Tag Archives: business idea

Idea: Social Impact Bonds for mental health

The case for improved mental health services

The consequences of poor mental health on human well-being are becoming more widely understood, as are their impacts on other areas of society such as use of drugs, violence, lack of productivity, obesity, lack of creativity, unemployment, smoking and other addictions. Improvements in mental health can cause a cascade of positive multiplier effects throughout society.

Social Impact Bonds as a concept

As noted in my recent post on tackling homelessness, I am fascinated by the potential of Social Impact Bonds to help drive positive social change.

One idea that really resonates with me is the use of Social Impact Bonds to drive positive change in people’s mental health.

Inspiration for the idea

I was inspired by the potential for improvements years ago after reading Healing Without Freud or Prozac by the late Dr David Servan-Schreiber (which was once lent to me by the late Ismena Clout).

In the book, Dr Servan-Schreiber talks about combatting depression with the following:

  1. Meditation and heart coherence
  2. EMDR (Eye Movement Desensitization and Reprocessing)
  3. Maximising exposure to natural light
  4. Acupuncture
  5. Omega-3 Fatty Acids
  6. Exercise
  7. Social Interaction and Emotional Communication

Most of these activities can be undertaken by a beneficiary without any qualified medical assistance, which made me think that this would be an ideal area for a for-profit company or social enterprise to provide a service that would support sufferers of depression.

Indeed, people like Tony Robbins have companies focussed on this area with many of these areas being employed.

However, with Tony Robbins, the emphasis is on the beneficiary directly paying for services themselves. This means that many people that are not currently in a financial position to access the services can benefit.

Use of Social Impact Bonds to reward positive outcomes

What if a company or social enterprise could provide beneficiaries with all the benefits of this approach at no cost at the point of use but instead could be rewarded by a government or health service for delivering the beneficial outcomes?

I drafted this paper below on the back of the idea that Social Impact Bonds could be used to reward social enterprises for just this:

Concept Paper_ Social Impact Bonds for Improved Mental Health

Originally I designed this business so that it could be implemented by a Tony Robbins company because I am a big fan of the work they do to help people achieve transformational change in their lives. However, it could be undertaken by any organisation with a mission to help people make positive change in their own lives.

Below is a diagram explaining the value flows in the concept (note in this diagram I referred to beneficiaries as “patients”, which is not a terminology that I would use anymore):

Diagram: Social Impact Bonds for Mental Health

Risks and risk management

One major risk of this approach is that it could contribute to “privatisation of the UK’s National Health Service (NHS) by stealth”, with private sector organisations slicing off more and more of the NHS’ workload and sweating the assets for profit in the way that UK train franchises have done.

This could be mitigated by the fact that a lot of these activities are things that can be undertaken by individuals without any form of medical intervention, such as regular exercise, socialising, and improved diet. Therefore these would fall outside of current NHS services and would carry a low risk of this.

Another challenge is whether or not the activities would count as, or have the perception of, being medical treatment and therefore need to be regulated.

For the same reasons above, I think a strong argument could be made that this is not the case. Effective protocols that signpost beneficiaries to NHS services should be in-built so that the NHS and other authorities can have confidence that the social enterprise is not masquerading as a healthcare provider, but a “wellbeing-support provider”.

UK Government support

It’s interesting to see that the UK Government also sees the potential for Social Impact Bonds to stimulate change, as they have launched an Inclusive Economy initiative that includes a funding stream for Social Impact Bonds.

Contact me to discuss

I’d welcome any contact via my contact page from anyone interested in starting a social enterprise in this field. I’d be happy to share my ideas for potential methodologies that exist for the service, as well as potential funding streams to launch a pilot project.

New business idea: SecondChance – reducing retailer waste

The inspiration: Dumpster diving

I recently read this excellent WIRED article on a professional “dumpster diver” in the US.

Matt Malone makes $65,000 dollars a year as a part-time scavenger from dumpsters behind retail stores in Austin, Texas.

Diving has yielded many interesting and lucrative finds for Morgan, such as printers, laptops, and gifts,  with office supplies being (somewhat counter-intuitively) one of the most profitable sources.

It’s a great way to reduce the amount of waste going to landfill, but this is a niche hobby so the impact on landfill volumes will be minimal. This got me thinking.

