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1. 1
RESEARCH REPORT
The State of Internet of
Things in the Home
PART II: OPPORTUNITIES AND CHALLENGES FOR
BRANDS SELLING IOT PRODUCTS FOR THE HOME
AUGUST 2017
BY ED TERPENING
WITH AUBREY LITTLETON
INCLUDES INPUT FROM 18 BRANDS, VENDORS AND THOUGHT LEADERS
AND 6,339 GLOBAL SURVEY RESPONDENTS
PREVIEW ONLY

2. 2
EXECUTIVE SUMMARY 3
KEY FINDINGS 4
WHAT IS THE SMART HOME? 5
WHAT DRIVES BRANDS TO CREATE SMART HOME PRODUCTS 6
CHALLENGES FACED BY SMART HOME BRANDS 15
MOVING FORWARD 24
END NOTES 27
METHODOLOGY 28
ACKNOWLEDGEMENTS 29
ABOUT US 29
Table of
Contents

3. 3
Executive Summary
Although some connected products for the home, such
as home security systems, have been around for years,
the market for smart home Internet of Things (IoT) products
is early.
In Part I of our report on 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.
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 consumer response, what drives brands to create these products, and what
barriers they face.
3

4. 4
Key
Findings
• The market of IoT devices for the home is early, with brands from Original Equipment
Manufacturers (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. Early Adopters — consumers who are currently buying connected products —
enamored by technology buy these products despite compatibility concerns. But the next
generation of buyers — what we call Fast Followers — will require seamless orchestration of
devices and ease of use.
• 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). Just as e-commerce
disintermediated retailers by offering almost unlimited product selection and lower prices,
smart home OEMs continue this trend by selling replenishment products and services
directly, bypassing retailers in ongoing transactions and customer relationships.
• Brands are driven to IoT for the home to grow and remain relevant. Brands are driven
to make their home products connected to maintain relevance with consumers in an
increasingly tech-savvy world. 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 ensuring
home technology interoperability; absorbing 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 that
are possible if products are hacked or if owners’ personal data is disclosed; 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 mirror 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 expect devices to learn their
habits to deliver true automation1
.

5. 5
What Is the
Smart Home?
Home product manufacturers and consumers have wide-ranging
perceptions of what defines a “smart home.” Some see a future in
which any electrified home product could someday be smart and
connected. For this report, we define the smart home as:
“A home of interconnected technology
devices whose connection with a remote
service provider adds value, customized to
the homeowner’s unique use, habits
and needs.”
This definition recognizes the need for products not to simply be
connected, but to be truly smart by learning users’ habits and
minimizing the need for interruptive notifications and interaction.
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6. 6
What Drives Brands to Create
Smart Home Products
In our interviews with consumer electronics brands and retailers, we identified three reasons
why they are investing in IoT for the home: to maintain relevancy, to grow, and to improve
customer experience.
TO MAINTAIN
RELEVANCY
TO GROW TO IMPROVE
CUSTOMER EXPERIENCE

7. 7
As technology continues its reach into more aspects of our lives
and tech leaders like Apple, Google, Amazon, and Samsung
redefine product categories in the home, brands that currently
focus on traditional home products risk losing relevancy with
their customers. The Nest thermostat is a great example of a
product that has completely shifted consumers’ perception of
how valuable a connected product can be over its traditional
“dumb” counterpart, particularly when it comes to addressing
their priorities of saving money and managing the home
environment more easily and efficiently.
To Maintain
Relevancy
7
Consumers ask, “Why do I need this?
Relevency is the biggest barrier to adoption.
At one point in time, people asked ‘Why do
I need a computer in my home?’ As people
start to understand use cases, they start to
understand the value.”
PHILLIP RAUB, FOUNDER/CMO, B8TA

8. This preview version of
“The State of Internet of Things in the Home,
Part 2”
contains only the first seven pages of the report.
To download the entire report, free of charge, please
visit the link below:
http://bit.ly/altimeter-smart-home-2