Over a relatively short period of time, the smart home has emerged as a category that is taking the tech world by storm with Nest leading the charge. Jonathan Easton speaks to Nest Labs EMEA general manager Lionel Paillet about the company’s journey from a Californian garage to creating a home that cares
Tell us about how Nest got to where it is.
Nest was co-founded by two ex-Apple execs – Matt Rogers and Tony Fadell. Both worked on a number of iconic Apple products. Tony was actually called the godfather of the iPod and he worked with Steve Jobs on the first few generations of iPod and the first three iPhones as well as the start of the iPad.
When they left Apple they created Nest in a garage in California with a few people. They were asking ‘why do we carry a smartphone in our pocket while our homes are so dumb? Products that look the same, beep the same, behave the same’. The thought was to make these products more intelligent while creating a new vision.
Years before, there had been multiple attempts from the industry to work with ‘home automation’, and it wasn’t a great success. The reason was that it came with a need to build a dedicated part of your home for it to work together. It was more ‘B2G’ – business to geek – than selling to consumers. I’m a geek myself so that’s perfectly okay for me, but it would not appeal to millions.
In terms of attraction, home automation (or domotics as it was called in other places) was a failure. The degree of obsolescence of those products was really high because there were new products every month and the old ones couldn’t survive.
What did Nest do differently to combat that problem?
As a result of the failures of home automation we had to establish a vision of a ‘home that cares’. We wanted to design a home where the product will build a smart home, not as a package. Consumers don’t buy the package – you don’t ‘buy’ a smart home – you buy products that address real problems of your every-day life, one product at a time.
The first product was the thermostat with the idea of creating a product that programs itself. So rather than having to programme a thermostat all the time, we have to be geniuses with a ‘crystal ball’ design to guess what the weather will be tomorrow and adapt to your behaviour and also the characteristics of your home. That’s really really high tech.
We continued on the path of building products that are not just connected, but are intelligent on their own. A product that is just connected is a different philosophy, it’s the connected home, but it doesn’t necessarily mean ‘smart home’. Connected simply means that you can have an app for that. Our business was that each of the products will have to work entirely on their own.
The second product came out which was all about safety – Nest Protect. Nest Protect is a smoke and carbon monoxide alarm. These products were already in your home. They beep at you, they have been behaving the same way since they were invented, and we took the same approach. We decided that we should have a product with sensors that can tell you that the batteries need to be changed a long way in advance without having to beep so it tests itself 400 times a day. It has a military grade design, is constantly updating and – most importantly – is smart on its own and live on its own.
Nest co-founders Matt Rogers and Tony Fadell. Rogers (left) is still at Nest as chief product officer while Fadell (right) stepped down from his role as CEO in June 2016
The third category is one we recently added with the camera and that’s about security. Some customers use it for security, some use it for watching their pets or kids, and even to watch, listen or talk to them.
We can now record to the cloud all the time – it’s like the security guard that never sleeps. The video is in the cloud for not just storage but also computing. We use the cloud to compute the data, to make sure that we provide a service that is meaningful. It’s very different from getting an alert from most cameras on the market that will give you 25 notifications about a shadow that moved on the wall because there is a tree outside. It’s all about looking to build smart alerts using deep learning and the computing power of the cloud and that’s where we work closely with Google.
So that’s how we have built three independent categories which are all still connected to the idea of a home that cares, and a home that cares about the people inside it.
Is the Nest platform just restricted to those three product categories?
As we were building our categories, questions started to open up with privacy and security being a big concern. With security we started to say “how can we use the cloud to share status of ‘there is a fire in my home’ with another product?”. Because we aren’t going to build every product in the smart home, we decided to open it with what we call ‘Works with Nest’ – it’s on our website – there is a free developer programme that we started about a year and a half ago.
More than 20 per cent of our customers use it every day and more than 20,000 developers working on apps that work with Nest. These include Phillips with Phillips Hue and Bosch with their refrigerators. Just connect your Nest account from the app to, for example, your Philips account and say ‘if I’m away from home then share the ‘away’ status to the Phillips account to create an artificial presence when I’m away’. Then your lights will simulate a presence.
‘Works with Nest’ has been a way to have more products participate into the idea of having a smart home, and then link this into our online capabilities and explain to all of our channels that there is a way to make your home smarter one product at a time. If it says ‘Works with Nest’ it works with Nest. Simple.
We feel that there is still a lot of work to do in these areas, so we’re going to continue to push boundaries on them. I think we can go a lot deeper and there are some products in those categories that are ripe for makeovers.