What if there was a way to monetise this? Instead of having dumpster divers, could there not be a profitable business or social enterprise that would systematically give retailers the ability to reduce the amount of potentially-valuable waste from going to landfill?

Existing enterprise: FoodCloud

There is an existing version of this in the food retail industry: FoodCloud.

FoodCloud connects supermarkets and food retailers to local charities that can make good use of the food before it becomes unfit for human consumption.

This a win for the charity beneficiaries, environment and retailers alike.

If this could be done with other resource-intensive goods such as computers and printers, it would be like having an army of Matt Malone-style dumpster divers all over the country!

SecondChance: reducing retailer waste

The idea of SecondChance would be a for-profit version of FoodCloud for non-food products.

It would need better branding as that’s just a shorthand, but here’s how it could work:

  1. Retailers would upload any unsold goods that would otherwise be thrown away to the site.
  2. SecondChance would collect the goods for free and warehouse them.
  3. Local organisations or maybe even individuals could browse the site to look for bargains.
  4. They would buy them from SecondChance’s site.
  5. SecondChance would facilitate delivery to the end user after taking payment.

Risks and challenges

  1. It would probably be too tricky for individuals to be allowed to use the site, as it would be too expensive to have proper consumer rights for the goods sold.
  2. SecondChance would presumably have to have some smart buyers (or a very smart algorithm) to weed out the unprofitable goods as each collection would have a cost associated.
  3. The business model would be highly dependent on having no procurement costs at stage 1. As SecondChance takes off though, would the retailers want to charge for this?
  4. The business model is highly linked to the fees charged to retailers for discarding high-value items. If there are no fees or other penalties mandated by government in the area of the retailer, then the business case for participation in the SecondChance ecosystem would be diminished.

Potential entrants

1. Amazon

This is essentially a version of the Amazon business model but plugged into the back end of the retailer business process rather than manufacturers. Could it be something that Amazon would be interested in pursuing?

Without modeling the business directly, I suspect the margins would be too low to justify it for Amazon unless the cost of all goods were to remain at (or very near) to zero.

However, it is a good fit for their existing business model, with warehouses, delivery, and online retailing being the key infrastructure. It also marries well with their mission to bring goods to consumers as cheaply as possible.

2. eBay

Could an eBay business model work better? Would it make more sense to have the retailers simply auction all goods to consumers directly?

I personally think this would be too much of a challenge, as it would require a totally new shop area to handle the turnaround for the unwanted goods.

Arguably, why would the retailers even bother with listing the items online and then handling the traffic, when they could just resort to the low-cost alternative of having a very-steeply discounted bargain bin?

N.B. The name for this idea was changed from TrashNet to SecondChance on 11/02/2018 as I thought it better reflects the mission. Nobody wants to buy trash, so it shouldn’t be reflected in the company name!

Tackling Homelessness with Social Impact Bonds

One of the methodologies to achieve positive social change that really interests me is the concept of Outcome-Based Payments.

I recently saw a great example launched by The Big Issue, one of my favourite charitable organisations.

Homelessness in the UK: the challenge

Shelter estimates that there are about 300,000 people classified as homeless in the UK, with the National Audit Office estimating that there are about 4,450 people sleeping rough on any given night.

These are shamefully high numbers in such a rich and developed society as the UK.

How do Outcome-Based Payments and Social Impact Bonds work?

Social enterprises and charitable organisations target the social improvements that they want to achieve.

They find the relevant local authorities that would benefit from having these challenges dealt with and then enter into contracts with them. These contracts guarantee that the organisation will receive a certain payment once a measurable improvement has been made, known as an “Outcome-Based Payment“.

The organisation then provides the service in question and measures progress via the agreed methodology. Once this agreed target has been met, the local authority releases the agreed payment.

Of course, there is a delay between the provision of the service and the payment, meaning there is a need for startup capital. This capital can be issued in the form of a bond that is linked to the future income stream of the Outcome-Based Payments. Therefore, these bonds are often referred to as “Social Impact Bonds“.

Why are Outcome-Based Payments important?

This is a great model for local authorities because it means that the payments are made only after successful outcomes are achieved.

This means less taxpayer money is wasted on schemes that don’t work and it also means that funds can be diverted to the most effective strategies, obtaining maximum impact for the local authorities.

