NEST: our real-life J.A.R.V.I.S?… Perhaps, but not quite yet.
Advanced technologies are bridging the gap between aspiration and reality. Just as J.A.R.V.I.S helped Tony Stark become the Iron Man; NEST’s digitalization and machine learning capabilities are bringing us one step closer to our version of that reality.
Popular culture has allowed us to fantasize, filling our imagination with high tech wizardry that since forever seemed farfetched…until today. The ideal combination of technological evolution and bold leaders with big dreams, has enabled innovative products to seep through the fantasy world of innovation and machine learning. Google owned Nest Labs is one of several companies spearheading the transformation towards a new world of myriad possibilities through data gathering and analysis.
Some may wonder however how Nest’s thermostat can transform, capture and create value that makes it worth the $3.2 billion dollars that Google paid through its acquisition of the company in 2014?[1].
By simply selling its product, Nest is capturing important data to self-learn the human habits related to heating and cooling decisions a homeowner makes in order to maintain the owners comfort with little to no programming. Through this process it creates Big Data about the operation of heating, ventilation and air conditioning (HVAC) systems and human occupancy patterns[2].
This invaluable information helps achieve its primary objective of reducing homeowner energy consumption costs (cooling more when needed and heating more when needed) as well as providing utility suppliers with information relating to overall power demand requirements; something that manually controlled thermostats were unable to achieve. In addition, it allows utility suppliers to adjust and improve power supply network in order to meet environmental and local power products goals[3].
This simple change in homes (if scalable) can produce huge amounts of saving for the power utility sector. By developing a digital record of performance, Nest is able to activate the systems remotely, and can be used to identify and execute optimal operations for the whole network of homes, smoothing out peak loads and reducing demand.
The data gathered and benefits associated with that data enables Nest to do more as Google expands its capabilities and builds a bigger networks of users. Only now with the addition of other “Works with Nest”[4] products such as smoke monitors and cameras, Google is enabling Nest to become a full in-house smart monitoring system. The big data that is gathered in the cloud can help homeowners, companies and even governments make optimal decision that has the potential to be monetized to generate big value.
With big opportunities come even bigger challenges.
By looking at Nest we may be able to understand the challenges and limitations to digitalization that some of the hottest sections of the tech world faces today. Skeptics argue that Nest co-founder and CEO Tony Fadell, exemplifies how an Apple-like attention to product, and a focus on building a platform instead of ecosystem can hinder the potential of a promising vision. From a costumer point of view several problems exist which I will briefly outline below beginning with the modern day Maslow’ Hierarchy of needs.
Today, no one knows what to do with a smart home or why they want one. While we now have Wi-Fi on the updated hierarchy of needs, there isn’t a smart home. So our first problem is getting consumers to believe in and adopt the concept of connected smart home devices. Other issues for homeowners include price, installation complexity and technological/ development lags. Today, it is difficult to convince a customer to purchase a “smart” lock that costs 3x+ of “dumb” lock that still has connectivity issues and is not completely compatible with other expensive smart devices and one that requires constant upgrades with technological improvements[6].
The more pressing challenges related to digitalization are those that technology companies such as Nest face. These challenges relate to accommodating the great diversity of devices that varying in both uses and sophistication. Collaborating with other companies to establishing standards flexible enough (from a compatibility perspective) to embrace all devices is proving to be a very complicated task.
The future of companies like Nest depend on their ability to build the right ecosystem and innovate and connect devices at the right pace. Today, our generation is unable to predict how quickly and where these technological breakthroughs may lead, thus creating an extra layer of ambiguity for both consumers, developers and investors. Despite the challenges, I believe in the opportunity that digitalization and innovation bring and look forward to a future where Big Data and technology are used to solve pressing issues and hope to engage in the lifestyle transformation that awaits us.
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[1] Wohlsen, Marcus. “What Google Really Gets Out of Buying Nest for $3.2 Billion.” Wired.com. January 1, 2014. Accessed November 13, 2016.
