29 minutes | Jan 11th 2018

Episode 12: Honeywell vs. Nest: The Battle for the Smart Thermostat

While Nest wasn’t the first company to offer a smart thermostat, its first product quickly developed rock star status. Nest helped turn the thermostat -- a relatively forgettable device -- into a sexy offering that made consumers excited about other devices that would be offered as part of the smart home. Honeywell, a company that has long dominated the traditional thermostat market, is now going head to head with Nest in selling smart thermostats. In the third episode of a 7-part series on the future of the smart home, Andrew examines how an industry titan is able to maintain its lead in the smart thermostat space and what this means for manufacturers of smart home devices in other verticals. Interviewee Other Leaders Consulted for this episode Episode Excerpt The Birth Of Smart Home Cool In the mid-2000’s, Matt Rogers started as an intern on the engineering team at Apple that worked on the iPod. At the time, Tony Fadell was running the iPod group that Rogers reported into. Rogers went on to work on the iPhone and the iPad, and then, in 2010, in what must have seemed like a crazy move at the time, both Rogers and Fadell left Apple and decided to collaborate on, of all things, a thermostat. They began designing the prototype out of a garage that Rogers rented in Silicon Valley. When Rogers presented the idea of building a smart home to Fadell, even Fadell, who was building his own smart home at the time, told Rogers he thought that smart homes were only for geeks. Eventually, Fadell told Rogers that instead of a whole smart home, he’d like him to focus on a smart thermostat, and they came up with a plan to deliver on one with an interface as friendly as an iPod. This required a team of 100 people, and Fadell and Rogers released the first generation of the Nest device in 2011. Two things seemed revolutionary about the Nest Learning Thermostat. First, I'm guessing that, before Nest, the overwhelming majority of people couldn’t tell you the name of the company that manufactured their thermostats. For people who purchased Nests, the user interface was so enticing that people began to brag about their thermostat. If you’ve ever used a Nest, you’d know that there are no switches or mechanical buttons. There’s just a dial. As you turn the dial, you see different options (which are really menus and sometimes menus within menus). When you press on the dial, it selects the menu you want and then you’re presented with more choices you can see by turning the dial. Again, you press to choose air conditioning or press to choose the temperature you want. Strange as it may sound, using Nest is fun. Then, there was the second innovation. You could control your Nest from an app on your iPhone or Android device. I have two Nest thermostats in my home. There are many times when I’m lying in bed and too lazy to get up and change the temperature. So I take out my phone or iPad and change the temperature from where I am. Yes, it’s an exercise in extraordinary laziness. In subsequent Nest models, they incorporated a motion sensor to detect when you were in a room and then adjusted the HVAC to the temperature you liked. If the device didn’t recognize any motion, then the HVAC was turned off to actually save you money on your energy bill. The experience was so revolutionary at the time Nest was released in 2011 that sales went through the roof. Only a month after its release, it was “sold out” in Nest’s online store. Three years later, Google bought the company for $3.2 billion. The Smart Thermostat Market It turns out that thermostats are big business and serve as a gateway to much more functionality within the home. If a thermostat possesses a motion sensor, it might inform other decisions about how the room operates. Motion at a certain time of day might trigger a decision about what lights to turn on or whether the blinds should be ...