{"id":20725,"date":"2016-11-18T18:01:22","date_gmt":"2016-11-18T23:01:22","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\/"},"modified":"2016-11-19T09:18:46","modified_gmt":"2016-11-19T14:18:46","slug":"thrown-from-the-nest-nest-labs-challenges-and-opportunities","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\/","title":{"rendered":"Thrown from the nest: Nest Lab\u2019s Challenges and Opportunities"},"content":{"rendered":"<p>What do a doorbell, a thermostat, an oven, and a video camera all have in common? Each of these seemingly unrelated household items are all a part of Nest Labs\u2019 pursuit to unite the \u2018connected home\u2019 through digital transformation. The company, started in 2010 by iconic Apple iPod designer Tony Fadell, was founded in pursuit of shaping the Smart Home market that is projected to be worth over $120BN by 2022. [1]<\/p>\n<p><a href=\"https:\/\/youtu.be\/pghUO8C6Onk\">https:\/\/youtu.be\/pghUO8C6Onk<\/a><\/p>\n<p><strong><em>Nest Labs\u2019 business model creates and captures value for multiple groups of stakeholders<\/em><\/strong><\/p>\n<p>Best known for its iconic thermostat, Nest has built a successful two sided platform business model that uses data to create and capture value for three groups of stakeholders: utility companies, consumers, and shareholders of the company itself.<\/p>\n<ul>\n<li><strong>Consumers:<\/strong> Nest creates value first and foremost for its consumers through savings in heating and cooling the home. It does this by learning the daily habits of the owner, ensuring that a room is at the desired temperature when someone is home, but adjusting temperature when unoccupied, thereby reducing the amount of energy consumed. In addition to lowering energy usage, Nest Thermostat also connects to energy companies\u2019 networks to optimize energy consumed at off-peak hours throughout the day when electricity rates are lower than at peak hours. [2]<\/li>\n<li><strong>Utility Companies:<\/strong> Critically, Nest provides substantial value to energy companies in the form of data. Providing instantaneous, aggregated energy usage across thousands of households enables utility companies to improve their forecasts and therefore cost efficiency. [3]<\/li>\n<li><strong>Company: <\/strong>Lastly, Nest creates value for itself and its investors through selling its Smart Home consumer products, namely its thermostat, which is between two and three times as expensive as a traditional thermostat [4]. It also has established a secondary revenue stream from selling the energy consumption data that it is able to aggregate across its devices.<\/li>\n<\/ul>\n<p><strong><em>Underwhelming product revenues have missed acquisition sales targets<\/em><\/strong><\/p>\n<p>Despite the fact that smart meters (the category in which Nest Thermostat is included) held the largest share of the Smart Home market in 2015 [5], and despite support from city governments who have gone so far as to enact laws that require the installation of internet connected thermostats in any new residential construction [6], Nest Labs has struggled to meet the hardware sales targets set by parent company Google as a part of its $3.2BN acquisition of Nest in 2014 [7]. Analysts and Google insiders have criticized the company for not producing more revenue-generating hardware products since the acquisition and as such, have applied pressure to produce another blockbuster product innovation.<\/p>\n<p><strong><em>Untapped opportunity to shift primary focus from hardware sales to data solutions<\/em><\/strong><\/p>\n<p>Rather than following on analyst and holding company expectations to sell more products, I would argue that there is another path for Nest Labs to leverage the strengths of its current business model and create value through digital transformation. Instead of doubling down on hardware and trying to win market share in a currently fragmented product market (an area where parent company Google has had a track record that is inconsistent at best [8]), the company could instead focus on data collection and becoming <em>the<\/em> data aggregator for the connected home.<\/p>\n<p>Nest labs is well positioned to take on this role and create data-driven value for consumers and suppliers alike. With its own branded Thermostat, Smoke Detector, and Video Camera products \u2013combined with its dozens of \u201cworks with Nest\u201d partner products [9], Nest Labs has a head start on most competitors in the industry.<\/p>\n<p><strong><em>Product partnerships and data aggregation as the pathway to maximizing value creation through digital transformation<\/em><\/strong><\/p>\n<p>Focusing primarily on partnerships and leveraging parent company Google\u2019s strength of data collection and trend analysis, Nest Labs has the potential to expand beyond solely providing utility companies with user data on energy consumption. Revenue generating data and analytics opportunities from the Nest platform are near limitless. Examples for how Nest could commercialize the data that it would connect from its network of \u201cworks with Nest\u201d in-home devices include:<\/p>\n<ul>\n<li>Selling GE data on frequency and types of repairs when a refrigerator or oven breaks down<\/li>\n<li>Aggregating and sharing burglary data with local police through its Nest Cam and Yale Linus\u2122 lock<\/li>\n<li>Commercializing data on consumer water consumption through its partnerships with Heatworks, Smart Garden Hub, and Rachio smart sprinkler products<\/li>\n<\/ul>\n<p>In prioritizing partnerships over products and focusing on growing the size of the \u201cWorks with Nest\u201d network, the company will be able to disproportionately grow its network effect: increasing the number of product manufacturers who want to work with Nest Labs, which will in turn make the Nest platform more attractive to more consumers, increasing the value of the data that Nest Labs is able to provide back to product manufacturers. This is the true opportunity for Nest to unlock growth through digital transformation.