high market value amid assignment Help
Business Model- Smart Lock
Our business opportunity is in the field of smart lock, as it has a worldwide market and owns a high market value amid the digital era of these days and the future. Smart lock is a technology that is a significant part of smart connected homes. Regardless of a building being a house, an apartment, a hotel room, an office unit, a warehouse etc; a security i.e., a locking system is an essential element. Considering our world being digital dynamically and being driven by technology, the smart lock business instills a high potential for a profitable business opportunity. As a new company entering the smart lock market, in order to draw market attention and awareness along with thriving in the existing competition, we have put together a range of innovative elements to differentiate our design from our other direct competitors, aiming to not only solve more identified issues but also to provide convenience to enhance the quality of the smart lock.
Our product will ensure enhancement of consumer convenience as the unlocking mechanism would be without the inconvenience of physical keys. By going with the keyless approach for the smart lock, our product would mainly address the fear of people associated with losing their keys.
With a number of 7 employees, we strive to provide a highly convenient and hassle free unlocking system ensuring double verification and higher security which unlocks your door just with a touch of your phone with the lock of the door along with Quick-Click function through the keypad attached with the lock. The main technology through which the smart lock operates is NFC (Near Field Communication).
In the initial stage of the business, our target market would be Student Accommodations Providers such as Hello Student and Student Roost in Manchester and London as these are the biggest cities in the UK. Factors such as safety issues in big cities and high demand for higher education in the UK, makes student accommodations an ideal place for us to provide our services as it would ensure better reach. This would facilitate a Business to Business model for our business idea/opportunity.
Our competitors in the field of smart locks are majorly startups namely, Nuki, Sesame, Loqed, Friday Smart Lock, Ring lock etc. Although, there are many substitutes to our products which act as our competition, such as physical key-lock and card based key.
We plan to take a minimum order of around 300 locks for each accommodation. We will strive to make contacts with student accommodation providers through whom we would provide services to various student accommodations. We aim to gradually increase the number of student accommodations we provide our services to by initiating providing services to two accommodations for the first year. For the second and third year, we aim to enter in one additional contract per year with a new student accommodation. For the fourth and fifth year, we aim to enter in two additional contracts per year with two new student accommodations. Our long term sales goals are to expand our market to apartments along with various other student accommodations of the student accommodation provider.
PART 1- The design Journey so far:
- A) Identification of the Opportunity and Problem
Identification of the opportunity and problem was ensured by following the Key Practices to Learn Entrepreneurship (Learning by Doing) as per Neck, Brush & Greene (2014). This section will cover the process of identification of the idea/opportunity of the business along with its description and functioning, the needs addressed, the problem being solved and the trends which we plan to exploit to our advantage.
Through Practice of Play, the business opportunity was discovered through our mindful observation, wherein we strived to capture the problems/complaints of ourselves and of the people around us in our daily life and ideated with innovative solutions to address those problems/complaints. Additionally, due to the group members being of different nationalities; efforts were made for application of existing profitable business ideas in our respective countries to Bath, United Kingdom.
With the help of Practice of Empathy; through our observation, research, personal life experience and our ability to understand the emotional experience of other human beings by relating with them; it was agreed that carrying keys is inconvenient and is a hassle as there is always a risk and fear of losing our keys. We also observed that we never keep our phones out of our sight, which implies that we rarely lose our phones. Considering these aspects, we saw a business opportunity in keyless locks. Through which, ideation for the business opportunity was done which is, Replacement of keys with phones- Smart Locks.
The need to avoid the inconvenience of physical keys is addressed by our business opportunity/idea along with the problem in the traditional locking/unlocking system which is, a fear of losing the keys experienced by people which we aim to solve by going keyless.
Through the Practice of creation, we put together a design for a new product with a new combination of elements such as an NFC Chip, NFC Reader, Arduino, Battery and materials for aesthetics of the smart lock and the keypad. The smart lock will operate through the NFC chip as the key of the lock which will be accessible through the smartphones settings to NFC. The NFC Reader will act as a lock of the door as it will support automation for unlocking the door due to it’s pairing with programming in arduino which will ultimately perform the automation to unlock the door.
Due to the NFC based operation of the smart lock, it would rely only on the lock’s battery for its functioning. Unavailability of wifi, signal and electricity will not cease the performance of the smart lock. A regular maintenance of the smart lock i.e. replacement of the batteries, will ensure hassle free and proper functioning of the smart lock.
