Where does the thermostat go after Nest CEO’s exit?

By David Ferris | 06/07/2016 08:24 AM EDT

Tony Fadell, the brash co-creator of the Nest thermostat who modeled himself on Steve Jobs, has left the company he founded, leaving a crowded smart-home energy landscape without a clear direction.

Tony Fadell, the brash co-creator of the Nest thermostat who modeled himself on Steve Jobs, has left the company he founded, leaving a crowded smart-home energy landscape without a clear direction.

In 2011, when Fadell and a fellow alumnus of Apple Inc. started Nest, the world’s supply of thermostats was mostly inconspicuous beige rectangles. The term "home energy management" meant something to only the most hardcore of energy nerds.

Five years later, most thermostat makers have followed in Nest’s footsteps and sell sleek wall-mounted gadgets that can be controlled from a smartphone. Dozens of companies are trying (most of them unsuccessfully) to do what Nest did: draw millions of people into conserving energy through sexy technology.


"Before Nest came into being, the thermostat was a pretty basic household device, and Nest set a new standard," said Neil Strother, a smart-home energy analyst for Navigant Research. "High marks to Tony."

Nest’s thermostat is often credited with being the first viable entrant into the "smart home" category. That area is now eagerly being explored by a universe of companies, from Apple to big-box department stores to every big purveyor of products from dishwashers to door locks.

Today’s home-energy landscape includes LEDs that change color with a swipe on your screen, as well as a host of companies that are using the data from smart meters to make the interaction between the consumer and the utility less like dental work and more convenient and fun.

Yet none has caught users’ imaginations the way the Nest thermostat did.

And it is unclear whether Nest itself has other tricks up its sleeve. Nest’s last original product, a souped-up smoke alarm, debuted in 2013.

Doubts about a darling

On Friday, Fadell announced his departure from Nest and named his successor, Marwan Fawaz, a former Motorola executive with lots of experience but not the kind of resume that suggests Nest will seek to disrupt new categories.

Fadell, 47, has spent most of the last 15 years being celebrated for his visionary approach to technology. But in the last year, it appears his welcome may have worn thin.

At Apple, Fadell was assigned by founder Jobs to lead the design team of the original iPod, and he participated in teams that built the first generations of iPhones.

Fadell and another Apple refugee, Matt Rogers, founded Nest Labs and unveiled their thermostat in 2011. It had several groundbreaking traits: It was connected to the internet, and it could be controlled from a phone. It observed the habits of its user and automatically adjusted temperatures based on occupancy, which promised energy savings even if its owner ignored it.

But most salient of all, it looked cool. The now-famous design — a brushed-steel oval with a circular display that lights up at the presence of a passerby — led to copycat designs from Honeywell and ecobee (EnergyWire, Sept. 25, 2014).

That cool factor — combined with its energy savings, which Nest says can reach 12 percent on heating bills and 15 percent on cooling — has made the Nest one of the most sought-after devices by utilities offering energy efficiency incentives in homes.

Several utilities contacted for this story declined to comment, saying they offer many thermostats and wanted to avoid the appearance of favoritism.

Two years ago, Nest was acquired by Google for $3.2 billion. But trouble has emerged since Google underwent a transformation last year into a new parent company called Alphabet.

Nest is one unit of Alphabet, and each unit is now expected to meet revenue and sales targets. Reports emerged earlier this year that Nest had failed to meet its goals. At the same time, internal disputes at Nest broke into the open (EnergyWire, April 7).

The company faced an exodus of talent, particularly within Dropcam, a home-security camera company that Nest acquired two years ago for $555 million. Engineers griped that Fadell had failed to deliver on product upgrades. Fadell got into a toxic online argument with Greg Duffy, the founder of Dropcam, who accused Fadell of poor management.

Nest appeared to receive a demotion last month when Alphabet announced its plans to sell Google Home, a gadget to coordinate users’ lives in the home (and compete with the leading entrant in that young category, the Amazon Echo). The device is aligned with Google, rather than the Nest family of products, which until recently was Alphabet’s leading route into the smart home.

Google’s executives announced Fadell’s departure through a brief statement Friday afternoon, a favored announcement time for companies seeking to avoid attention. (Fadell will remain at Alphabet as an adviser.)

At the same time, Fadell announced his departure through a post on Nest’s site. In it, he said he had left a pipeline of products and a two-year plan in place.

"We’ve created a hardware + software + services ecosystem, which is still in the early growth stage and will continue to evolve to move further into the mainstream over the coming years," he wrote.

Fadell took the opportunity of his departure to disclose that he is an adviser or investor in about 100 startups, some of which are related to energy.

On Twitter, he talks up Actev, a maker of electric go-karts for kids, and he is also an investor in Phononic, one of a handful of companies commercializing technology to turn waste heat into electricity.

In an interview with Bloomberg, Fadell defended his record at Nest, pointing to the millions of products he’d sold and the categories he’d created.

Asked if he was a tyrant, he responded: "You can’t make an omelet without breaking eggs. That style may not be for everyone."