Although some connected products for the home such as home security systems have been around for years, the market for smart home IoT products is early. In Part I of our report on the Internet of Things (IoT) for the home, we explored who is buying these products now and who will constitute the next wave of adoption. Understanding the priorities and perceived barriers of consumers is vital for brands to succeed—but so is understanding the internal struggles they face when entering this new market.

For brands who manufacture traditional products for the home, breaking into the consumer electronics space—one alien to them—can be a daunting task. The shift from creating disconnected products to smart, connected devices requires a significant internal transformation including building new technological acumen and new business models, reconsidering product development approaches, creating more sales channels, and servicing more complex products. While this transformation can translate into new opportunities to grow, it’s not without weighty challenges.

Key Findings

For this report we interviewed 16 leading companies in technology such as Apple, Intel, and Samsung, as well as retailers such as The Home Depot, Amazon, and b8ta, to explore both consumer response and what drives brands to create these products and what barriers they face. This is what we learned:

  • The market of IoT devices for the home is early, with brands from Original Equipment Manufactures (OEMs), retailers, and technology competing for standards. Without adequate standards as a catalyst for widespread adoption, the current market is dominated by single use-case devices that may or may not work together to deliver true “smart home” automation
    Retailers are in a unique position to educate consumers on home IoT product offerings and drive adoption. But they face further disintermediation by new commerce models built into smart devices (e.g., automatically re-ordering supplies)
  • Brands are driven to IoT for the home to grow and remain relevant. This push for relevance includes the shift from hardware sales alone to value-added connected services that help brands grow through “servitization” business models
  • Brands that enter this market face a growing list of challenges. These include increased costs; dealing with increased supply chain complexity required to design, build, sell, and service connected products; understanding connected customer experience; managing reputational brand risks; and finally, marketing products that many consumers don’t understand or see as relevant to them
  • For “always on”, connected products, brands face new customer experience challenges. Most brands—especially those today that don’t make connected devices—focus on developing customer experiences that largely mirrors the traditional sales/marketing funnel, which close the loop with support when things go wrong. In IoT for the home experiences, consumers expect minimal interaction and notifications, and expert devices to learn their habits to deliver true automation

Looking for Part 1? Download here.

Ed Terpening

Industry Analyst

Aubrey Littleton