Through the operation of the product above, all we have to do to unlock the door is follow the steps below:
Touch your NFC enabled phone to the lock
Enter the passcode in the keypad for double verification
The above steps are inspired from the mobile payment method through NFC in public places, wherein, the details are transferred just with a touch of the phone to the reader, after which, entering the pin code in the card swipe machine is required for the payment to be authenticated and collected. Although there are some situations wherein, our phones might not be able to help us unlock the door, such as:
If the smart lock users loses their phone
If they leave their phone inside the room
If their phone’s battery gets dead
If their phone is not compatible with NFC
For the above mentioned prospective hindrances, an additional feature in the smart lock is an attached keypad which is inspired from the design of a Safe locker. In order to be able to open the lock without the phone, following are the steps to be followed:
The smart lock users will only be required to remember two passcodes and enter those one by one in the keypad itself
The first code will be the code which the smart lock users enter on a daily basis
The second code will be the code for emergency
- After pressing enter, the door will be unlocked without phone, key and NFC Chip
Additionally, in order to address the issue of dead battery of the phone, all the phone chargers/USBs will be provided in the security/reception of the student accomodation and apartment buildings. Charging the phone for a minute will ensure enough battery in the phone to be able to unlock the door.
Through Practice of creation, a Business to Business model is visualised in which collaboration would be done with University accomodations in the initial stage of the business, afterwhich expansion towards Apartments will also be considered; resulting in around 300 products to be sold at once as the same locks will be installed in every flat/room. Considering our product design and our target market, the business would be highly profitable based on the trends which we strive to take advantage of such as technological advancement which is the current and future trend along with Social Trends in the UK such as preference for late marriages which resulted in a rise in single households i.e., increased demand for flats and apartments (Economics Online, 2020) and high demand for higher education in the UK leads to increased demand for student accommodations, as more students study away from their homes (Empiric Student Property plc, 2020).
Execution of the initial plan will take place by entering in a contract with Student Accommodation providers such as Hello Student and Student Roost, through whom, connecting with various student accommodations under them will be ensured for providing the services of smart lock system. We will initiate with providing our services in Manchester and London; these being the biggest cities in the UK will lead to better reach for providing our service. Big cities are considered to be more unsafe which gives our product a major problem to solve.
- B) Following are the activities carried out to test initial assumptions and develop a viable business model:
For preliminary analysis, a survey was conducted and responses were gathered from 80 respondents, in order to understand the feasibility of the product/business idea. Based on the survey conducted, a high demand for replacement of phones with our key was observed. Although, the demand was high due to the fear behind losing the physical keys. Respondents found their existing locking system to be very convenient, as a result, we realised the importance of aiming towards removing the fear of losing keys amongst people rather than emphasising on the inconvenience of the physical keys.
Extensive research on the competitors, their products, price and USPs was ensured in order to understand how we should differentiate ourselves from the competitors. The outcome was that there were more competitors in the field of smart lock then expected, as a result, we came to the conclusion that differentiation strategy will work highly in the business’s favour. The real differentiating factor will be focused on double verification, hence reducing the risk in keyless locks without compromising on the convenience in the process.
We followed Practice of Experimentation to visualise the product and understand its possible functioning by watching various relevant experiments conducted by tech enthusiasts which helped in creating the product design and gave insight for the prototype. Various methods such as Bluetooth, Wifi, RFID, NFC Tags etc were considered from the experiments for the product design. However, it was NFC Chip and NFC reader which implied to be the best suitable method for functioning of the smart lock.
Interviews with few real customers were ensured in order to be able to make a more suitable design for the product. In the initial stage of the idea, it was observed that people are worried about locking themselves out by forgetting their keys/phones inside their rooms/flat. In order to be able to enter their room/flat, they prefer not to be relying on a second person to unlock the door, as it questions their security. As a result, we understood that the customers seek to help themselves in emergency situations rather than seeking help from someone else in this matter, as a result, it was vital to ideate with an additional measure through which the residents can unlock the door. Based on the experiences and viewpoint of the interviewees, the additional feature i.e. keypad was considered in the smartlock along with the NFC Reader.
