Jordan O'BrienThe installation industry has enjoyed considerable success over the last few decades, but the industry is set for a sea of change according to Rich Green, founder of the CEDIA technology council and one of the association’s most prolific instructors.
Technology has been accelerating at a greater rate than ever over the last few decades, when compared to the rest of human history. That rate is set to increase even faster, with the world set to reach the singularity by 2040 – at this point computer processing power will surpass the processing power of every human brain combined. This will also be the turning point for computers that improve themselves, rather than requiring human input.
With this massive advancement in technology, installers will soon see their margins dwindle. Rich admits that the current status quo is that the heavier the product, the more margin those in the industry currently make. That will soon end however, with racks set to turn into Apps available on mobile devices that will essentially be free of charge.
So how does an installer make a money in this future? Well, Rich believes that while the physical manifestation of the industry has gone, installers will find much of their future revenue by offering services and their expertise.
Service-Based Economy
“It’s all about services. Software will overtake hardware be the digital concierge. Consumer electronics sucks. It breaks. Doesn’t work. They’re disposable products. Be the CEDIA trained professional to set expectations – product will fail, but I’ll fix it for you,” Rich notes.
Already the industry is beginning to adapt to this model. Services such as Ihiji and Domotz have set to stage for the service model – allowing installers to remotely monitor the health of a network and receive a status update on all devices on it, whether they’re Wi-Fi, ZigBee or even Z-Wave.
With services such as Ihiji, installers are able to set-up service plans and project revenue for their next quarter based on those service plans alone. That means any hardware installations will simply be additional revenue for those experts.
Dashboards such as Ihiji can also track exactly which technicians have been to their client’s house, what they’ve achieved, when they’ve achieved it and what still needs to be done.
Jason Aldous and other industry experts have previously echoed the need for installers to jump on the servicing bandwagon, so much of this philosophy isn’t new.
Rich believes strongly that CEDIA members are in the best position to service customers. “Consumers are like water; they take the path of least resistance. Don’t deliver crap. CEDIA members are the ‘decrapficiation’ of the industry,” he noted.
Acquiring Talent
There are other ways to make money other than just servicing however, Rich admits that installers could concentrate on those who can actually afford the expertise they offer. That means serving the 1% and acquiring the best talent to ensure they are serviced well. This approach still means that products are the least important aspect of what an installer does. “People are expensive, things are cheap,” Rich noted, quoting technologist Ramez Naam.
Even when installing products, installers will need to realise that products specifically designed for their industry are unlikely to be the future. In fact, Rich Green sees the future of innovation coming from the consumer space – even if many CEDIA members sneer at the very thought.
It’s big companies such as Amazon, Apple, Google, Microsoft and IBM that will define the smart home – rather than Crestron, Control4 and RTI. Even Savant recognises the consumerisation of the industry – positioning its latest product directly at consumers, rather than integrators.
Savant’s positioning is not unique in the consumer space. In fact, many of the big names have the exact same model – selling products and services directly to consumers. These companies recognise that there aren’t enough pros on the street to get the kind of smart home adoption they’re hoping for, which is why they prefer the direct to consumer model.
It’s not just the installation industry that is being cannibalised either. Rich identifies Enjoy is a company that is revolutionising both retail and installation in one fell swoop. Rather than forcing users to go into a store, buy the product and then go home and wait for an installer, Enjoy allows consumers to book an appointment with the company to try out and product before they buy. Once the appointment date and time arrives, an Enjoy expert will come to the person’s house, showcase the product and even install it – all free of charge. Rich admits that it’s hard to compete with free.
While it’s hard to compete with free, Rich believes that by acquiring talent installers will find themselves stronger than ever. That talent should also be capable of adapting to new industry trends – as Rich admits many of the things installers currently install will be increasingly out of place in the future.
VR And Design Will Be The Future Of The Industry
“AV industry made a lot of money during 80s, then became commoditised. Integrators took on control, energy management, digital health – but now VR. The next million-dollar room will be an interactive VR room where you don’t need to wear a head mounted display,” Rich said.