Big Issue Invest, the social investment arm of The Big Issue Group, launched the £10m Outcomes Investment Fund to target just these sorts of opportunties.

How could this work for homelessness?

Big Issue Investm via its Outcomes Investment Fund, has backed Changing Lives in its target to get 150 rough sleepers in Newcastle and Gateshead into long-term accommodation.

Source: The Big Issue, November 20-26 2017

I think this is a fantastic model that has potential to stimulate improvements for many other social challenges, such as mental illness.

What other organisations invest in Social Impact Bonds?

A non-exhaustive list of organisations that would make these sorts of investments are listed here.

Farewill: a great business idea!

I recently came across this amazing idea for a business: Farewill.

What is Farewill?

Farewill is an online service that helps you to make a last will and testament for £50.

Farewill claims that the wills are legally binding, takes 15 minutes, and will be reviewed by experts. For an additional £10 a year, you can also get coverage for updates to the law and unlimited revisions.

This is a really important idea as dying without a will (“intestate”) can cause major problems for your family and can cause major confusion over who inherits your estate. I know this from first-hand experience, as my father passed away suddenly without a will when I was 16.

Why write a will?

Leaving your loved ones with the burden of complicated legal procedures at a time when they are least able to carry them out causes a lot of anguish. Anything that gets more people to write a will gets my approval.

Providing this service makes fantastic business sense for Farewill, as around 60% of British adults do not have a will written up. That is an extremely attractive market size.

WillAid – cheap wills from a solicitor

Previously I had referred people to WillAid, a partnership between the legal profession and 9 UK charities. The participating solicitors draft your will for free in exchange for a donation to the targetted charities. £95 is the suggested donation but it is voluntary. It’s a great way to get a will at a cheaper rate than normal from a solicitor (usually around £200) and it runs every November.

However, this Farewill service has got my attention.

It’s one of those rare occasions where I see a new business and I am genuinely annoyed I didn’t think of it!

Nesta Inventor Prize

Nesta, a UK-based innovation foundation, has just launched the Inventor Prize.

It’s a new challenge prize aiming to support and inspire inventors to come up with physical and digital solutions to 4 major challenges in UK society:

  1. Financial Inclusion
  2. Mental Health
  3. Ageing
  4. Air Quality

The finalists get a £5,000 grant and mentoring support to help develop and test their invention. At the end of the competition, the top prize is £50,000.

The inventor must have a working model of their idea and it must have a clear market to improve lives in the UK. The final version will be developed through the prize with extensive user testing.

The deadline for submission of ideas is 11 pm on 22nd October 2017.

If their previous Dynamic Demand Challenge is anything to go by, this new Inventor’s Prize will be a great little initiative to support upcoming inventors.

Amazon and eBay rentals – business model of the future?

Isn’t it amazing that neither Amazon and eBay let users lend and borrow items between themselves? There are plenty of websites chasing the rental market currently, so why aren’t the e-commerce giants chasing it as a business model?

Connectivity = efficiency = sustainability

Connectivity within a system allows for greater efficiency, as it allows different elements of a system to pool resources and reduce the duplication of effort. From a sustainability standpoint, the rise of the internet is incredibly exciting as it facilitates the sharing of resources, meaning fewer items need to be fabricated for human use, which in turn reduces the total amount of effort and investment wasted on items that have a low usage factor.

Prior to the internet, the pool of objects and items that human beings could “leverage” (i.e. use) to achieve their goals without an outright purchase was mostly limited to those held by their within their own network of friends, neighbours and family. This was a pool constrained by the mind’s numerical capacity for relationships, the lack of a complete and quick way to search a person’s hypothetical inventory of items available for use, and also by the ability to convince others of trustworthiness.

Internet marketplaces facilitate sharing

The internet can disrupt this status quo through the use of marketplaces that can be used to connect borrowers and lenders of items. Items could be listed as available for borrowing/renting, and potential users could search for them. Possible features include:

  • rating the condition of an item by both parties before and after the transaction
  • insurance products could be offered to cover the item
  • payment (if needed) could be handled via the marketplace site/app
  • location of the borrowers/lenders could be matched quickly through mobile GPS
  • the option to buy the item could be provided if desired

There are startups working on this very concept as we speak, such as StreetBank in the UK. Watch their company trailer below:

Business case for Amazon and eBay rentals

Given the interest in the rental model by many startups around the world, driven by the fundamental capability shift that has been enabled by the internet, I find it intriguing that Amazon and eBay do not offer their customers the opportunity to search for rentals (with the exception of holiday home rentals on eBay and Amazon’s e-book and online film/movie rentals).

