Samsung's Smart-Home Master Plan: Leave the Door Open for Others (BusinessWeek)

Yoon Boo-Keun, president and co-chief executive officer of Samsung Electronics, speaks at a news conference during the 2015 Consumer Electronics Show in Las Vegas on Monday, Jan. 5, 2015.

The most important product at the 2015 Consumer Electronics Show may not actually be a product at all. It’s a policy. Samsung Electronics has pledgedthat 90 percent of all devices it creates, including televisions and mobile devices, will be Internet-enabled by 2017—just two short years away. The remaining 10 percent will come on board by 2020. Considering that in 2014 Samsung delivered more than 665 million products to consumers around the world, it’s hard to understate how important this is to the overall move to turn the Internet of Things—the everything-is-connected tech Valhalla—from a plaything for early adopters into the mainstream of moms and microwaves.

There's more: In addition to building this functionality into its own products, Samsung's platform will be entirely open, rolling out the red carpet for developers and other software and hardware manufacturers to, basically, have at it. Samsung's smart-home push has been anticipated for a long time, particularly since it acquired smart-home sensation SmartThings in August 2014, but few expected this level of openness. Samsung could have just as easily created a walled garden, forcing users to choose from Samsung or a specific partner devices to assemble a networked life of automatic temperature adjustments and TV-based alerts.

“The Internet of Things is not about things, it is about people,” said Samsung Chief Executive Yoon Boo Keun early in a keynote address on Monday, hitting on a sentiment he would repeat over and over again. Creating an Internet of Things that did not place improving people’s lives at the core of its mission would be “like a bedtime story for robots.”

Not everyone allows so many types of interactions. On Monday, Google's Nest announced its own smart-home ecosystem, but its Works with Nest protocol places restrictions on the types of data that can be shared, how long those data can be stored, and how they can be used. For Samsung, Yoon said, an opposite approach has its benefits: It hopes an “open ecosystem” will lead consumer needs and desires to optimize Samsung products in ways that might not have been thought of in Seoul. Samsung has also committed $100 million dollars to invest in development of a connected ecosystem, meaning everything from creating infrastructure, to funding startups, to facilitating conversations between existing players.

The move comes as Samsung's hugely successful smartphone business is under significant pressure, particularly from lower-cost competitors in China. "When the mobile business ceases to be profitable, Samsung will have to force its way into some other industry that requires a lot of upfront capital and expertise in mass-manufacturing," my colleague Sam Grobart wrote inBloomberg Businessweek almost two years ago. At the time, Samsung had announced its intentions in medical devices, solar panels, LED lighting, and batteries for electric cars. The Internet of Things fits right in. Samsung, with its unique combination of technological breadth and depth, can create the Things at scale: They already make sophisticated electronic components and circuitry and a full suite of household appliances. Its ability to design, produce, and market what it makes is already global in scale. This is a level of integration the company would appear to be quite comfortable with. 

SmartThings is still at the core of Samsung’s push forward. Though Yoon didn't emphasize it in his keynote, SmartThings unveiled the second version of its core Hub product—its version of a central command center for your house—earlier in the day, along with updates to its other hardware offerings. But in an interview after Yoon's keynote, SmartThings CEO Alex Hawkinson reiterated that “SmartThings is, at its heart, a software company.” Specifically, it's the software that allows everything to work together, from Samsung’s connected wine cellar, to its latest smartphone, to an August lock, to a Jawbone UP. SmartThings’ Hub essentially takes all the data coming in from all of these different sources and allows them to speak with one another. Your sleep tracker can tell you what not to watch on TV before bed; your lock tells the lights when you’re gone for the day.

Open systems can have their drawbacks. Users might not notice, but in the beginning, a jumble of protocols and languages will most likely compete on the back end. Hawkinson is confident that, over time, Samsung's and SmartThings’ approach will allow certain protocols to rise to the top and that market dynamics will consolidate standards. If that process is relatively smooth and speedy, it will result in lower-cost, lower-friction development. If not, it's a long messy haul, which could discourage the very kind of participation that Samsung needs to lift the whole effort off the ground. 

Services also stand to be a big part of the Internet of Things marketplace as Samsung envisions it. SmartThings will offer the first, a premium subscription service (price to be announced) that will allow users to configure message and phone call alerts that can be escalated to friends and family. If you leave the oven on, you might get an alert; if the security alarm goes off, your down-the-street neighbors might get one, too. Without rigid boundaries between different manufacturers' devices, it wouldn't be surprising to see third parties figure out how to squeeze more functionality out of them for a fee. This is the Google Play store for your kitchen instead of your Galaxy.

There's still a long way to go before this is all a reality. Samsung gave itself a two-year runway, and it'll take a good bit of time after that for homeowners to embrace the devices. Buying a new smartphone is a lot easier than swapping out all your home appliances. For now, Samsung’s pledge of a well-developed, truly open Internet of Things starts with the SmartThings Hub, some well-credentialed corporate partners, and a lot of people who really want to see this succeed.