Nest Makes Its Own Mess

The article in Fortune, “The Mess at Nest Echoes the Mess in the Smart Home” by Stacey Higginbotham, revealed an interesting perspective on Nest and the importance of visionary leadership.

A messy strategy

In today’s rapidly changing technology landscape, with a new paradigm around connectivity and consumer engagement, companies and certainly top executives need to understand the forces at work in the smart home market, and to constantly monitor and adjust the course when these forces change fundamentally.

“Fadell, whose vision of the smart home was all about how intuitive such automation should be, doesn’t seem to have accepted the fact that any kind of intuitive home would require open standards or sharing data among participants.”

At least this is the reality for most smart home companies – and certainly startups. Simply because there is no alternative in the current state of the industry, where Nest launches a platform, Samsung acquires SmartThings to build a platform, followed by Apple’s Home Kit, then Amazon Echo gets traction and reveals an open API to create its own platform, and Google works on the Brillo platform.

The point is that everyone else in the smart home industry needs to constantly adjust strategy, technology interoperability and go-to-market approach to maneuver in this landscape among deep-pocketed incumbents, which all seem to have only one objective: To dominate the smart home through Platform ownership.

However, that strategic approach seems obsolete today. The opportunity of universal Platform ownership was lost several years ago when ‘no-one wanted smart home products’.

The Root Cause Problem

The ruthless and simple truth is this: No-one can go it alone.

If you don't accept that premise, you'll end up in a mess! Certainly, if the strategic intent is to create an intuitive smart home without solving the fundamental connectivity problem in the smart home industry.

But the industry cannot agree on one connectivity standard – if for no other reason, then because there is no clear definition of the industry! Does it comprise the legacy players in lighting control such as Schneider Electric, Siemens and Legrand, or security players such as ADT, Verisure, Alarm.com or newcomers such as Nest, Philips/OSRAM and SmartThings, or the smartphone incumbents such as Apple and Samsung, or the telco incumbents such as AT&T, Verizon and Comcast, or…? The list could go on, and that’s the problem of smart home connectivity; that’s the problem of agreeing on one standard.

Everyone ‘reserves the right to play’ in the smart home market – everyone wants a bite of this cake – but companies enter the smart home market from different ‘associated industries’ adding to the patchwork of technology platforms, and in turn the complexity of smart home solutions, which ultimately holds back consumer adoption!

Unfortunately, this is not the early days of the internet, where consensus was created around HTML. It is in reality what is required for the industry to effectively unlock its potential, though, but too much is at stake for the incumbents in this untapped multi-billion-dollar market space called ‘smart home’.

The risk of losing out in the smart home race, prevents the incumbents from effectively collaborating to create it!

From Platform to Ecosystem

So, what is the problem with the Platform strategy? Nothing per se, but it is too tightly linked to a ‘hardware only’ game. And considering the current state of the industry, a Platform is a huge undertaking that will inevitably slow down the innovation pace and execution power in any company.

Add to this, the pressure from 'stand-alone' Connected Devices such as Philips Hue, Sonos, Amazon Echo, etc., that successfully support:

1. The customer journey; and
2. Smart Home Ecosystems

Could you imagine a world of only one Smart Home Platform? You could dream about it, but not really expect it. Should Google or Apple accept Samsung to take the ‘Platform ownership’ role – or vice versa? It is as likely as Google and Apple agreeing to merge the Android and iOS platforms for smartphones.

The strategic implication of this is that in reality we will end up with several Platforms – or, to put it differently, an Ecosystem of Platforms or Systems or Connected Devices.

The Nest Mess

Is it fair to say that the ‘mess at Nest echoes the mess of smart home' in general?

I don’t think so. The smart home industry is a technology and connectivity mess, but the mess at Nest seems like a self-inflicted wound of lack of strategic leadership and unwillingness to adjust to the smart home reality. At least as described in the article, because – as also pointed out – Nest is indeed interoperable, although in its own Ecosystem with the ‘Works with Nest’ framework.

Interestingly, though, to control an Ecosystem, you would need to control the gateway in the Ecosystem, and Nest just revoked their Revolv gateway.

What Consumers Want

At the end of the day, consumers want seamless smart home experiences – not Platforms or Ecosystem.

Consumers are victims of the industry’s technology battle, but they are increasingly served by stand-alone Connected Devices with connectivity to Ecosystems like Amazon Echo, Sonos and Philips Hue.

In conclusion, it has proven unwise for the ‘Platform incumbents’ to leave this ‘stand-alone’ market entry point wide open, because these newcomers are the ones imposing the Ecosystem reality onto the Platform incumbents, making their strategic Platform game obsolete.

It is quite ironic, when you think about it, but it reminds us of this:

If you want to change the game, you must define the rules for winning!

As we are still figuring out the rules, there is no telling who will ultimately win this game, so stay tuned...

--- 0 ---

I would love to hear your comments to this post.

Thanks.