Parce, pariot, and home-ix

In the last couple of days at least three German startups have made it into the news:

  1. parce pitched on Die Höhle der Löwen
  2. Pariot started their Kickstarter campaign
  3. Porsche invested in home-iX


During the Die Höhle der Löwen (DHDL) parce pitched their smart socket Parce Plus. It costs €49.90 and devices connected to it can be controlled through an app or Siri. They also have two smart light switches announced to ship March 2018 in the portfolio.[su_table]

[/su_table]parce’s products from left to right: light switch Parce M1, light switch Parce L1, and socket Parce Plus (Sources: Parce M1, Parce L1, Parce Plus)

The socket, which was the focus of the pitch, has pretty standard features; integration into HomeKit (no Android support, however), an accompanying app and power consumption logging. According to the TV pitch, their main differentiator is „Made in Germany“ and WLAN as the connection technology. However, on Indiegogo, where they raised money for their first socket Parce, they advertised more functions which centre around analytics. The Parce turns off devices based on usage or schedules, has price comparison for electricity included and recommends you ways how you can save money. But according to their website these features are not part of the current products.

Established competitors and little differentiation

Anyhow, going back to the features they currently offer WLAN as the connection technology is no valid differentiator because a range of other companies offer that as well. For instance, the WeMo Insight Switch (€ 59,99), the D-LINK DSP-W 215 (35,99€), the TP-LINK HS 110 (39,99€) or KÖNIG OPL-SP1.

Besides KÖNIG, however, none of these companies are from Germany. (Admittedly, I am unsure if KÖNIG produces in Germany). Interesting in this context is that, according to a study by Deloitte, Germans prefer German smart home companies when it comes to privacy protection and security.

Preference for German smart home companies when it comes to privacy protection and security (Adapted from Deloitte)

Although in an analysis of German people’s reaction to Google Home I found that privacy is people’s most pressing concern in regards to the smart speaker, I was again surprised that people put so much value on privacy. Nevertheless, I still think that people will always prioritize value over privacy; when choosing between a great product with good privacy protection and a good product with great privacy protection, the majority will go for the first option. Also, I think that the above study would look completely different in a couple of years. Due to the ongoing discussion around the General Data Protection Regulation, which was made in April 2016, data protection is very present in the news and thus in people’s minds.

Damaged brand, unclear B2B ambitions and betting on wrong industry future

What won’t change in relevance, however, is the importance of brand reputation. And parce’s reputation is somewhat damaged. They shipped their first product in 2016 and sold 2500 units in three months. However, after three months they also had to recall the socket due to technical shortcomings. Whatever the damage from the recall truly was I cannot tell, but considering that their socket is not better than their competitors’ I am curios why people would ever go for a company with a bad reputation when proven products are just around the corner.

However, that might not be so important to parce after all, because in the long run parce wants to focus on B2B. They want to help other companies make their products smart through the Parce Cloud. Furthermore, they are working on a Parce Blockchain which connects the clouds of several smart home companies to ensure interoperability. Unfortunately, they do not provide any additional information on either solution, so it is difficult to make any sense out of it.

However, I think that such smart home platforms (see also home-iX below) are only temporary useful because in the long we won’t have multiple standards anyway. It should remind one of Betamax and VHS, the myriad of smartphone chargers before Micro USB and Lightning, or Blu-Ray vs. HD DVD. If the market cannot bear two video formats, it is very unlikely that we will have half a dozen smart home protocols.

Furthermore, as outlined below, I doubt that it makes sense to work on infrastructural smart home devices such as light switches and sockets because they are by nature undifferentiated, high volume products.


home-ix is a white-labeling solution for smart home products and apps with interoperability across all smart living industries (smart home, smart grid, and smart energy) and products. This solution consists of two products; conUgate and microGate. conUgate deals with interoperability between other solutions, microGate is the white-labeling solution to develop smart home applications. conUgate is technically similar to a hub (e. g.Samsung’ SmartThings Hub or the new Amazon Echo Plus) or one of the open smart home protocols (e. g. Zig Bee)

Their business model implies that there will be several smart home platforms at the same time, which — as mentioned above — I doubt.


Pariot, a German-based smart home startup, recently (12th October) started a campaign on Kickstarter. They are seeking money for their first product the Pariot One, a smart home hub. In addition to that, they also announced smart home packages which in addition to the hub come with several other smart home devices (sockets, light switches, motion sensors, and heating controls).


The Pariot (left) and overview of smart home packages (right) (Sources: Kickstarter)

Unfortunately, they do not provide any information about the supported protocols or the devices in the smart home packages. Furthermore, the Pariot is equipped with an integrated IR-sensors which aims at replacing all your remotes. An interesting idea but the problem is that IR is a one-directional technology, meaning that you must point the remote at the device you want to control. With the hub being a stationary device it will be difficult to reach all your devices.

Vision not supported by pricing strategy

The company’s vision is to “make Smart Home affordable for everyone“.

They try to accomplish that through low prices for the hub and accompanying devices. The hub’s Early Bird Kickstarter price is 149€. Considering that the Amazon Echo Plus which comes with a hub as well, costs the same (and it includes a Philips Hue and Pariot’s price is not even retail pricing), they cannot support their vision through that.

The Starter Set (see table above) which comes with the Pariot hub, three sockets, one light switch, two motion sensors, and one heating control, should retail for 299€. Although it is impossible to judge these products’ quality in comparison to competitors without any information, I have replicated the set with products from Amazon. Admittedly, the products I have chosen are — besides the motion sensor — the lowest priced ones from Amazon (the motion sensor was labeled as most relevant in the search).