In my mind, allowing customers to lend/borrow in addition to buy/sell would be a source of additional traffic to the site, adding additional opportunity to grow revenue. The rental model itself would also be extremely appealing to the two companies as, in the case of popular items or items rented for long periods of time, it could yield regular cashflow. For example, it would be perfect for those who want to rent big items like TVs or sofas.

This business model would also hedge their position against a potentially disruptive market force and allow them to stay ahead of the curve (and potentially kill any upstarts dead in the water).

But why don’t they want to offer it as a service to clients? There may be a few reasons:

  • They do not want to lose the focus on their primary business model
  • They don’t want to create a new market that could potentially disrupt their current operations
  • They don’t believe their is a real demand for the service
  • They do not believe that the potential revenue streams do not justify the costs of lost sales and investment in their site infrastructure

I believe that the last two are the more plausible ones, as Amazon in particular are not known for shying away from innovation!

One thing worth noting here is the ingenious “Subscribe & Save” feature of Amazon that allows users to create a regular repeat transaction for an item they buy regularly (such as food or toiletries) and save up to 15% of the cost in the process. This is win-win for both parties: customers save money and Amazon gets a regular cashflow. The service is a step in the direction of the rental model and creates much more of a recurring relationship between the parties (making the user of the site a “client” rather than a “customer”).

Disrupting the very concept of “ownership”

Having wider access to use the items around us (i.e. having greater “personal leverage” of your community’s assets) will suddenly change the very concept of ownership. If an item is readily available to be lent or borrowed by thousands of people via an online marketplace, who will really “own” the item? Technology will blur the lines between group and individual ownership and the old definition of ownership being “the moral right to categorically control something” may begin to feel like an anachronism.

The economist and activist Jeremy Rifkin recently wrote an article for the New York Times heralding “the rise of Anti-capitalism”. He argues that the “zero marginal cost economy” being driven by technological mega-trends such as the Internet of Things will increase collaboration. This will reduce the opportunities for capitalists to make profits and increase the relevance of social enterprises and non-profit organisations.

Given how this could represent a threat to megacorporations, this is a concept worth serious consideration.

Business case for rental not sales

In my mind, this highlights the potential business case for companies renting items to us rather than selling. This is the lifetime cost model versus the upfront cost model of a transaction.

Upfront cost model characteristics

  • immediate access to cash = lower risk of cash loss via customer churn or default
  • Lack of cash flow predictability
  • Upfront cost is a barrier to customer acquisition
  • Vendor has no incentive to take responsibility for maintenance or disposal of product = higher margin

Lifetime cost model characteristics

  • Lower initial cost = lower barrier to purchase = more sales
  • High predictability of cash flow
  • Greater emphasis on client relationship = greater emphasis customer service = greater chance of add-on sales/repeat business
  • Responsibility for life cycle of product (maintenance and disposal) = incentive for sustainability = better quality products made and less wastage

Can you imagine a world where, instead of buying a pair of Jeans outright, you would instead rent them? The borrower would sign up for a certain amount of time (say 5 years) and the lender would be responsible for ensuring they last the allotted length of time (perhaps offering a post-back service to have them fixed or tailored).

This business model would reduce the amount of unused, unnecessary items in circulation, would save customers money, and would allow more responsible and competent companies to thrive. I for one would be keen to see this model take off!

Winners of Nesta’s Dynamic Demand Challenge announced

The winners of Nesta’s Dynamic Demand Challenge have been announced at the Finalists Awards Presentation last week.

The winners were Demand Shaper of Exergy Devices with Hestia, a “smart home controller specifically designed for electrically–heated homes, and could save these households over £200 per year. Using Demand Shaper technology, Hestia implements a time–shifting algorithm to subtly alter domestic heating schedules, modulating electricity demand according to the needs of electricity suppliers, or National Grid“.