“We continued on the path of building products that are not just connected, but are intelligent on their own.”
Where is Nest headed over the next year?
Going into more countries is a part of that. Recently we launched into Germany, Austria, Italy and Spain. And you will continue to see us adding more territories progressively and carefully.
There will also be more collaboration with Google. We are separate from Google, but we work with them on a couple of things such as algorithms and people detection along with voice, which is one of the ways that you interact with your home with things like Google Home and Amazon Echo. In 2017 we are going deeper into our loyalty channel strategy, more countries and continuing to innovate both our hardware and our services.
So it’s an exciting time to be in the industry?
Absolutely. We’re seeing traction and maturity. If you look two or three years ago you’d say it was early days, but in the UK our multichannel strategy has really helped us build the market brick by brick.
Who would have thought that John Lewis in the UK would sell a thermostat? Most people probably wouldn’t have spent a lot of money on something like this previously, but now they are, and that’s a smart part of the retail strategy. You can go to John Lewis on Oxford Street and it’s one of the places where you can see the smart home set up in the store across 1,000 square feet and it’s magnificent. They explain technology not in a ‘B2G’ way, but to consumers in simple terms what it does. That’s been really helped by multiple voices in the market that we work with – John Lewis being one of them, energy suppliers another.
You’ve got British Gas in the UK and they’ve helped educate consumers and accelerate the market as well as got plumbers and electricians. When we started in the UK three years ago I think we had 200 ‘Nest Pros’, who trained themselves in how to work with our products. Today we’re closer to 9,000 people who are trained around the UK.
‘White glove’ services have really helped get the first, second or third smart product into homes and starting the journey of the home that cares. It’s still early days and has tremendous potential, but it’s really exciting.
In the past three years we’ve seen well over 50 per cent year on year growth every year. We’re in millions of homes now saving billions of kilowatts in energy.
Today, our whole belief is that we should design these products for consumers: make them beautiful, give them a life of their own and ensure they have upgradeable software. These products will stay in your home for 10 years. That’s the difference between this and many other products that often go to your tech ‘graveyard’ of stuff that was interesting on paper but forgotten after six months.
“We have built three categories which are all still connected to the idea of a home that cares about the people inside it.”
How much of the role of educating customers is up to you as a brand and how much is down to the retailers themselves?
The internet really helps educate consumers to get them to understand what the smart home is all about. We feel we have a responsibility to first educate the professionals (i.e. the people in the shops selling the products) but also the user online and to work with our partners to relay information.
In the store it’s a continuation of that. You take the information learnt online and then go into the store to see what they’re like and physically touch them. From there you can have different conversations with experts.
Are the physical store demo setups more successful?
We’ve tried different types of execution on the merchandising sides. For example, one thing that has been really successful with John Lewis is the ‘shop in a shop’ – the smarthome set up inside the shop. That is working well because it also assists the sales people in explaining the tech.
You can’t always rely on having someone who knows about the products, or there might be someone who’s only been trained on one or two products. So the display should tell the story. In many places we decided to put live demo units in and we’ve seen a relationship created between the products and the consumer. It’s bizarre, but when people are touching a piece of stainless steel in the store they get what it’s about. These set ups are great.
Three or four years ago, you’d find the security cameras in a store next to the router section which is next to the PC section. These days it’s completely different. Go into a Dixons store and you will now see an entire smart home category. You look at John Lewis and it’s the same. Same story for Screwfix which is an entirely different type of shop. If you take the professional distribution Channel it’s exactly the same.
These categories have come from non-existence in two or three years. They all need to be amplified by the online messaging because that’s where we can tell the full story about what the product is all about. From there, people can go into the shop and get a hold of the product. We spend a lot of time at Nest focussing on the end-to-end experience and making sure it’s really good. Maybe that’s a part of our Apple origins. Everything from the unboxing to the welcome email. It’s all a part of the customer journey.
Nest’s main business is selling to consumers, but are you finding many building developers or contractors going to Nest to for new builds?
It’s starting. It’s back to the multichannel strategy. In the UK we have started doing pilot homes because some building developers are questioning if it could work?
The reality is that consumers really, really get it. You get them inside the home and you can control your home from your phone. So that was about a year ago and now we’re starting to see homes that come with Nest fitted. It’s not everywhere, but we’re seeing testing and trials where it’s really working. Consumers are super engaged with it. They aren’t going to buy a home because of it, but it’s like air conditioning in a car. Why wouldn’t you want it?