[2] “Central Heating Ventilation and Air-Conditioning (HVAC) Systems.” Consumer Energy Center – Central Heating Ventilation and Air-Conditioning (HVAC) Systems. Accessed November 16, 2016.
[3] “Digitization Lessons from Google’s Nest.” BIG DATA TO BIG PROFITS. October 6, 2016. Accessed November 16, 2016.
[4] Lacoma, Tyler. “All Devices and Apps That Work with Google Nest.” Digital Trends. June 04, 2016. Accessed November 16, 2016.
[5] “The Updated & Modern Version of Maslow’s Hierarchy Of Needs.” Management Training Courses & Management Development Programs | MTD. N.p., 27 Nov. 2013. Web. 17 Nov. 2016.
[6] Higginbotham, Stacey. “One Day Our Homes Will Be Smart, but We Have a Long Way to Go. Here’s How We’ll Get There.” Gigaom. September 28, 2014. Accessed November 17, 2016.
Very interesting article on the future opportunities of Nest, now that Google is at the helm. As a homeowner (x2), I am particularly interested in the idea of digitizing my home for improving energy efficiencies and reducing security risks. From personal experience in pricing and attempting to piece together a system for a home, their is no clear winner in the home automations landscape for the cost conscious consumer that is interested in only components of a system. While there are systems available to automate an entire home (oftentimes costing upwards of $5000) that do everything from adjust blinds to monitor water quality from a smartphone, most homeowners do not need that level of automation. There are two partnerships that companies such as Nest should pursue. First, they need to partner with current traditional security systems, as these companies have existing customer bases and the installation expertise. The marketing could focus on upselling the product to any existing system. Secondly, I would push hard to partner with internet providers. Most high-speed internet providers, in addition to providing the internet data, also provide modems and other ancillary products. Adding the capacity of a more fully integrated home, with cameras, thermostats, and other components provides a natural path into the homes of more customers.
Great post, RM. That updated hierarchy of needs is becoming truer and truer. For over 30 years, the federal government has subsidized landlines for low-income people as essential “lifeline” communications service. It was just earlier this year, though, that the FCC finally added mobile voice and broadband service to the lifeline program.[1]
Following Greg’s point, I wonder what types of partnerships could help Nest get over some of the adoption programs you discuss. Working with traditional security systems is certainly one of them. Partnering with other home service providers to reduce their costs and improve service could be another path in—and a potential revenue source to take some of the cost burden off homeowners. Power companies are an obvious option here—smarter homes generally mean lower energy consumption—as are broadband providers, insurance companies, and potentially even retailers like Amazon that want to be as connected to a family’s buying needs as possible, and are also looking for ways to make the delivery process more seamless.
[1] FCC, “Lifeline Program for Low-Income Consumers,” [https://www.fcc.gov/general/lifeline-program-low-income-consumers] accessed November 2016.
Great post RM! I fully agree that consumer adoption is a critical issue for home IoT solutions. Indeed, unlike industrial IoT where upgrading directly translates into efficiency gains and decreased costs, home automation doesn’t solve any existing problems, it just enhances the user experience in ways that aren’t clear to consumers today.
Consumer need to be sold on the value of a smart home before companies like Google can monetize their investments. Companies like Nest should do more communicate their vision for these technologies and how they will transform the user’s lifestyle. As you mention in your post, a smooth consumer experience will also be critical. The first step is streamlined installation – no one wants to spend hours figuring out how to make the new smart lock work with Nest. Nest should figure that out for you. The second thing is device integration – devices should be easy to control from a centralized hub/app and later, ‘talk to each other’ to anticipate user needs. The final thing is security: device interconnection will open many possibilities for all internet stakeholders, including hackers. Google must make sure it has a robust security framework preventing malicious attacks on user devices. Everyone agrees that getting your Facebook account stolen sucks, but getting robbed because someone hacked your smart lock will feel much worse, especially if the attacker used your smart toaster to access the lock.