Practice of reflection contributed towards testing an initial assumption regarding the functioning of the smart lock through mobile app. Initially, it was planned to ensure unlocking of the door by the touch of the NFC enabled phone along with entering the pin in the app. However, It came to realisation that the app will lead to increased complexity in the operation of the smart lock along with increased costs for the business for app development. For a function which the existing keypad can ensure, an app for the same purpose was observed to be inefficient. Hence, it was finalized to replace the function of the app with the keypad itself resulting in permanent removal of the app.
PART 2- Clarity of Market Desirability 1:
This section will cover the value proposition (the strength of the business) and the unique element of differentiation against the competitor..
Value proposition (Risk reduction and Convenience):
Value proposition of business model canvas includes algorithm of solving problems and enumeration of customer benefits (Osterwalder & Pigneur 2009). Our smart lock offers user convenience when accessing home while enjoying a smart and safe home life. When leaving the room or home, there is no need to use a key to lock the door and the door will be locked automatically after you close the door and hence avoiding the risk of forgetting to lock the doors. According to (Schmieder, 2017), it shows that using smart locks helps people get home earlier and more conveniently. Unlike other general smart lock which focus on using “Figure-pin”, “Face-ID” and “Pin-lock”, our smart lock differentiate by allowing user to access home by using their smartphone, which nowadays is an essential item carried by everyone, making them feel at ease and convenience as they just need to touch the NFC and enter a passcode to enable the smart phone to unlock the door, while enjoy an intelligent and modern feeling of using the smartphone. A click on the smartphone and entry of the passcode to open the door should be quicker than using a key, allowing the user to get into the house faster especially in case of emergencies. Moreover, our product will free users from carrying bulky keys and avoid the situation of forgetting or losing keys which will result from locking themselves out from home as a result shows that keys are one of the most commonly lost items (Express, 2016)
“Security” or “Safety” are the biggest concern to use the smart lock. To encounter the issue, our smart lock incorporated a new function which is rare in the other smart locks, the timing of an unlocking record for tracking 24/7 on the website account showing timing of the door being unlocked. Notification will be sent via the phone app whenever the door is failed to lock or unlock to ensure user security and safety. Moreover, to enhance the experience of smart home, besides the master user password which can be changed from time to time, our smart lock allow user to share access to other authorized third party users to enter the house by sending them a pre-set one-time encrypted passcode key to open the door in the absence of the smart lock owner. All these functions are to offer flexibility and convenience to smart lock users, such as in an emergency case when the house owner is not able to back home and needs help from a third party. Considering the possible hindrances of smart lock mentioned earlier, we have put together a feature in the smart lock which involves a keypad ensuring authorization by dual password system for enhanced security which can function without the smartphone. Additionally, despite the smart lock comes with a set of replaceable batteries in the form of a maintenance system, our service also addresses a tiny yet relevant issue i.e.phones running out of battery. The issue is addressed by providing value-added service to the residents which is standby chargers and USBs available in the security/reception aiming to offer absolutely safe and smart life to our customers.
Value Proposition Canvas:
Unique element of differentiation:
From the market research, five main direct competitors were identified which use smartphones as their USP, offering similar functions. We have brought forward and incorporated all the smart functions into our product while adding-value by putting certain innovative elements into our product to supplement the limitation in existing products, which is unique and as well to differentiate our product to existing direct competitors. The below table summarized and compared our product with the other five main competitors.
The Five main competitor which are:
Friday Smart lock
Clever Lock Nuki Loqued Sesame Friday Smart Lock Ring Lock Criteria: Double Verification
We offer a free installation service
Keypad as an alternative Guest access 24/7 unlocking record Notification USB charger Smart lock not relying on Internet/Carrier signal
The table above summarized and compared the different features and services offered by our “Clever” smart lock to our direct competitors. For enhancement of customer satisfaction and our service, our “Clever” smart lock not only incorporated all those functions that our competitors offered, but at the same time provide a few add-value services. Among which, we offer free installation and technical support in installation as we understand this will benefit our customer and free them from any trouble in the installation process which should be most appreciated by users. Moreover, provision of USB chargers to the building is another unique service that differentiate our “Clever” smart lock to other smart locks as mentioned above. To provide after-sale maintenance service and support is also our unique service to build up our brand name to win repeated sales
PART 3- Clarity of Market Desirability 2:
Customer Relationships (Personal Assistance):
Establishing a continuous connection between a company and its customers is necessary which helps to build customer satisfaction (BDC, 2020). We can maintain good customer relationships by having great marketing communication, customer service as well as sales support. We understand and find out our customer’s value by listening to what they say and adjust our method to meet their expectations. We also provide each customer unique individual treatment which makes them feel they are valued and special as nowadays quality products are not the only things that can satisfy customers. Research showed that by calling customers’ names, tracking customer order history and providing personalized recommendations for them can be more intimate with customers and maintain a good reputation for business (Pietruszewska, 2020). Thus, the key to strengthening our customer relationships and satisfying them is to build exceeding expectations. Giving customers more expectations will surprise and joy them. This is a way to ensure that they not only continue to come back, but they also are willing to recommend the product to their friends and family.