Hestia Nesta dynamic demand Challenge winners

Hestia (aka Exergy Devices) received their award: Winners of the Nesta Dynamic Demand Challenge

To be perfectly honest, at the Hackathon I didn’t fully grasp understand their offering, as you can see from my previous post on the topic.  However, I should have guessed they would do well as the team have invested significant efforts in their academic research into this field, and already have a history of successful and profitable IP generation for the smart home market.

The focus on an initial target market (or “sandbox”) of electrically heated homes will lead to some impressive benefits:

Hestia could reduce energy consumption by 25% thanks to subtle alterations in domestic heating schedules which match the homeowner’s needs with the supplier’s capacity. The technology offers a peak demand shifting capacity of 1.7 GW if deployed across the UK and has the potential to reduce individual homeowners’ CO2 emissions by around 3 tonnes per annum and save around £200 a year.”

Hestia have won £50,000 in funding on top of the significant benefits and funding they have received from the Challenge already. Congratulations to Dr Peter Boait and his team!

I was also delighted to see that my favourite finalist, Upside, won a place on the Climate-KIC Accelerator which will see them receive €25,000 in funding and “continued support to develop their business”. In addition to this, Upside has recently confirmed their successful bid for funding from the Technology Strategy Board’s Localised Energy Systems Competition, in consortium with Siemens, Sharp Labs, Tempus Energy and the University of Manchester. Graham and his team now have a great combination of validation, investment, and partner support to take the idea forward. Well done guys!

This brochure from Nesta contains information on all the finalists: their progress to date, their future plans and any investment opportunities for those that want to support their work. On a side note, it’s nice to see my PowerCube Tariff idea get a little shoutout in there:

“An ultra low–priced electricity tariff, with a capacity ceiling that is hard wired into consumers’ electricity supply. A smart meter would be installed in house, including a switch, which will feed from the capacity limit that is fed from the smart meter. The Powercube will notify the user via green, amber or red lights and also via text message when they are utilising a surge of electricity. If a large amount of electricity is used at one time, the house’s full electricity supply will cut out for 60 seconds as a warning/incentive for the user to be more wary of their activity.”

I should add that paragraph was not written by me… 🙂

It was exciting to see how far the ideas have come in the 12 months of the Challenge and I’m optimistic for the potential environmental benefits that will come out of this successful initiative. I recommend this as a model project for all those seeking to stimulate smart grid entrepreneurship.

PowerCube: a capacity tariff to fight UK fuel poverty

During last year’s Dynamic Demand Challenge Hackathon, the organisers asked me to form an impromptu team with another Roving Hacker. Together we designed a “capacity tariff” aimed at those living in fuel poverty (an estimated 3.5m UK households).

Our idea, PowerCube, is to limit the power that can be drawn by a household in exchange for a deep discount (50% or more) for the price per unit of electricity (kWh) paid by the consumer. This would be achieved by installing a device such as a relay switch on the main incoming power supply that is triggered by the smart meter when the power reaches a certain predefined level. Our pitch presentation at the end of the 36 hour Hackathon can be found here:

Benefits of the idea

The benefits of this tariff are many. Customers would benefit from reducing their outgoings on expensive energy, utilities would eliminate the need to buy electric at peak times when it is expensive by shifting large amounts of demand to off-peak times, and the environment would benefit as it would reduce the need for GHG-intensive peaking plants powered by fossil fuels like gas and oil.

Fuel poor customers often have poor credit history and therefore frequently receive their electricity via a pre-paid meter, notorious for their scandalously high prices. Because ‘Fuel poor’ householders are often in a situation where they are faced with the “heat or eat” scenario, our belief is that the 50% discount of the PowerCube tariff is something that would get real traction.

Weaknesses of the idea

Capacity tariffs are not a new concept and have been trialled on the continent before, to mixed levels of success. We believe that targeting them at the energy poor section of the market, for whom energy prices are a real and priority problem, will give the concept a new lease of life as this application will add real value to this particular market segment.

The PowerCube tariff idea relies on a physical device to give a visual/auditory signal to indicate when the household is close to its limit. Ensuring that this signal is simple to understand and able to inform action is vital.

It is also important to realise that the whole concept of a capacity tariff means that people will need to learn the relative power demands of their devices, which could prove difficult for consumers who are not very tech-savvy. However, a counter argument to this is the fact that non-commercial sailors intuitively learn how to ration their power use on a boat to stay within the fixed capacity limits of their vessel’s battery supply.

