Between sessions at the 2009 Connected Home Conference, Rich Green spoke to Paul Skelton about macromyopia, psychofrugality and the decrapification of the modern home network.

Proving to be one of the most popular presenters since its inception six years ago, Rich Green, an installer and futurist from Palo Alto, California, gave the audience of the 2009 Connected Home Conference a rare glimpse at what was coming down the line for the home automation market.

Rich has been an active professional in the custom installation industry since 1978. He was part of the team that designed the first PVR, as well as the ubiquitous iPod.

Further, for the past five years, his system-integration company, Rich Green, Ink, has been voted one of the top 100 design and installation firms in the US.

This, he claims, is largely the result of his relationship with the Custom Electronic Design & Installation Association (CEDIA).

Rich is a self-confessed “volunteering fool.” He currently sits on the CEDIA US Board of Directors as Secretary, where he founded the Technology Council, which he also chairs. He also serves as a subject matter expert and instructor for CEDIA’s certification programs. He also participates in numerous standards committees with CEDIA, the Consumer Electronics Association (CEA) and InfoComm International.

Further, Rich explains that he has successfully leveraged CEDIA education into his business by achieving the CEDIA Installer Level 1, CEDIA Installer Level 2, CEDIA Designer Level 1, and CEDIA Home Theater Design Specialist certifications.

“I would not exist without CEDIA. There is no way my business would have become what it is without CEDIA training,” he says.

“As a result I’m really concerned and passionate about the globalisation of the organisation. We want to make sure the CEDIA brand represents good value throughout the world and that it is displayed properly.

“Further, we have great subject matter talent all across the world and we need to find ways to get these people to talk more to each other and reinforce each other as strong brand.”

Rich says the strength of CEDIA is grassroots: “It’s those passionate few members to really make things happen.”

“If CEDIA is going to truly succeed here, then we need more volunteers in this region. There should be much more growth than we have seen.

“The energy I saw over in New Zealand, on the other hand, is incredible – they’re very passionate. CEDIA is a volunteer member association, you can’t just sit there, pay your dues and wait for good things to happen. You’ve got to get involved.

“I guess the benefits just aren’t that obvious to some people over here.”

Rich believes that in order for the local industry to succeed, installers need to start sharing with each other.

“We’re in a tough economy. Some of the manufacturers I’ve spoken with say they may lose up to 30% of their dealership network during 2009. That is a major swipe at the industry.

“Will it come back? Sure, it will. But will it come back the way it was? Maybe not.

“People worldwide realise now that they don’t need to spend as much money as they did before the financial crisis, they certainly don’t need to leverage into all of the credit they did.

“I think that there is going to be a global paradigm shift with people consuming less, spending less, families becoming closer, and spending more time at home. There will be these major societal shifts and we will lose more members of the industry.

“My friends are losing their companies and it breaks my heart every time I see another one go, and it’s because CEDIA members, for the most part, are undercapitalised small businesses, highly entrepreneurial in spirit, and usually founded by and led by technology enthusiasts who may not have had proper business training to handle workloads and staff.

“When these entrepreneurs started their companies, they were built on a high-volume, low-margin business models where they should be low-volume, high-margin. Unfortunately, as these companies have high overheads, this is quite difficult to do.”

Rich explains that members of the home automation industry tend to suffer from “macromyopia”; we over-estimate short term change and under-estimate long term change.

“It’s human nature not to see the big picture. But, what’s beyond home theatre? Home theatre isn’t going to sustain our businesses going ahead, and we need to figure out a way to tell our customers that so they continue to do business with us.

“Can you predict the future? Not really, but you sure can make it your own. Now is the time to decide what kind of business to have in five years.

“The year 2014 will come around quickly, so you need to look towards it now. Home networking will still be around, but everything will be connected and easy to retrofit. Media servers will move to the cloud, and part of our responsibilities will be to keep families connected beyond the house.

“This means we must pay attention to business opportunities created by new customers on the cutting edge of technology and be the agents of change.”

But, he says, this also means combating “psychofrugality.”

“Being based in Silicon Valley I’ve got a lot of multi-millionaire clients (Gene Siskel, Roger Ebert, Luciano Pavarotti, Rush Limbaugh, and Steve Jobs), and even those guys are having problems. These people may have been worth $600 million three years ago and now they’re worth $60 million. This has a huge psychological impact on who they think they are, even though they are still incredibly wealthy. So what was a half-million dollar project is now only a $100,000 project. So we practice value engineering, which is delivering similar functionality at a much lower price.

“This means performance sacrifices. We’re coming down into a price point dominated by products like Elan and Control 4, NuVo and Universal Remote Control, where in the old days it was Crestron, AMX and the other big players. We’re shrinking the dollars that are being spent but are still delivering a lot of functionality, which is a problem because we are still doing the jobs but making a lot less money.

“How do we get to grips that the AV industry has peaked and we’re in the collapse of the AV industry which is becoming less profitable for us because the equipment is becoming really good, really cheap, really fast? We are getting equipment that is performing embarrassingly well for the price so I am able to deliver a very good customer experience at a much lower price.

“Is it good for us? Yes and no. Ultimately we’re making less money – look at the iPhone, nobody is making money off it or the associated apps, yet we must incorporate them because they are enablers to get to something else.”

So, as AV becomes less profitable, what are those emerging markets installers can be an early adopter in and enjoy profitability?

“Lighting control is a huge opportunity at the moment, particularly as control systems now become commoditised. Right now I make more money from lighting control than I do AV, even though I think of myself as an AV guy.

“But, right now the key industry is energy monitoring and management, it is the new audio as far as I’m concerned and I believe it is going to carry our industry for quite a few years. But that, too, will decline. Power utilities will connect straight into the home and won’t need us to do the installation of a home area network.”

After that is digital home health, he says: “Who is better positioned than us to deliver sensors, cameras and communication to the home for the elderly. That’s exactly what we know how to do so it will be a major opportunity for us.

“And what’s after that? 10-15 years in the future will be virtual reality, augmented reality, new uses of telepresence and video conferencing. It will be social presence enabled by technology. That’s what I’m staking my business on.

“Eventually we will end up with the end game, which is virtual reality.”

Overall, Rich says the future can’t be achieved without a certain amount of risk-taking.

“I’m not talking about switching business plans, I’m talking about being aware of exciting new markets as they develop,” he says.

“At the end of the day, if you haven’t made a profit then it’s the end of the story. Sustainability is all about profitability.”