Customer Segment (Niche Market):
For multi-dwelling units, protecting the security of buildings is becoming increasingly challenging (Huang, 2019). In order to ensure a safe environment to protect students, residents and visitors, multi-dwelling units are gradually substituting smart lock solutions for standard door locks. In addition, smart locks enable apartments and universities to effectively use limited personnel and resources by unlocking and locking doors automatically (Huang, 2019). Due to the careless student, they often lose their keys and lock themselves out of their room. Campus reports showed there are over 25% of campuses that need to rekey a lock at least once a week and many schools often need to change keys through school years (Timme, 2016). Thus, it is time consuming for staff to use the master key to open the door or replace lost keys. Moreover, the residential sector dominated the smart lock market in 2019 which holds more than 65% of that year’s revenue, and is expected to preserve its dominant position during the coming years (Grand View Research, 2020) (Appendix 1). So, we set our customer segment mainly on student accommodations residents and apartment residents in order to serve the niche market effectively (Osterwalder and Pigneur, 2010). These two groups are likely to purchase smart home products based on the product’s strong value proposition, design and the experiences of users. Owners of the multi-dwelling units and apartment buildings are deploying the product of smart locks which guarantee building automation, enhance strong security and reduce insurance costs. This can be achieved by overseeing open doors and tracking unauthorized access attempts. Furthermore, smart locks enable staff to “rekey” units and entire buildings effectively.
(Appendix 1, Global smart lock market share in 2019)
The worldwise smart lock market has continued to rapidly grow in the past few years. Vertified Market Research (2018) illustrates that the smart lock’s market size in 2018 was £1138 million and due to the increasing trend of smart lock, the global market size for smart locks will reach £2899 million by 2026 which will grow by 12.3% from 2019-2026. There are over 7 million sets of smart locks sold in 2019. As the rise of cloud-based lock management and smart home access, it will continue to promote the growth of smart locks in the future (Statista, 2020). Also, as consumers’ awareness of the advantages of advanced security is increasing, it is expected to have a great impact on product sales and therefore can drive the market growth. In addition, due to the benefits of convenient and easy-to-use user interfaces, the rise in the number of mobile phone users worldwide has led to the continuous growth of smart lock deployments in the past few years (Statista, 2020). Thus, due to the smart lock’s market size being large, our business can successfully make profits and grow in different urban countries.
Key Partners (Optimization and economy of scale):
Our partners mainly are SmartLock who is our supplier, student accommodation provider, as well as apartment venture capitalists. Our supplier’s purpose is to supply us with sufficient advanced electronic technology such as smart locks in order to allow us to provide a flexible and security environment for our customers. We cooperate with our suitable supplier to make all products more humanized, bringing great convenience to life and work, and also attempt to change customers’ lifestyle. Additionally, we negotiate a suitable price with our key partner in order to lower our costs on purchase goods. By using a smart lock’s application on the phone to lock and unlock the door, it is inconvenient that if customers’ phones run out of battery. Thus, we preliminary notify the person in charge of student accommodations residents and apartment residents that we will provide chargers for all phones in the reception or security entrance of the building in case our customers’ mobile phone runs out of battery.
Our marketing plan is to promote our product through advertisements in Instagram as it is one of the best platforms for business to attract customers. For our marketing position, we have determination to gain a position which offers high quality and reasonable price of the product in order to compete with our competitors such as Nuki and Sesame. We will use a penetration pricing strategy to differentiate our product by lowering the price at the beginning in order to gain market share quickly. We will then set back a premium pricing strategy after we built brand loyalty and customers’ awareness. Moreover, we will continue to utilize the product development approach of Ansoff’s Matrix Model in order to settle customers’ wants and the market needs. We focus on product development to develop new products and grow the business by using product differentiation strategy. Additionally, we will divide three different categories such as patient satisfaction, technology and marketing to identify our Key Performance Indicators in order to perform better than our competitors.
