Denotation – The application of digital technologies to the activities that take
place within our residential living spaces, whether that applies to entertainment,
communications, control or security.
Connotation – A home that is enabled to enjoy a variety of digitally-enabled
applications, whether that be music, movies, telephone service, home control, or
home security.
1
Courtesy of whatis.com, at
http://searchsmallbizit.techtarget.com/sDefinition/0,,sid44_gci211948,00.html.
Actionable
Courtesy of dictionary.com, at http://dictionary.reference.com/search?q=home.
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Comments – At this point the denotation and connotation begin to look familiar,
if only due to the fact that I made them that way. The point is that there is no
standard definition for the “digital home,” at least not in any strict sense. The
only way in which we understand the “digital home” is by combining the
common sense of “digital” and “home” – any other way of thinking about this
concept is useless if not counterproductive, especially to companies trying to
create and market “digital home” products or services to the mass-market.
The Fundamental Components of the “Digital Home”
Enough of waxing academic. Now let’s shift our focus to the “enabling” the
“digital home” concept; that is, the groundwork or fundamental components
upon which any discussion of the “digital home” must rest. TDG believes there
are three such components:
(1) The presence of multiple Internet-capable devices (for example, personal
computers);
(2) The presence of a broadband Internet service; and
(3) The presence of a home network.
There was a time when discussions about the “digital home” centered on highend custom solutions that were designed into newly built homes, systems which
enabled the sharing of video and audio among multiple rooms, integrated a
security system with various control panels and remote monitoring stations, or
allowed the home owner to use strategically placed video cameras to peak in
on various parts of their home.
While many believe that this definition is too strict, it really isn’t that far off base.
With advances in digital and IP technologies, it is now possible to deliver this kind
of experience without having to spend thousands on a whole-home, structured
system. This means by definition that the market for “digital home” solutions and
services is as real as the co-presence of a broadband connection, multiple PCs
or other Internet-capable devices, and a home network.
Why is This Important?
Given the fact that most broadband households own multiple PCs (most of
which will be purchasing other non-PC Internet-capable devices in the next few
years), with the simple addition of a wireless home network this household can
be meaningfully said to live in a “digital home” – at least according to TDG’s
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definition. As demonstrated below, this means that the “digital home” has
reached critical mass among US households (“critical mass” being understood as
the point at which legitimate market opportunities can be discussed without the
need for pie-in-the-sky “pipe dream” anecdotes). Perhaps the best definition of
“critical mass” (and one implicit in TDG’s analysis of any emerging consumer
innovations) is offered by Everett Rogers, the father of diffusion theory, in his
famous work, The Diffusion of Innovations:
“The rate of adoption of interactive media…often displays a certain
distinctive quality called the critical mass. The critical mass occurs at the
point at which enough individuals have adopted an innovation so that
the innovation’s further rate of adoption becomes self-sustaining.3
Rogers’ key finding regarding critical mass can be summarized as follows: only
when a critical mass of individuals (usually early adopters and the earliest of
mass-market consumers) adopt an innovation does it begin to have sufficient
utility for the average individual (that is, the mass-market) to find it valuable and
worth adopting. Once this critical mass is achieved, the adoption of an
innovation begins to accelerate.
Other authors have used (and abused) Rogers’ findings, some of them to great
acclaim. Technology pundit Geoffrey Moore’s Crossing the Chasm is considered
by many to be the most important work on marketing emerging technologies to
emerge in the last two decades. Unknown to those that have read Crossing the
Chasm, Moore uses Roger’s adoption Bell Curve (and even incorporates the
same category headings such as innovators, early adopters, early majority, late
majority, and laggards4) to explain how certain emerging technologies reach
mass-market status while others disappear in what Moore calls “the Chasm.”
Perhaps one of the few unique additions that Moore offers to Roger’s diffusion
theory is the concept of the “chasm”; while a notable addition, Moore has yet to
give Rogers editorial recognition for his substantial body of work in diffusion
theory or credit for his specific contribution to Moore’s own work.
Rogers posits that the first 16% of the adopter population is comprised of
innovators (2.5%) and early adopters (13.5%). Thus, penetration of an innovation
beyond 16% of the population can be said to have reached the “early majority”
or early mass-market. Again, this is terminology and concepts with which the
majority of readers will be familiar, but it is important to remind ourselves of the
3
Everett Rogers, The Diffusion of Innovations: Fourth Edition (The Free Press, New York, New York.
1995), p. 313
Actionable
Ibid, p. 262
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importance of attaining critical mass and what it means to emerging technology
markets, in this case the “digital home.”
Conclusion
As previously stated, the concept of the “digital home” has been tossed about
for years, but it always referred to something that was likely to happen tomorrow.
The problem was that “tomorrow” never arrived and the concept of “digital
home” was rapidly becoming vacuous, somewhat of a pipe-dream. But this is
no longer the case.
Digital Home Reaches Critical Mass
(Penetration of broadband, home networks, and multiple PCs among US households)
(percentage of all US households)
60%
Broadband HH (% HH)
Networked HH (% HH)
Multi-PC HH (% HH)
40%
20%
Critical Mass: 16% Penetration
0%
2001
2002
2003
2004
2005
2006
2007
© 2004 TDG Research
This conclusion is based on the fact the three key metrics by which The Diffusion
Group defines the “digital home” have exceeded 16% penetration among US
households. As illustrated above, at year-end 2004:
•
Broadband Internet service penetration stood at 34%;
•
Home network penetration passed 17%; and
•
Multiple PC penetration topped 35%.
Given that the basic constituents of the digital home are present in at least 17%
Actionable
Intelligence for New
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A TDG Topic Paper
of all US households, the “digital home” can now be discussed in the here-andnow, not just as some distant vision of technology enthusiasts. This should service
as good news to those companies looking to exploit the growing market for
“digital home” solutions, but it should also serve as a warning. While the early
market for such products and services is comprised of early adopters, the early
majority (a consumer segment comprised of followers who, while energetic
about new innovations, seldom lead the pack). This early-mass market segment
tends to wait until others have purchased and used new products, established
their worthiness, and given manufacturers a chance to work out the kinks.
Reflections and Recommendations
Yes, the market for digital home products and products is very real…finally.
Moreover, it is growing. According to TDG’s forecasts, the number of “digital
homes” will grow to almost 50 million by 2010, comprising more than 45% of all US
households.
Making the most of this growing market means that manufacturers and vendors
of digital home products and services must quickly shift their focus from what
their solution is (802.11x, BlueTooth, UPnP) to what the solution does (enables
access to your home media from any connected device, allows you to hook up
a stereo system without stringing a single wire, allows you to communicate with
others in way that is both better and less expensive than alternatives). Focus on
the application value of the solution, not the technology. Think of it from a
consumer perspective:
•
What can I do with this solution?
•
How does it improve my life, and how is it better than what I have now?
•
Why would I want to pay “x” for something that is not that much different
from my current experience?
Notice the emphasis upon pragmatic value. This is a permeating characteristic
of the early mass market and one that is ignored only at great risk.
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Copyright Notice
This document was published by The Diffusion Group, Inc. Copyright 2004.
Reproduction is forbidden unless authorized. All rights reserved.
About The Diffusion Group –
The Diffusion Group is a “think tank” of consumer technology analysts charged
with providing timely, actionable intelligence designed to best position new
consumer technologies for rapid diffusion. TDG is committed to providing market
research and strategic consulting services based on conservative, real-world
analysis and market forecasts grounded in consumer research. For more
information about The Diffusion Group, please visit our website at
www.tdgresearch.com.
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