Replication of Pariot’s Starter Set with products from Amazon[1]

As you can see from the table, it will cost you around 200€. With products of better quality you will even the price difference or go beyond 299€, but a fair comparison is only possible once more information is available. This quick price comparison should, namely, show that it will not be easy for Pariot to support their vision through price.

With all that in mind, let’s take a look at the (German) smart home (startup) landscape.

The (German) smart home (startup) landscape

First, a definition.

Translated from Deloitte’s German definition:

A smart home encompasses the smart connection of individual components within a home (hardware and software) and their central control and monitoring through end devices. The actual value of a smart home lies in the smart interplay of these components and not the activation of individual hardware.

This is what that looks like in image-form:

Smart Home components (Source)

All these components can be summarized under four categories:

  1. Increasing comfort: Through home automation. For instance, lights and blinds ago up when you when wake up.
  2. Increasing security: For instance, security cameras or motion detectors
  3. Saving energy: Smart thermostats that automatically adjust heating or smart sockets that turn devices off based on usage.
  4. Ambient Assisted Living (AAL): In addition to aspects of the other categories (e. g. intruder detection) AAL consists of applications tailored to elderly. For instance, fall detection or emergency buttons.

Low penetration rate of smart homes due to no relative advantage relative to normal homes

Sticking further with Deloitte, they believe that we won’t have more than 1,5 Million smart households by 2020 and forecasted some 700.000 smart households for 2017. With Germany’s 40 Million households, this equals a penetration rate of less than two percent. Statista on the other side, including also stand-alone solutions in their definition of smart homes, reports a penetration rate of about 11% for 2017. Whatever the rate is, it is safe to say that it is low. The reasons for that are manifold as the survey below shows.

Reasons against a smart home (Adapted from Deloitte)

What all that comes down to is limited relative advantage to normal homes. In comparison to normal homes, smart homes provide “no value”. However, “too expensive” usually means that it is too expensive for what is offered (i. e. a smart home does not offer enough value in relation to a normal home). Similarly, “setup too complicated” and “usage too complicated” means “setup and usage too complicated relative to a normal home”. And you derive value from your home, amongst others, through the way you use it. If each time before you want to turn on a light you must find your phone, open an app, select the relevant light and press “on”, then this home is of no value to you. If instead you only must walk to a light switch and press a button, then your home is of value to you.

“No knowledgable about providers”, “no known reference address” and “no information about offering” also comes down to limited relative advantage to normal homes. Diffusion theory argues that “Diffusion is the process in which an innovation is communicated through certain channels over time among the members of a social system.“ In short, people learn about innovations through other people. And this is also true in the 21st century as a study by — you guessed it — Deloitte shows.

Factors influencing smart home purchase (Adapted from Deloitte)

And if nobody sees any value in a product, nobody is going to recommend it.

Finally, afraid of new controls equals fear of change, something that exists with each innovation. Lack of privacy protection I again have to shrug off as a temporary phenomenon.

Network effects as source of relative advantage

The biggest source of relative advantage for smart homes are network effects; the more smart home devices you own, the more value your home has to you. In fact, it might be of value only after it reaches a threshold of a certain amount of smart devices. Brilliant, producer of a smart light switch, who recently raised $21 Million, shows the power of network effects nicely in their video.

In contrast, telling somebody about a smart light bulb that you can control through an app or voice, will prompt a question along the line of “Why should I use an app when a perfectly good light switch is right next to it?”

Network-based value proposition and position along the value chain

This network-based value proposition raises the question of where at the value chain a startup should position itself. Generally speaking, there are four layers (adapted from Deloitte)

  1. Planners: architects and the like who design homes with “smart” in mind or companies and individuals who design house-wide smart home solutions
  2. Implementors: Those who install smart home products and solutions
  3. Platform operators: Companies who offer bundled smart home solutions
  4. Service providers: Companies offering services tailored to smart home products (e. g. security companies)
  5. Manufacturers: Companies who build smart home devices

It would be too much to discuss all layers (and their combination) here, so with parce and pariot in mind, I will only cover manufacturers here.

Price-based strategy for infrastructural smart home devices

Under the assumption that a smart home is only useful with a range of devices installed at the same time, it seems likely that infrastructural smart home devices such as lights or sockets will be bought as part of a solution. In these scenarios, people look for companies who provide a one-point solution. This means that the end consumer won’t know which brand her socket or light switch is (as it is currently the case). The smart of smart home devices will eventually become standard and especially for infrastructural devices, this means that the only reasonable approach is an emotionless, price-based strategy.

Value-based strategy for infrastructural smart home devices

In contrast to that are trigger-based purchases and stand-alone devices. Trigger-based purchases are products that you buy because an external event shows you a need for it. Home security systems are a great example for that. Because you or somebody you know was robbed, you go out and buy an alarm system, security camera or similar. Here it makes sense for startups to engage because they have a lot of ways to differentiate themselves. Security systems are also a good product category for value differentiation because they are stand-alone products. It is enough to have only one security camera or one smart lock to derive value from it.

Appendix: Overview of German smart home startups with focus on B2C

Overview of German smart home startups with focus on B2C


[1] Links to the products

  2. KMC Smart Plug
  3. Switchmate Snap-On
  4. All-Pro MS180, 180° Motion Sensor
  5. Honeywell RTH6580WF

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