Nest

Nest started from a pain people had stopped noticing: thermostats nobody could program. Heating and cooling was about 50% of the energy bill, yet programmable thermostats were rarely used because programming one was as arcane as a VCR. People hated the interface and just paid.

Tony Fadell says old pains like this last because products evolved but never revolutionized, and pains usually come from the limits of the technology of the time. Quote: "I always start from pain."

Lenny's Podcast▶ 26:27

AI that learned schedules let a $249 thermostat pay for itself. Nest used AI to learn when people were home or away. It cost $249, five to six times more than rivals, but was pitched as saving $800 to $1,200 a year so it could pay for itself within a year or two.

AI was a founding piece of Nest in 2010, though far smaller than today's LLMs. In 2011 "AI thermostat" would have scared people, so it was sold as a learning thermostat.

Lenny's Podcast▶ 26:27

Nest reinvented installation and purchase, not just the device. Nest changed how the thermostat was installed and bought, selling through installers instead of Best Buy. Fadell treats the product as one piece of a system that must be designed from the start, like the iPod with iTunes or the iPhone with the App Store.

He argues marketing, sales, distribution and messaging must be planned up front because customers only see the product through that lens, and back-calculating them later fails.

Lenny's Podcast▶ 43:30

Fadell honed the Nest pitch by telling it to outsiders repeatedly. Before Nest launched, he told the story over and over to smart friends outside the project, sharpening it until it resonated, as Steve Jobs did daily for 2.5 years before the iPhone.

The rule is to lead with why it matters rather than what it does, since the what only speaks to other geeks. He also recommends writing the press release first, which limits a product to three or four key features.

Lenny's Podcast▶ 1:01:48

Nest needed several product generations before the business worked. It took several thermostat generations and two smoke alarm generations to make Nest work as a business. Fadell's sequence: make the product, fix it with customer feedback, then fix the margins and volume.

He says to stay with an idea unless something is fundamentally broken. Quote: "You make the product, you fix the product and then you fix the business."

Lenny's Podcast▶ 31:07

Nest's smoke alarm led its category, then died from Google's neglect. Fadell calls the smoke alarm among the toughest products his team made, because the constraints are extreme. It was the best in its space for a decade, yet Google treated Nest as a stepchild, never improved or replaced it, and discontinued it.

Its Heads Up feature warned that it was about to make a loud noise so a test wouldn't startle people. He cites a cultural and probably a business mismatch with Google.

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Nest's sensor-filled home was an early bet on home AI. Fadell says sensors placed around a home give an AI assistant the context to work anywhere in it, tracking comings and goings without invading privacy. The vision took about 15 years to arrive, so Nest was just too early.

He sees room for a "Nest 2.0" and says he is receiving business plans for one.

Lenny's Podcast