Finally, the level of the capacity ceiling will probably need to be fixed and chosen very carefully, as it will be too confusing/undesirable for customers to live in a situation where their allocated capacity ceiling is changing unpredictably. It also might need to be set on an individual basis, which could prove expensive if not an automated solution is not developed well.

Opportunities for the idea

The tariff would provide consumers with savings of around 50% from their electricity bills, which is a significant amount of money (around 5% of their annual income when using the old definition of fuel poverty).

It would also allow the UK to shave a significant amount of peak load if designed correctly. For example, if 5% of the UK’s energy poor households (3.5m*0.05=175,000) were to sign up and reduce their peak demand by 2kW it would be a 350MW saving, equivalent to an average UK natural gas power plant gas.

Threats to the idea

One big threat to this would be a change in the demand of a household, or a consumer switching tariffs after receiving the PowerCube device.

Another threat would be weaknesses in the UK smart meter roll-out, such as low up-take or hardware that is incompatible with the infrastructure of this tariff offering.

Internet of Things: Smart Home Security Systems and Burglar Alarms

Google recently paid $3.2 bn to acquire Nest, the makers of connected smart thermostats and smoke alarms. It is a strategic coup for the company, partly because it brings Nest’s CEO Tony Fadell on board, an engineer with a proven eye for design honed during his time as Apple where he lead the design of the iPod. However, it is also a major move as it positions Google strongly to capitalise on a new frontier: enabling web-enabled devices in the home, more commonly known as the “Internet of Things”.

This is a pretty grand ideal in theory, but what concrete, near term opportunities are there for the company to innovate? Specifically, what are the “low hanging fruit” of the Internet of Things?

Home Security System/Burglar Alarm

A prime example of a pre-digital device that is essentially redundant in its current form is the home security system or burglar alarm. Great though they must have been during an age of tight-knit local communities, the audio signal emitted when an alarm is triggered nowadays is delivered to a largely unconcerned audience. Close neighbours in big cities or even towns are largely unknown to each other, so burglar alarms tend to just add to the cacophony of the urban ether rather than acting as a call to action to apprehend burglars or call the police.

Connected Home Security Systems: the burglar alarms of the future

Features of a smart burglar alarm

A smart burglar alarm would be able to send the signal to the relevant parties by SMS, email or signal to an app on the user’s smartphone, tablet, or other connected device. In addition, GPS trackers on the devices of nominated parties (relatives, friends, and maybe the emergency services) would show the central system of the app when they are near to the house and if they are within a certain response time, they will be also sent an alert by the app so that they can intervene if the householder is too far away to do it themselves.

Nature of pre-smart alarm signal is redundant

Another critical characteristic of pre-smart burglar alarms is that the information carried by the signal is too generic to call for action in a compelling or efficient way. They are binary, with an off state (“silent”) or an on state (LOUD NOISE!!!). This leads to a confusing call to action, as there is too much ambiguity for an actor to investgiate: is there really an intrusion or is it a false alarm? Is the burglar still inside the house? Has somebody already been informed and are they already in the process of dealing with it?

A smart home security system concept

The exponential decrease in the cost of sensors means that a smart burglar alarm could actually convey more specific and hence useful data to the nominated parties, enabling a more effective call to action.

For example, the specific trigger point could be communicated (roof, ground floor windows, front door) so that the alarm points can be investigated quickly and the possibility of a false alarm ruled out in less time. Infra-red cameras could measure if there are people inside the house, counting them and perhaps even identifying them using facial recognition.

The triggering app would allow the user to see who precisely has been signalled, who has acknowledged the signal, who is acting on it, their estimated response time, and their current location.

Competitors and Innovators

Piper’s Home Security System and Mobile app interface

There are some impressive innovations in this field such as Piper and Canary, which are standalone video and sensor units acting as a “mini sentinel” in the home. Piper, which is already available for purchase, also acts as a household device controller and could therefore turn on lights in the home if signalled to do so. They both have the awesome idea of adding video to the equation, meaning that if the motion sensor is triggered, the user could immediately switch to video to see who the intruder is. I imagine the video stream could also be recorded for legal purposes in the event of a burglary.

