Navigant Research Blog

Departure of Nest CEO Not as Bleak a Picture as Widely Portrayed

— June 14, 2016

Home Thermostat DialNest has been on an upward trajectory since its launch in 2010, and the company now finds itself at an important juncture with the departure of co-founder and CEO Tony Fadell. It is worth noting how the company’s journey began not long ago when it effectively fueled the stagnant thermostat market with its introduction of the Nest Learning Thermostat. As my colleague Neil Strother puts it, “Before Nest came into being, the thermostat was a pretty basic household device, and Nest set a new standard.” The company became an even bigger player in the thermostat space when it was acquired by Google in 2014 for $3.2 billion, Google’s second largest investment behind its acquisition of Motorola for $12.5 billion in 2012. Simply put, Nest has excelled in the connected home space, becoming what many consider to be the top player and star of the market.

Despite years of success, in recent months Nest has been the subject of a myriad of media stories highlighting technology glitches, internal struggles, and lawsuits. In December 2015, the New York Times covered a software glitch that drained the Nest thermostat’s battery and deactivated the device for an unconfirmed number of users, though the company was able to fix the issue for 99.5% of affected customers. In January 2016, it was reported that the Nest was leaking ZIP codes over Wi-Fi, and while this is not the most sensitive information, it may give consumers reason to be concerned about the security of Internet-connected devices. In May 2016, Honeywell and Nest settled their long-standing patent dispute, which began in 2012 when Honeywell sued Nest Labs, stating the company’s thermostats infringed on seven of Honeywell’s patents related to thermostat technologies.

To top off this wave of negative media coverage is the news of Tony Fadell stepping down from his role as CEO. This decision follows months of reports about internal struggles at Nest with regards to Fadell’s management style, though the official reason given for his departure is simply that it’s time to move on. Alphabet, parent company of Google, reports that Fadell will become an advisor to Alphabet.

Although the current media climate and Fadell’s departure seems to cast a bleak shadow over Nest’s future, the reality is that smart thermostat technology is still evolving, and fast-growing companies in this space (such as Nest) experience bumps along the road. It is important to keep a patient perspective, and take negative coverage with a grain of salt, because despite Nest’s issues, it remains a major player and leader in the smart thermostat market, and is likely to remain so for the foreseeable future.

 

Which Voice to Rule Them All? New Google Device Enters Virtual Home Assistant Fray

— June 3, 2016

Computer and TabletWith Google’s recent announcement of its Home product, a voice-activated virtual assistant for your home to control devices, provide information, and manage energy might be closer than you think. The device will compete directly with Amazon’s popular Echo, and consumers are likely winners.

Home won’t be available until later this year, and its cost has not been revealed, though it’s expect to sell for around $180 to match the Echo’s price point. If the Echo’s history is a guide, I anticipate Home will be a hit with consumers, gaining relatively wide and quick adoption. Amazon has sold an estimated 3 million Echo units since its launch in November 2014.

Home will answer questions and hold two-way conversations in addition to executing tasks like playing music or controlling connected smart home devices, such as a Nest thermostat or LED lights. Essentially, it will do what Amazon’s Echo does.

A Step Forward for Voice Activation

So why is this a big deal? Because Home represents another step toward mass adoption of voice-activated interfaces in homes. Instead of pulling out a smartphone or a tablet, firing up an app and using fingers on a touchscreen to control something in a home, using one’s voice is a more natural and simple process. For instance, while cooking in a kitchen with your hands occupied, calling out to Home or Echo to set a timer is quite convenient, as is commanding a TV to mute itself from across the room as you answer a call. Seemingly small applications like these are the future.

From a utility company perspective, the Home device and other smart home (i.e., Internet of Things [IoT]) products represent a small revolution. Nearly half of utility industry executives say the smart home will revolutionize the industry, according to a survey by public relations firm Antenna. The PR firm does note a separate study about current barriers to adoption among consumers, namely the cost to purchase the equipment and the complexity of installing and configuring smart home systems. Those barriers, however, are likely to fall in the near- to mid-term as production volumes build (thus driving down costs) and competing manufacturers reduce the installation complexities. (For a detailed forecast of residential IoT device shipments and revenue, see Navigant Research’s latest report, Market Data: IoT for Residential Energy Customers.)

No Shortage of Competitors

And don’t count out other prominent companies still on the sidelines in this regard. One is Apple; the masterminds from Cupertino are not to be underestimated, as a former colleague says. “Underestimating Apple in this space or even Siri in this space would be fundamentally wrong,” says Michael Gartenberg, an analyst with iMore.com and a former Apple marketing director. I concur. The other is Microsoft, which has yet to launch a virtual assistant product specifically for the home, but could easily do so with Cortana. There is no shortage of competitors in the space.

Given its influence, Google’s entry into this particular market is likely to be significant, going head-to-head with Amazon. For consumers, the competition should drive prices lower, and a flurry of new applications for both product platforms should be just over the horizon. Voice, it seems, is the new touchscreen for homes.

 

Google and Fiat Chrysler Team Up to Build New Fleet of Self-Driving Minivans

— May 3, 2016

Electric Vehicle 2For the first time since Google began work on developing autonomous vehicle technology 7 years ago, the company now has an official relationship with an existing automaker. The technology giant is teaming up with Fiat Chrysler Automobiles (FCA) to build an expanded test fleet to accumulate more real-world miles. Engineering teams from FCA and Google will be colocated at an undisclosed facility somewhere in southeast Michigan to develop and build vehicles based on the new Pacifica Hybrid minivan.

