The next Google – should iRobot sell you a $0 Roomba?
Data maps: the next battle in 'smart' homes
iRobot is the manufacturer of the Roomba, a vacuum that autonomously cleans your home. The Roomba builds a map of your home and tracks its own location enabling it to seamlessly navigate and vacuum your home (see Exhibit 1 for visual of how the Roomba maps its location relative to items). Using sensors, the product is able to avoid colliding with walls or furniture, falling off stairs, and also allows it to automatically recharge itself.
The Roomba is part of a rapidly growing sector called the “Internet of Things” (IoT). The IoT creates a network of smart physical products which can “talk to each other” and share data[ii]. Research from Gartner forecast that by the end of 2017 we will have 8.4 billion of such connected items[iii]. The value of products grow exponentially as more items are connected[iv]. The combination of the rapid growth and increasing prevalence of smart devices should make management very interested in opportunities in the home IoT segment, which was worth $9.8 billion in 2016 and has a projected growth rate of an astonishing 60%[v]. The sector is still in its infancy with the products generally working independentlyii . This provides a large opportunity for a company that can connect different home IoT devises to dominate the market by essentially becoming the Google of the home.
Colin Angle, who is the Chairmen, CEO, and founder of iRobot has clearly identified this opportunity by publically announcing Roomba’s short-term goal of selling data maps to Amazon, Apple or Alphabet next 2 yearsiii. This data, which can provide dimensions of rooms, features of a room, and the distance between various furnishings using the Roomba’s sensors and camerasv, is highly valuable, and offers a new set of information previously not collectediii. In March 2017, iRobot also agreed a deal with Alexa to integrate voice to the Roomba’s maps. Right now, Alexa cannot tell what room is a kitchen or a bedroom, and therefore through the Roomba integration, simple voice commands such as “Alexa please switch off my kitchen lights” may be round the corner[vi].
In the medium term, it is clear that the value of this data could be significant when connected with other devices. Angle thinks the Roomba in the future could connect “music, TV, head blinds, stove, coffee machine, fan, game console, smart picture frames or robot pet”[vii]. Guy Hoffman, a Cornell robotics professor believes the Roomba’s data maps can be used to optimize home smart lights by accounting for where windows are located, or optimizing home acoustic or air conditioning air flow systems by factoring in the size, shape, and furniture in a roomv.
When Angle, publically announced that iRobot plans to sell user data this was met by a large backlash by users concerned for their privacy. Media reports such as Forbes and the New York Times reported that users were alarmed finding this “creepy,”i and an “invasion of privacy”[viii]. This led to iRobot correcting its original statement to take a softer stance, reporting that they would only provide data with users consent and would provide it for free rather than selling iti. The company has also published a detailed FAQ on its website to clarify its position and distance itself from a controversial topic[ix]. The UK data protector regulator, the Information Commission Office, released findings that 59% of IoT companies fail to properly communicate the data collected or used to customers[x].
To solve this problem iRobot could take a bold move to price in the data they want to sell. iRobot could consider leasing a Roomba for free, with 100% rights to sell and use the data it collects. With the cheapest Roomba retailing at $300, this could be highly attractive for users, while allowing iRobot to become the “a connective tissue for the smart home” similar to what Google is for the webvi. To make this viable they would need to fundamentally alter their business model – from the data being an incremental addition revenue stream – to being the core asset of the company. Similar to how Apple and Google create platforms for developers to create apps iRobot would need to offer a platform to encourage smart home IoT developers to build products connected to Roomba’s map data to rapidly create new smart home products.
Going forward the question that needs to be asked is can iRobot create a defensible first mover advantage to become the Google of the smart home and if so should it take on this bold move to disrupt the industry?
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[i] Kevin Murnane, “iRobot Clarifies Its Position On How Roomba-Created Maps of People’s home will be Used”, Forber, August 1 2017, https://www.forbes.com/sites/kevinmurnane/2017/08/01/irobot-clarifies-their-position-on-how-roomba-created-maps-of-peoples-homes-will-be-used/#546e1be07d81, accessed November 17 2017.
[ii] Matt Burgress, “What is the Internet of Things? WIRED explains”, Wired, April 21 2017, https://www.wired.co.uk/article/internet-of-things-what-is-explained-iot, accessed November 17 2017.
[iii] Matt Burgress, “The Internet of Things is a Data Farm, Roomba won’t be it’s only Profiteer”, Wired, July 25 2017, http://www.wired.co.uk/article/roomba-data-sell-internet-of-things, accessed November 17 2017.
[iv] Michael E. Porter and James E. Heppelman, “How Smart, Connected Products are Transforming Competition”, Harvard Business Review, November 2014.
[v] Jan Wolfe, “Roomba Vacuum Maker iRobot Betting Big on the ‘Smart’ Home”, Reuters, July 24 2017, http://www.reuters.com/article/us-irobot-strategy/roomba-vacuum-maker-irobot-betting-big-on-the-smart-home-idUSKBN1A91A5?il=0, accessed November 17 2017.
[vi] Brian Heater, “With Alexa Integration and Mapping, iRobot Aims to Make Roomba Center of the Smart Home”, Tech Crunch, March 14 2017, https://techcrunch.com/2017/03/14/roomba-connected-home/, accessed November 17 2017.