Home CCTV enabled by Piper

Priced at $239 and $199 respectively for a single basic unit, the issue is that the devices only cover one room each, which makes them an expensive solution for a whole home, although a promising start and a massive leap forward. Canary smashed its request for crowdfunding on IndieGogo so expect to see the first units available later this year.

The miGuard alarm system from Response Electronics uses an integrated mobile phone SIM card to communicate with your phone by GSM/SMS and has a total system cost of £269.95 (about $452). This is a much more attractive price point for a whole-home system, but the technology is not smart enough to capture the full range of possibilities offered by the rapidly decreasing costs of technology and increasing connectivity of web-enabled devices.

miGuard Home Security System – schematic diagram

Other potential players

Of course, this concept is not just a possibility for Nest and the innovators outlined above, as there are other innovative technology companies who are trying to get into the smart home space.

As a Brit and Imperial college alumnus, the most notable example I can think of would be Dyson. My rationale here is that Dyson are one of the great innovators of UK industry and a global pioneer in domestic technology, highlighted by its recent partnership with Imperial College on robotic vision with a view to implementation for autonomous vacuum cleaners.

This is an intriguing partnership, given the promise of Imperial’s recent contributions to the field of Simultaneous Localisation And Mapping (SLAM) in addition to the fact that the unlocked value of Dyson’s disruption of household technology markets runs into the billions.

AlertMe, the British home monitoring controls company could also have a say in the development of this industry on the software side through their Smart Monitoring platform, linking all devices in the home.

Conclusion

A connected home security system is a complex endeavour, given all the possible flows of information and control that are being unleashed by the digital revolution. There is a range of possible ideas already in the market, addressing the various price points that could be considered by consumers.

The advantage that Nest could have if they developed a smart home security device or burglar alarm is that they already have two products on the market that could feed into it, not to mention their experience of successfully designing the necessary user interfaces and hardware for mass consumer uptake. Combined with Google’s expertise with algorithms and handling large data sets, it is a mouthwatering prospect to think what they could do together in this area.

Given the fact that smart burglar alarms will be such an improvement on the pre-digital state-of-the-art, I wouldn’t be surprised if the eggheads at Nest have already been incubating something like this for some time. This guy has even mocked up a great example of how Nest’s existing thermostat interface could be converted into a burglar alarm.

Nest’s Thermostat as a Burglar Alarm

I would not be surprised if there are further acquisitions in this sector in the coming months. These are very exciting times for this emerging technology market.

My thoughts on the Dynamic Demand Challenge Prize Finalists

To recap from my previous blog post on the Dynamic Demand Challenge Prize, the 5 finalists chosen by the judges were:

My favourite idea – Upside

Of the 5 chosen ideas, the most exciting from my perspective is Upside. Their idea is to allow the owners of UPS systems to trigger them to turn on during times of peak electrical demand, saving the customer money and reducing the burden on the electricity grid.

This demand curtailment could be coordinated through a demand response aggregator such as EnerNOC or KiWi Power, meaning that not only could the UPS owner profit on the arbitrage of cheaper energy and enjoy the carbon savings associated with avoiding high-carbon peak rate power, but they could also benefit from participation payments from the providers. Not only that, but it is inherently beneficial for customers to regularly test their UPS to ensure that it will actually work effectively in the case of an actual emergency, so why not get paid for it?

For me this idea is exciting due to the size of the UPS market in the UK. My finger-in-the-air estimate is that there is around 0.5-2.5 GW of connected UPS capacity in the UK currently that is protecting sensitive servers and equipment (a better estimate is probably available via this market study or similar). Even at the conservative end of my range, if this “dumb” capacity could be made “smart” and then mobilised during times of peak grid demand, that would be the equivalent of a virtual gas power plant turning on. Now that is exciting!

It sounds like Upside are currently very busy developing their product and customer base. If it were up to me, they would win the challenge hands down.

My second favourite idea – Powervault

However, a special mention should go to Powervault. Their technology is a battery system that can be simply installed in a UK home via a normal LV socket to allow the household to store any surplus electricity produced in the day by their solar panels to be used later on during times of high-carbon peak electricity demand.