While a VR room sounds like an incredibly difficult thing to install, it may not be the hardware where the difficulty comes from. Rich believes that installers need to pay more attention to the D in CEDIA, as that’s where much of the future profit of the industry will come from. While many manufacturers and distributors already offer free design services, CEDIA members should be mastering design and charging a handsome fee for it.
“Deliver profit by creating value. Mastering design. Most important work is design – it helps installers solve the right problems. Essence of design is simplicity. Master complexity to deliver simplicity,” Rich commented.
Rich is a big believer in good quality design, believing that many of his customers value that above all else. That’s no surprise either, with Rich’s customers including the likes of Steve Jobs, Pavarotti, Gordon Getty, Evan Williams, Tony Fadell, Roger Ebert and Jenson Wong.
When designing an installation CEDIA members need to keep in mind the user experience. The PC and web browser are dead with many users now using their smartphones and tablets for control. If a homeowner is typically glued to their smartphone screen, then it’s likely that they wouldn’t mind controlling their home from that same screen.
Design is about knowing the customer too. A dedicated Android user is unlikely to be happy with a HomeKit automation system, while a dedicated Apple user will not want to use a controller built on the Android OS. Knowing the customer will also come in handy when deciding which devices to install – a savvy digital-first customer is unlikely to favour a 4K Blu-ray player over Netflix streaming in 4K. Rich doesn’t believe 4K Blu-ray players will be around for more than 18 months anyway, so maybe that last point was redundant.
The Internet of Things
CEDIA members are in a unique position to offer their customers exactly what they want – and that’s where the value comes from. Rich notes how the industry has been in the Internet of Things business since day one.
The Internet of Things is quickly becoming a minefield however, with customers needing expertise to help design a solution that is right for them. Does a user need a smart toaster to talk to their smart kettle which in turn discusses the temperature of the room with their smart thermostat? Maybe not, but that’s why CEDIA members can help their customers to ensure they get the devices they truly need.
While many of the devices they’ll need, or simply want, are consumer devices – Rich commented on exactly why many of the big names are getting in on the smart home industry.
“So much consumerisation is propelled by big data. Big data is end game. Get behavioral info on consumers,” he noted. “Smart cams and other devices that track user data aren’t friendly devices, they’re spy devices.”
In recent years’ privacy has been a big deal in the world of technology, but that hasn’t stopped companies coming up with surveillance devices that consumers actively want to have in their homes. Rich identified one such technology is the Asus Zenbo and the lesser known Jibo. Both of these devices are robots that feature stereo cameras and stereo microphones to monitor the surrounding environment. In fact, they’re so adept at monitoring their environment that the robots can actually make eye contact with the homeowner and if the user goes to leave the house, it can even remind them to grab an umbrella.
Despite pointing out these ‘scary surveillance devices’, Rich believes that this kind of technology is perfect for assisted living situations.
Is It All Doom And Gloom?
So with all these changes coming to the industry and technology in general, is it all doom and gloom?
Well, not really. Despite the change coming to the industry there will be some revenue still available for those wanting to stick to the traditional model. Object-based audio is one such technology that is creating new revenue opportunity. Consumers are interested in acquiring Dolby Atmos, DTS:X and Auro 3D systems. There is also a new generation of people who appreciate what integrators do – with high-res music and vinyl just two of the technologies seeing widespread adoption.
That’s not the only opportunity available however, one installer questioned Rich asking: “Are we better off taking every penny we have and buying shares in big companies?” To which Rich replied: “Yes – it’s almost impossible to penetrate the likes of Apple, Google, Amazon. They’re essentially big countries.” So if all else fails, buy shares.
CEDIA will not allow installers to fail however. Vin Bruno, CEO of CEDIA, was also at the event where he showcased his vision for the future. Vin noted that CEDIA is already talking to Amazon about the Echo smart speaker and Samsung’s SmartThings – two distinctive consumer products. Vin commented that these two ecosystems can benefit from the expertise CEDIA members can bring to the table.
Vin wouldn’t completely spill the beans on what the association has been discussing with these two juggernauts, but he did note that Amazon actually sought him, rather than the other way round.
CEDIA members wanting to learn about all these new profit opportunities are encouraged to attend the keynote at CEDIA 2016, which takes place between September 13-17 in Dallas, USA.