L.E.K. Consulting Survey Reveals What People Want but Still aren’t Getting from Today’s Connected Home Options 

BOSTON, MA (May 31, 2023) — Americans homeowners remain eager for increasingly connected homes, presenting a lucrative opportunity for companies and investors that find ways to capitalize on entering the market of 1.8 billion smart devices. Only 8% of U.S. homeowners have no connected devices, though 60% of these non-owners considered a connected device purchase in the last year, according to a new survey by global strategy consultancy L.E.K. Consulting

Among current connected-product owners, the number of devices per home has increased from 10 to 16 in just three years. At the same time, the percentage of homeowners who engage with their devices every day has grown to about 66% from 41%. 

This spike in demand is the result of more affordable, better performing and easier-to-use technology. Homeowners report that the top reasons they’ve stepped up adoption are lower prices (38%), greater interest in smart products (34%) and growing comfort with technology (33%).

“Advances in technology drive greater consumer engagement, which leads to additional product evolution, which leads to still greater consumer engagement and penetration,” said Paul Bromfield, L.E.K. Managing Director and co-author of The Connected Home: Can Your Company Plug Into Opportunity?. “All of this has made the connected home cycle largely self-reinforcing.”

That said, some pain points are keeping some Americans away from full adoption: privacy concerns (29%), high monthly costs (24%) and devices not functioning as intended (24%).

“Companies that can mitigate one or more of those barriers – privacy concerns, cost and performance – have a real opportunity to differentiate themselves and drive adoption of what they’re offering,” said Gavin McGrath, L.E.K. Managing Director and report co-author. “Not every player will win in this transforming world — there will also be losers.” 

The L.E.K. research identified steps to success for companies that want to win in the connected home. They include identifying the precise segment to target and then developing and implementing a strategy that articulates a solution to a specific pain point. Companies also need to determine if they want to be a player that defines a connected home ecosystem or, more narrowly, that fills in gaps in and increases functionality in an ecosystem. 

Connected home products span seven basic categories, including home comfort (e.g., thermostats, air purifiers), security and access control (e.g., cameras, doorbells, garage control), appliances and lighting (e.g., vacuums, smart plugs, laundry machines), entertainment (e.g., smart TVs, smart speakers), healthcare and wellness (e.g., remote monitoring, emergency response), energy (e.g., solar panels, home batteries, EVs) and outdoors (e.g., sprinklers, lawn care).

“Given the breadth of factors driving growth in the connected home space, many companies feel compelled not only to participate but also to lead,” said Rob Haslehurst, L.E.K. Managing Director and report co-author. “To avoid misguided attempts at claiming leadership, as well as risks of disintermediation or wasted investments, players in the space need to step back and objectively assess their prospects for succeeding in the connected home ecosystem.”

“The more the connected home ecosystem expands, the harder it is to find an entry point – due to intense competition and higher likelihood of business model disruptions as new solutions evolve,” he said. 

The report points out that companies in the space need to be vigilant about a number of variables, both positive and negative. For instance, interoperability of and interconnectivity among devices is great for consumers but could be a liability for companies invested in proprietary solutions that don’t connect to a broader ecosystem. Another is potential margin squeeze at the hands of big competitors that expand their device portfolio and leverage scale. And then there’s commoditization: As consumers take smart functionality for granted, certain products, such as lightbulbs, may lose their distinctiveness and ability to command needed pricing. 

“The complex connected home ecosystem is constantly evolving, with implications across the building and construction value chain,” said Amar Gujral, L.E.K. Managing Director and report co-author. “Participation is not always wise, and leadership is not guaranteed. That’s why a careful, systematic analysis can reveal where and how a company will be best positioned to play. It’s important for companies to remember they’re not developing a strategy in a vacuum.”

For more information, please see The Connected Home: Can Your Company Plug Into Opportunity?

About L.E.K. Consulting

We’re L.E.K. Consulting, a global strategy consultancy working with business leaders to seize competitive advantage and amplify growth. Our insights are catalysts that reshape the trajectory of our clients’ businesses, uncovering opportunities and empowering them to master their moments of truth. Since 1983, our worldwide practice — spanning the Americas, Asia-Pacific and Europe — has guided leaders across all industries, from global corporations to emerging entrepreneurial businesses and private equity investors. Looking for more? Visit www.lek.com