Our advertising goals are to participate in innovation fairs/ exhibitions for demonstration and build awareness of the product in order to position our brand, and raise engagement as well as build loyalty by showing our latest products to audiences. Also, as technology is growing rapidly, social media such as Facebook, Instagram and Twitter are a great platform for business. Social media not only has the ability for us to connect people from different backgrounds, it also can through their platform’s ads to target users who feel interested about our product and willing to buy it. This will ensure that our business presents the advertising content to the right users at the right time. In appendix 2, it shows Instagram’s users with 42% are living in urban areas and 42% of them earning $75K or above. Also, 80% of users are following brands on Instagram according to Ad Espesso (Lyfe Marketing, 2020). Thus, it shows Instagram is a great channel for us to target customers who have afford to purchase the product.
(Appendix 2, Instagram usage among key demographics)
PART 4- Clarity of Market Feasibility:
Key activities refer to the palfrom or network which related to the main business activities, where an actual business plan is executed to its success – Neck, Brush & Greene (2014). To manage the platform, our key activities include approaching the lock manufacturers for production of smart locks according to our specification and design on one hand. On the other hand, to approach a shortlist of new accommodations, apartments and building sites and as well a shortlist of existing accommodations and office buildings to offer our smart lock products and services to match its security requirement including installation and after sale service. By matching the users’ security needs with quality and innovative features, so as to establish our brand name in the market to strengthen our selling platform.
PART 5- Market Viability:
PART 6- Design Journey Ahead (A and B)
Untested Assumptions and Unknowns:
Based on the business model, the identification of untested assumptions and risks/unknowns were done. An unmade prototype increases the unknowns in the design and functioning of the product. An untested assumption is the discomfort which could be faced by the residents due to sudden change from traditional physical keys to technological keyless unlocking systems, which could possibly lead to negative word of mouth for the product. The matter regarding confidence by the Student accomodations providers/apartments on a start-up is considered as an unknown. For crucial matters such as security, major trust would be given to known/established brands rather than a startup. In the future, this might be a huge risk for the business, as this will increase the chances of less customers and sales; thus, less revenue by the business.
- B) Market Experiments to Test Unknowns
Section that provides a clear outline of at least 3 experiments (and their costs) that you can do to test your idea before investing fully in it.
The experiments below are based on the untested assumptions and unknowns; in order to apply the Lean Start-Up Principles in Practice, following are the experiments which will be needed to take place:
Payment to suppliers for manufacturing the product based on the prototype/product design Testing the product in accomodation (market) Forming contract with student accommodation
The above experiments will help us follow the lean start-up model, as manufacturing the product will build, i.e. turn our idea into a product; forming a contract with student accomodation and testing our product there will help us measure and learn as it will enable us to understand the response of the residents along with identification of value creating/wasting activities which can lead to possible pivots in the idea.
The above market experiments will be conducted by approaching a student accommodation provider and providing our free service for the first 6 months to one of their accommodations. If the accommodation residents desire to continue with the smart lock, commencement of entrance in contact with the student accommodation provider will take place, wherein, they will purchase our service for two of their other accommodations. Incase of dissatisfaction by the residents for the smart lock, the products will be uninstalled and will be charged at a highly discounted price.
This approach will ensure testing of the product, gathering feedback/suggestions for changes in the product along with formation of a strong relationship with a prospective key partner, resulting in increased contracts for sale. Based on the outcome from this approach, decisions regarding full investment in the idea will be ensured.
With an ever increasing trend in technological advancement which results in desire for convenience and hassle free way of life, we believe our smart locks will thrive in addressing the fear of people associated with losing their keys along with providing them with the convenience of the keyless locks with the help of the simplicity in functioning of the smart lock along with its double verification feature which ensures higher safety and security.
We will strive to reach our customers and establish ourselves through approaching well-known student accommodation providers in the UK along with ads on Instagram and active participation in Innovation/Start-up exhibitions.
The positive five year financial projections implies increasing profits in the long term. With emphasis on the product design and better awareness of our products, it will lead in increased positive word of mouth along with increased sales and revenue, resulting in yielding higher profits benefiting the investors.