[vii] Alex Landa, “How iRobot Plans to Dominate Household IoT”, Northeastern University, August 11 2017, http://www.northeastern.edu/levelblog/2017/08/11/strategic-vision-irobot-will-dominate-household-iot/, accessed November 17 2017.
[viii] Maggie Astor, “Your Roomba may be Mapping your Home, Collecting Data that counld be Shared”, New York Times, July 25 2017, https://www.nytimes.com/2017/07/25/technology/roomba-irobot-data-privacy.html, accessed November 17 2017.
[ix] iRobot, “iRobot Roomba Privacy and Deata Sharing”, https://homesupport.irobot.com/app/answers/detail/a_id/964/~/irobot-roomba-privacy-and-data-sharing, accessed November 17 2017.
[x] ICO Org, “2016 GPEN Sweetp – Internet of Things (with a focus on Accountability)”,https://ico.org.uk/media/about-the-ico/disclosure-log/1625142/irq0648379-attachment.pdf, accessed November 17 2017.
Student comments on The next Google – should iRobot sell you a $0 Roomba?
While consumers and business alike are excited about a more connected and “smarter” world, there is a glaring need for the IoT industry to consider how such technologies are rolled out and transparency into data use when it comes to building a trusted relationship with customers. In a recent Gemalto survey, the vast majority of both organizations (96%) and consumers (90%) believe there is a need for IoT security regulations and government oversight. In iRobot’s case, I think the company needs to prove the overall efficacy of Roomba before even exploring the option to shop its data around. After reading several reviews of the Roomba, I took away that people thought it cleaned certain spots well, but it wasn’t very good at mapping areas, missed several spots, and had a tendency to zig-zag on carpets. While room mapping information might be somewhat beneficial for Amazon and Google to make incremental improvements to their respective technologies, I don’t know why they wouldn’t develop it in-house, especially provided the customer reviews on the Roomba. Finally, I don’t believe a leasing option will work either, so long as the consumer is uneasy that potential burglars could purchase data and use it to “case” their homes. Most options that the company has will likely do it more harm than good, and I think the primary focus should be on delivering the best possible products / new models to market.
This is a well-written and thought-provoking piece Amar.
To your question, I think that it is very rational for a consumer to accept a win-win proposition such as this. The consumer will receive a high-tech cleaning device and have an improved experience from their other IoT devices around the home, all for ‘free’. iRobot will be able to penetrate more homes and this will increase the ability for devices such as Alexa to follow suit.
However, I believe that this will be a tough sell because the value proposition is very difficult to communicate to the end user. The lack of regulation around privacy and protection in this space is likely to be the consumer’s primary concern. In addition, there is a general lack of understanding of what data is collected and how this data is shared across different devices and organizations. This knowledge gap will also add to a reluctance of accepting such a deal.
If iRobot pushes ahead with such an offer, consumers will become wary of having a Roomba in their home. All of these combined could potentially cause more harm than good to the acceptance of a Roomba cleaner.
Nice article Amar. This is very thought provoking and brings up many fascinating ideas. However, in most cases, I feel very strongly that iRobot’s strategy is a poor one.
As Anusha mentioned, privacy is a huge issue for any data company. If Roomba were to start mapping and selling the data of a user’s home, it would then sit on very private data, considering that end users consider their home to be one of the most private aspects of their lives. One might wonder how security breaches would affect Roomba data. If the data were to be hacked, would it be possible for a burglar to see your home layout and illegally enter a Roomba customer’s home?
When we think about who will be the customers for this potential Roomba data, I think of major tech companies such as Amazon (who will in the future sense that you’re out of toilet paper and order you more) and advertisers. The question for each is how do you classify this data in meaningful ways that can be actionable but not overwhelming, as well as secure. In internet advertising, most banner ad retargeting is done by cookie’ing a user and anonymizing their user data. There are also many compliance issues with collecting personally identifiable information (PII) such as name in advertising and analytics. In a sense, an ad server is sending a ‘check out your abandoned cart’ display ad to USER123456 instead of Amar. The inherent problem I see with anonymizing and depersonalizing this data (and as a result protecting the privacy of the user’s data) in this case is that the dream for a smart home is to have a more intimate solution like Alexa, calling you by name and making smart recommendations, not to have a Roomba rolling around like an internet pop-up ad. In order for Roomba to even think about creating a significant personal relationship with a customer, PII compliance rules will likely need to be re-evaluated (which may take years) and iRobot will need to develop significant core competencies in information security for IOT applications an inherently insecure sphere due to the youth of the space. Personally, the core competencies for security and privacy are so high in the case of mapping a home that I would not entrust them to iRobot.
Finally, there is an interesting idea of pricing in that iRobot would give away Roombas in order to collect data on users. This is frankly awful positioning because it positions Roomba almost as a surveillance tool that is always watching the user only to collect data on the customer and make money. It is likely that by using this strategy Roomba would acquire low-value customers who do not have a lot of data to protect or who are careless about their privacy. In addition, looking at the iRobot home page for pricing, the Roomba is priced between $250 and $750. Roomba can easily monetize that user data over a few years, but the question for customers that will happen (and is happening across many industries) is how much do I value my privacy, security, and data? $250 – $750 is probably too low.