Until now, Google has largely worked independently on its self-driving car program, purchasing Toyota Priuses and Lexus RX450s and installing the sensors and computing hardware necessary to have the vehicles drive themselves. More recently, Google contracted with Michigan-based Roush Engineering to build dozens of dedicated self-driving pod vehicles, but these were strictly low-speed electric machines limited to a maximum speed of 25 mph.

Approaching the Automakers

Several automakers have acknowledged off the record that they had been approached by Google over the past several years, but the business conditions set by Google were unacceptable. Essentially, Google wanted a company to build cars and turn them over for installation of a black box control system. Since it’s generally acknowledged now that automakers will be liable for the reliability and performance of autonomous vehicles, no company was willing to cede that much control to Google.

The hiring of former Ford and Hyundai executive John Krafcik as CEO of the Google Self-Driving Cars division last fall likely led to a change in attitude in Mountain View about how to collaborate with incumbent automakers. There had been speculation in late 2015 that Google would announce a partnership with Ford as early as the 2016 CES in Las Vegas last January, but the show came and went without an announcement.

For more than a year, FCA CEO Sergio Marchionne has been looking for a partner to merge with. Marchionne made an especially hard push for a merger with General Motors, but was repeatedly turned away. More recently, Marchionne has publicly stated that FCA would make an excellent partner to manufacture vehicles for Apple should the electronics company decide to get into the automotive business. Given FCA’s limited resources relative to larger rivals in Detroit, Europe, and Asia, a partnership with Google is likely the company’s best course of action right now.

FCA Developments

Navigant Research’s Leaderboard Report: Autonomous Vehicle OEMs from last year ranked FCA 14th among 18 OEMs evaluated for their work on autonomous vehicles. FCA has never publicly discussed or demonstrated an autonomous vehicle program, although it has been surprisingly aggressive in deploying advanced driver assistance systems to its model lineup in the past 3 years. Back in the mid-1990s, Chrysler also developed robotic driving systems that could be used to control vehicles running on a particularly harsh durability test track at its Chelsea, Michigan proving ground. Human drivers could only withstand short periods of driving on the course because of the pounding and it was hoped that an autonomous system could be used to conduct accelerated durability tests. The system was not sufficiently reliable at that time and was eventually abandoned.

The new Chrysler Pacifica Hybrid was unveiled in January 2016 at the North American International Auto Show in Detroit and features FCA’s first in-house developed hybrid drivetrain. The plug-in hybrid features an 18 kWh lithium ion battery pack manufactured by LG Chem in Holland, Michigan and is capable of an approximately 30-mile all-electric driving range.

FCA and Google have not said when the new autonomous minivans will be ready for testing, but the 100 vehicle fleet will enable the two companies to significantly expand their collection of real-world data needed to make autonomous systems more robust.

 

Google Weaving an IoT Web

— June 12, 2015

Recent announcements by Google that it is developing the Weave communication protocol are expected to make waves in the building automation ecosystem, possibly to the chagrin of incumbent equipment manufactures for commercial and home equipment. Weave is centered on Brillo, the Google-developed lightweight operating system, essentially a minimalist version of Android. With Weave, Google may be trying to quickly capture the mind-share of end consumers who want and answer to the question, “how can I quickly connect all of my home systems?”

With Weave, all Brillo devices (and Nest) are self-discoverable, making them, in theory, plug-and-play. A consumer could connect the new wireless door lock with the wireless lights, all through an Android phone. The proposed ease of connecting devices was introduced in Navigant Research’s recent Home Energy Management report, as being a challenge for consumers. This integration is contingent on the wireless protocols being interoperable, as mentioned in a recent blog.

Feeling Threatened?

For equipment manufacturers that sell into the commercial markets, Weave poses a threat in two ways. First, this is yet another communication protocol to incorporate into equipment, adding a step to the integration. On the commercial side, integration firms have been stepping up to manage that issue. Weave is not the first extensible system to be developed with an easy user interface (e.g., Android) in mind (see Apple’s Homekit). Weave’s approach is not anchored on iOS, of course, and is therefore more open.

More significantly, the entrance of Google and Weave are expected to force the small and medium commercial market suppliers into a quandary. The small and medium commercial market is vast, and is in need of energy and cost-saving solutions.  These customers do not have the funds to invest in large solutions, and in some ways are like residential consumers; HVAC does not keep them up at night. In this light, do original equipment manufacturers (OEMs) keep selling single end-to-end building automation system solutions, focusing on the value of a single integrated system, or do they appeal to the ease of integration with a solution like Weave? Most small or medium-sized commercial building owners or tenants have heard of Nest. But how many have heard of BACnet or LonTalk?

During a recent Lightfair panel discussing the promise of convergence of the Internet of Things  (IoT) and automated building controls, it was reiterated that IoT-based building integration solutions exist, and are being deployed. The linchpin in wide-scale deployment will be people wanting easy solutions. Weave is certainly going to push the adoption wave; it will be interesting to see how integration solution providers and OEMs respond.

 

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