What Hardware Startups Can Learn from the Nest Acquisition


If you’re reading this, there is no doubt you have heard about the recent Nest acquisition by Google. Perhaps you are even thinking of starting your own smart home device company if there is to be a vacuum in their unlikely departure from the space.

Many have already said much and more about the what contributed to the success of Nest; a visionary founder, a team of a hundred Apple engineers, and a enormous amount of financing no doubt had something to do with it, but I would like to touch on a few points not discussed elsewhere that you may find useful in your own hardware endeavors.

1) Product First, Platform Second

Many people are hypothesizing that Google acquired Nest, not because they were looking into enter the smoke detector market, but because the company found a way to establish a successful platform within the home.

Nest has succeeded with a thermostat where hundreds of others have failed with gateways, routers, and various networked-like hub devices; from the ancient dinosaurs like X10 to Google’s own Android@Home efforts, most of these technologies fizzled and did not yield traction beyond a niche audience.

In contrast the Nest thermostat incorporates all of the above technology and more but the user experience on the thermostat itself was so polished that you would almost think this was an afterthought because a few engineers were joking around and had some cycles to spare.

If you can nail execution on your first delivery, you set yourself up with a beachhead to ship complementary products that work in concert to delight your customers.

2) Make the Complex, Simple

Take a process everyone perceives as a shlep and reduce it to the point where it is trivially simple.

Nest did a fantastic job with how they market their installation process. Taken by itself, rewiring your home thermostat seems like a daunting task, but their approach of “matching the colored wires” makes it seems no more difficult than an exercise you would find in your toddler’s favorite iPad game.

Likewise, setting a schedule of home and away times on normal thermostat seems about as fun as getting a VCR machine to record a show while you are away. With the Nest it is as simple as tapping a button on your smartphone, and it works from anywhere in the world.

Products, which get rid of shleps, are approachable. Approachable products are valuable products.

Paul Gerhardt

3) Go for Gaps not Walls

In warfare you quickly gain ground in areas of no contest (gaps) and are ground to a halt in areas with strong opposition (walls).

While the giants of the technology industry are fighting over the brains of the household in the media center (Apple TV, Roku, GoogleTV, and Xbox One), Nest went straight for the hearth.

By finding a non-contested base of operations Nest was able to eschew competition and keep shipping. Their next product, the Protect, works as a spoke to their thermostat’s hub. With a profitable “platform topology” now in place and the logistics infrastructure to support it, it is little wonder they were able to stake such an attractive purchase price.

Paul Gerhardt will speak at DLD14. Tune in on the beat of our community on the DLDpulse and find regular updates on the DLD14 programme and speakers here.

Mentioned in this article

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Tony Fadell
CEO & Founder
Palo Alto
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Paul Gerhardt
Mountain View