Through the Powervault system, the user would reduce their carbon footprint in a fairly measurable way by reducing their demand at peak times, plus they would presumably save money due to the arbitrage effect of saving electricity generated at a time of low cost for use at a time of high prices (as long as the cost of the electricity lost due to the inefficiency of the storage doesn’t cost more than the marginal arbitrage benefit received).

I like the idea that the technology is easy to install for a household. It is also undeniable that energy storage will be a huge market theme in the coming years, as the UK seeks to increase its resilience to grid volatility as it integrates more renewable power into the generation mix.

The main issue with the Powervault concept for me is the target market. It is great that the team have a very focused target customer, households who own solar panels, and a defined value proposition of “be greener”. This group is clearly so concerned with “being green” that they have already shelled out thousands of pounds for solar panels, so potentially it is a strong strategy.

However, I worry that if the financial benefits don’t add up then the prospect of being greener will not be strong enough to justify the cost of the Powervault system, which I guess would have to retail at somewhere between £250-£500 to be attractive. The system would need to yield an arbitrage income of £25-£50 per year to stand even a modest chance of appealing to customers. Even then, customers will not directly see these savings in their bill, so how will they be convinced of the financial case for the product?

I also wonder if a target market of residential solar panel owners in the UK (or owners of any distributed generation technology) is too small a market to focus on. Presumably there are only around 50,000-100,000 households in the UK that currently own solar panels (my guess), which would yield a maximum serviceable market of £12.5m. Assuming that you can only grab 5% of that market (due to factors like competition and customer apathy), that would give a potential market size of around £625,000, which would yield a very unattractive proposition.

One of the first things I learned in marketing is that fear sells. If Powervault wants to increase its potential market size, and add another really compelling motivation to buy their product, I suggest that the company also targets people who are scared about power cuts and outages that would damage their household equipment and interfere with their quality of life. As someone who has lived through a 3 day blackout in the UK, I can testify that this is something that I would be quite keen to avoid with a potential £250-£500 investment (although I’m not suggesting that they should have a battery that would supply a house for 3 whole days).

My least favourite idea: Community Substation Challenges

One of the ideas – Community Substation Challenges – centred on the use of smart fridge magnets to display information in the hope of motivating households to compete against their neighbours and save energy in their homes.

I am really not a fan of the theory that consumers will enjoy or prioritise the gamification of energy efficiency in their daily lives. Will you really care about how energy efficient your house is when the kids are fighting each other, the stove is boiling over and there’s just been a knock at the door? Will customers really look at their fridge magnet display 1-2 weeks after it has been delivered? When was the last time you really looked at the front of your fridge? Recently there was even a whole hackathon event in Paris, Energy Hack, entirely based along a similar line of thought.

Obviously I’d be delighted if this idea gets built and shown to successfully lead to consistent energy savings over time. However, if I was an investor, I would want to have seen extensive market research or some form of Minimum Viable Product as discussed in the Lean Startup methodology. Good luck to them, but the idea wouldn’t be a priority for my investment capital.

thEnergy

As I understand it, the idea of this team is to use a heat storage medium embedded in the fabric of a house to store heat generated by heat pumps during periods of low demand to be used in the winter when demand for heat is high.

The issues with this one are primarily technical but there are some commercial considerations. Is the heat storage mechanism cost effective to produce, safe to operate and easy to install? Will the market understand the offering and can the team create a product offering in a way that is desirable and easy to understand?

Quite frankly, this one didn’t especially grab me during the Hackathon and there’s not a great deal on the site to understand. However, when you consider how significant a proportion of UK energy demand is in heating (44% by their numbers), it will be a promising finding if they pull something together that is feasible.

Demand Shaper

The guys at Demand Shaper plan to create a service based on a smart home control device that will allow for residential energy use to be “influenced” by their company in order to reduce peak demand.

Demand Shaper business model

Source: Demand Shaper’s Second Blog

It’s a mammoth task and a complicated process, although the potential savings are enormous. Due to its complexity, it wouldn’t be my first choice of project to invest in, as it has various barriers to overcome. For example, they are in discussions with Ofgem and Elexon about making a change to the UK settlement system. Now I am all for the optimistic mindset, but that is one hell of a challenge for a new startup to pursue!

I also wonder whether they have undertaken enough market research to justify the effort they are making. Time will tell – it’s certainly an interesting concept!