Signify’s Growth Strategy Prioritizes Connected Lighting and Channel Strength

Editor’s Note: This is the second of a three-part series examining Signify’s Capital Markets Day presentation. Yesterday, we covered CEO As Tempelman’s candid assessment of Signify’s recent performance and his commitment to reversing years of revenue decline. Today, we take a closer look at the specific growth drivers behind Signify’s strategy. Tomorrow, we will conclude the series with an analysis of Kraig Kasler’s presentation and what it reveals about the future direction of Cooper Lighting Solutions.

At Signify’s Capital Markets Day, CEO As Tempelman outlined a growth strategy built around connected lighting, stronger channel relationships, and a more focused portfolio.

Some of his comments challenged conventional assumptions about where growth in the lighting industry will come from over the next several years.

Perhaps the biggest surprise involved research and development spending.

Forty Percent of R&D Goes to Value Engineering

Your humble editor assumes R&D spending primarily funds new products and breakthrough technologies.

Tempelman revealed a different reality.

“Forty percent of our R&D goes into value engineering,” he told investors.

That means nearly half of Signify’s engineering resources focus on improving existing products, reducing costs, simplifying manufacturing, and lowering bill-of-material expenses rather than developing entirely new offerings.

The strategy helps explain how Signify has maintained relatively stable gross margins despite several years of declining revenue. I believe this was a clear signal to investors, as some believe that Signify historically spends too much on developing new products that the market is not willing to pay for, i.e., LiFi.

According to Tempelman, Signify’s brand strength, sourcing power, and value engineering efforts have allowed the company to preserve profitability even as market conditions remained difficult.

Connected Lighting Remains in Its Early Stages

A central theme throughout the presentation was Signify’s belief that connected lighting remains significantly underpenetrated.  In the professional market, Tempelman estimated that connected lighting systems represent only 10% to 15% of the installed base.

The residential market lags even further behind.

According to Signify, only about 3% of homes currently have connected lighting installed.

Those figures help explain why the company continues to place so much emphasis on connected systems despite years of industry discussion about smart lighting.

Signify believes the market has not yet reached its inflection point. The company expects connected lighting volumes to continue growing while software and services create additional value opportunities.

Tempelman also pointed to emerging applications involving artificial intelligence, smart buildings, HVAC integration, and smart city infrastructure as future growth drivers.

Consumer Comes First

Another unexpected takeaway involved Signify’s investment priorities.

Many industry observers might assume the professional market would receive the bulk of future growth investments. Instead, Tempelman identified consumer as the company’s first growth priority.

The company plans to aggressively expand its consumer business through connected lighting, integrated luminaires, and continued growth in India.

Professional lighting remains critically important, representing roughly 78% of Signify’s revenue. However, Tempelman described the strategy there as more targeted and selective.

Rather than pursuing every opportunity, Signify plans to focus on specific market segments where it believes it can achieve stronger returns. Examples include healthcare and data centers in North America and outdoor lighting in Europe.

The message was clear: growth first in consumer, targeted investment second in professional.

Distribution Matters More Than Ever

Tempelman repeatedly emphasized the importance of distributors, system integrators, specifiers, reps, and sales channel partners.

“You cannot do it alone,” he said.

The company plans to invest more heavily in distributor support, training, digital tools, and AI-enabled platforms.

For larger distributors, Signify wants deeper integration through EDI and API connections. For smaller distributors, the company plans to provide AI-assisted product recommendations, configuration tools, and quotation support.

Signify sees channel relationships as a competitive advantage rather than simply a route to market.  That message should resonate strongly with electrical distributors and independent sales representatives who continue to play a critical role in specification and project-driven business.

Market Share Drives Profitability

One of the more revealing slides in the presentation showed a direct relationship between market share and profitability.

According to Signify’s analysis, business segments where the company holds more than 10% market share consistently generate higher margins.  That finding is helping shape future investment decisions.

Rather than spreading resources evenly across all segments and geographies, Signify intends to focus on areas where it can build meaningful scale and achieve leadership positions.

The strategy helps explain several of the portfolio decisions announced during Capital Markets Day, including reducing direct country presence from 55 countries to approximately 35.

All Options Are on the Table

Tempelman also signaled a willingness to reshape the portfolio when necessary. For several businesses classified as “harvest” operations, Signify is evaluating multiple options. Those options include continued optimization, partnerships, consolidation, or divestiture.

The key phrase was straightforward.  “If there is a better owner who is willing to give us fair value, we will explore those options.”

The comment applies particularly to commodity manufacturing operations and certain conventional lighting businesses that no longer fit Signify’s long-term strategic focus.

A More Focused Signify

Taken together, the presentation revealed a company becoming increasingly selective about where it invests capital and management attention.

Connected lighting remains the long-term growth story. Consumer lighting receives the first wave of investment. Professional lighting becomes more targeted. Distribution partners receive greater support. Commodity manufacturing receives less emphasis.

Perhaps most importantly, Signify appears willing to make difficult portfolio decisions if they improve profitability and sharpen strategic focus.

For investors, the message centered on performance.

For the lighting industry, the presentation offered a clearer picture of where one of the world’s largest lighting companies believes future growth will come from.

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