Connected Things Business Models: British Gas Boiler IQ

Jen van der MeerBusiness Model Practice, Hardware, Regional

Connected Utilities

Proactive boiler and other service maintenance that uses sensors to predict when you will need support for British Gas in key regions within the United Kingdom.

Founded

Founded by Frederick Albert Winsor and incorporated by Royal Charter on 30 April 1812 under the seal of King George III, The Gas Light and Coke Company was the first public utility company in the world, and now part of Centrica.

Funding

Centrica is listed on the London Stock Exchange, under the symbol CNA and is a constituent of the FTSE 250 Index.

 

Sustainable Development Goals

The company is focused on behalf of their customers, choosing Goal #9:  Inclusive and sustainable industrialization, together with innovation and infrastructure, can unleash dynamic and competitive economic forces that generate employment and income. #7 Affordable and clean energy is considered a supporting goal. 

Mission

Centrica has shareholder primacy clearly in their mission statement, “Centrica’s vision is to become the leading integrated supplier of energy and related services for its chosen markets and maximise value to shareholders.”

Where on the Resiliency Scale?

This series explores the variety of ways established companies and incumbents adapt the hardware-as-a-service model. 

Innovation for big incumbent corporates is hard, particularly in the energy sector with IoT. Most projects rarely get beyond pilot and are considered a waste of time and investment. Yet when an incumbent chooses to lead with the customer experience and business model first, technology second, the project turns into recurring revenue. 

Let’s take a look at the offering from British Gas. 

 

Business Model Moves

Lead with Customer Experience 

Strong IoT projects do not lead with technical features, they lead with customer experience benefits. 

“The boiler’s the heart of your home. Keep it covered with HomeCare and we’ll be there when you need us. We’re here to solve.”

British Gas has bundled former siloed products into one service package, with service levels that address multiple home systems that can be problematic when they go down.

“Whether it’s your boiler, electrics, plumbing, drains or heating, HomeCare has you covered. So the moment you spot a problem around the home? Make it our problem.”

British Gas passes a key test for validating value propositions: they’ve defined a clear and present pain point for their customers, and are promising to solve it for them. Particularly in the time of COVID19, no one wants to have their boiler, heating, plumbing, or electric goes down. 

 

Communicate the sensor tech clearly and transparently 

British Gas has branded their IoT device Boiler IQ: “a clever little device that keeps an eye on your boiler and tells us when it stops working. That way, we can help you get it fixed as soon as possible so you don’t get left in the cold this winter.” 

The promise of Boiler IQ: it will tell you via text when your boiler breaks down before you find out, and send the data to engineers who will arrive already knowing what might be wrong, with parts ready. 

Customers do need broadband internet, a spare port in their internet router, and an available plug socket close to the router – so not exactly a simple snap-on sensor but clear on the requirements for who is eligible. 

Software-Engineered Hardware 

Boiler IQ was inspired by Adi Andrei, who now serves as a senior data scientist at British Gas’ Connected Home division who is an ex-NASA scientist. Andrei has thought a great deal about fault detection and is the co-author of Information Display System for Atypical Flight Phase, which is a patented system used to detect anomalies in the flight logs of passenger planes and link those to safety faults. 

The system he inspired for British Gas also sets up a continuous data back to British Gas in order to track fault history or detect manufacturer defects.

The solution was developed with British Gas’ Connected Home team with Worchester Bosch but can be used to retrofit existing boilers from the manufacturer. The solution is not over-engineered: Boiler IQ connects to a ZigBee-compatible Smart Home Hub. 

Business Model Aligned to Value Proposition and Continuous Service

The customer pricing model is aligned to the service provided, level up to deliver more services. This is a pay-per-use model for the service in addition to a hardware-as-a-service fee for the Boiler IQ system. While the company charges an installation fee, reductions are made for those that sign on for the HomeCare service offerings.

Note the business model is not structured like an upfront warranty of set-it-and-forget-it and instead will show up on the customer’s bill on monthly basis, putting more onus on British Gas to ensure that the service stands up to its promise. 

The model also had precedent. The UK has a long history of the use of coin-operated meters, which allow a customer to pay for his electricity as he or she consumes it using 1 pound coins. The machines and coin payment collectors were frequent targets for crime, and it took the strong iron rule of Margaret Thatcher to demand their replacement. By the early 90s, most of the coin-operated meters had been replaced by a ‘token’ representing monetary value, charged with credit in a vending outlet and inserted into the meter instead of cash. Way before blockchain the British utilities were innovatin

The model also had precedent. The UK has a long history of the use of coin-operated meters, which allow a customer to pay for his electricity as he or she consumes it using 1 pound coins. The machines and coin payment collectors were frequent targets for crime, and it took the strong iron rule of Margaret Thatcher to demand their replacement. By the early 90s, most of the coin-operated meters had been replaced by a ‘token’ representing monetary value, charged with credit in a vending outlet and inserted into the meter instead of cash. Way before blockchain the British utilities were innovating.

Augmentation Over Automation 

For incumbents that are large employers, introducing an IoT innovation that is simply automating a repetitive task is typically not welcome by field employees or government stakeholders concerned about jobs.

Instead, the British Gas story describes the value and use cases as augmenting the capacity and foresight for the 8,000 engineers making over 50,000 visits daily. British Gas is not automating those jobs out of existence. Nor are they investing in a tech-driven pilot with the latest blockchain and AI to demonstrate proof of concept. They are using an IoT-enabled service to generate greater continuous value for customers that realists in increased recurring revenue streams. 

Business Model Appropriate to Company Risk

In a sense, British Gas’s choice of business models is more innovative than the Nest smart thermostat, which just relies on a simple device sale. But the company does not take extreme risks in the model. Customers still pay upfront for installation, and customers can cancel within a 30-day window but then are locked into a yearly service contract. 

British Gas is not taking a massive hit to the balance sheet to execute this model – subsuming the cost of all of those Worchester Boilers or even sensors. They are demonstrating the additional value to the customer for this time of on-demand proactive service, and are charging for it 


Data Rights Transparency 

British Gas is also transparent upfront about the customer’s rights and access to personal data, and data generated by the HomeCare system. In one of the clearest and most user-friendly terms and conditions documents we’ve ever seen, British Gas outlines the various insurance, warranty, and smart home products to describe the company’s obligations and those of the customer.

Data policies took a bit of searching. We had to scroll through a number of different privacy policies but the company had created a privacy policy specifically for meters and smart homes. Customers decide the frequency of how often your smart meters take meter readings: every 10 seconds, half-hourly, daily or monthly. Customers can also change their preferences at any time. The policy is clear in what information is used, and for what purpose. 

It’s not directly stated in the privacy policy, but it appears that British Gas sees the meter data as personal data and follows all relevant UK law.


Evaluating Boiler IQ and British Gas’ Efforts:

There are core design considerations when launching a business model for connected devices and services that help to shape the flows of value between different stakeholders: customers, partners, existing service workers, and investors. 

For a company with origins from over 200 years ago, British Gas does a remarkable job reframing the customer experience, leaning on partners for core technology, and aligning the choices within the as-a-service business model to the risk the company and shareholders are willing to take. While the company complies with UK and EU law in terms of data rights, they simply have too many different types of policies for each different offering and would benefit from company-wide policies and governance – for both customer trust and internal alignment benefits. 

Boiler IQ is a reminder to established incumbents that it is possible to launch revenue-generating IoT-driven connected systems that customers value.

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