<\/p>\n<p>&nbsp;<\/p>\n<p>Word Count: 799<\/p>\n<p>&nbsp;<\/p>\n<ol>\n<li>&#8220;M2 PressWire.&#8221; Smart Home Market worth. N.p., n.d. Web. &lt;http:\/\/www.marketsandmarkets.com\/PressReleases\/global-smart-homes-market.asp&gt;.<\/li>\n<li>Iansiti, Marco, and Karim R. Lakhani. &#8220;Digital Ubiquity: How Connections, Sensors, and Data Are Revolutionizing Business.&#8221; 性视界 Business Review, n.d. Web.<\/li>\n<li>ibid<\/li>\n<li>ibid<\/li>\n<li>&#8220;M2 PressWire.&#8221; Smart Home Market worth. N.p., n.d. Web. &lt;http:\/\/www.marketsandmarkets.com\/PressReleases\/global-smart-homes-market.asp&gt;.<\/li>\n<li>Calnan, Christopher. &#8220;Building a New Home? Make Sure the Thermostat Connects to the Internet.&#8221;\u00a0<em>Austin Business Journal<\/em>. N.p., n.d. Web.<\/li>\n<li>&#8220;M2 PressWire.&#8221; Smart Home Market worth. N.p., n.d. Web. &lt;http:\/\/www.marketsandmarkets.com\/PressReleases\/global-smart-homes-market.asp&gt;.<\/li>\n<li>Wakabayashi, Daisuke, and Nick Wingfield. &#8220;Google, Lagging Amazon, Races Across the Threshold Into the Home.&#8221; The New York Times. The New York Times, 03 Oct. 2016. Web.<\/li>\n<li>&#8220;Home.&#8221;\u00a0<em>Nest<\/em>. Nest Labs, Inc., n.d. Web. 14 Nov. 2016. &lt;https:\/\/nest.com\/&gt;.<\/li>\n<\/ol>\n<p><em>Original Post: Friday, November 18 \u00a0| Updated with correct sources: Saturday, November 19<\/em><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>After it\u2019s blockbuster $3.2BN acquisition by Google in January 2014, Nest Labs has struggled to meet its hardware revenue targets, but is there a bigger opportunity in the company\u2019s data- enabled business model?<\/p>\n","protected":false},"author":2584,"featured_media":20726,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-20725","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Thrown from the nest: Nest Lab\u2019s Challenges and Opportunities - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Thrown from the nest: Nest Lab\u2019s Challenges and Opportunities - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"After it\u2019s blockbuster $3.2BN acquisition by Google in January 2014, Nest Labs has struggled to meet its hardware revenue targets, but is there a bigger opportunity in the company\u2019s data- enabled business model?\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"article:modified_time\" content=\"2016-11-19T14:18:46+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/NEST-Wallpaper.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1280\" \/>\n\t<meta property=\"og:image:height\" content=\"720\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\\\/\",\"name\":\"Thrown from the nest: Nest Lab\u2019s Challenges and Opportunities - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2016\\\/11\\\/NEST-Wallpaper.jpg\",\"datePublished\":\"2016-11-18T23:01:22+00:00\",\"dateModified\":\"2016-11-19T14:18:46+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2016\\\/11\\\/NEST-Wallpaper.jpg\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2016\\\/11\\\/NEST-Wallpaper.jpg\",\"width\":1280,\"height\":720},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Thrown from the nest: Nest Lab\u2019s Challenges and Opportunities\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Thrown from the nest: Nest Lab\u2019s Challenges and Opportunities - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\/","og_locale":"en_US","og_type":"article","og_title":"Thrown from the nest: Nest Lab\u2019s Challenges and Opportunities - Technology and Operations Management","og_description":"After it\u2019s blockbuster $3.2BN acquisition by Google in January 2014, Nest Labs has struggled to meet its hardware revenue targets, but is there a bigger opportunity in the company\u2019s data- enabled business model?","og_url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\/","og_site_name":"Technology and Operations Management","article_modified_time":"2016-11-19T14:18:46+00:00","og_image":[{"width":1280,"height":720,"url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/NEST-Wallpaper.jpg","type":"image\/jpeg"}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\/","url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\/","name":"Thrown from the nest: Nest Lab\u2019s Challenges and Opportunities - Technology and Operations Management","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website"},"primaryImageOfPage":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\/#primaryimage"},"image":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\/#primaryimage"},"thumbnailUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/NEST-Wallpaper.jpg","datePublished":"2016-11-18T23:01:22+00:00","dateModified":"2016-11-19T14:18:46+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\/#primaryimage","url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/NEST-Wallpaper.jpg","contentUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/NEST-Wallpaper.jpg","width":1280,"height":720},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/thrown-from-the-nest-nest-labs-challenges-and-opportunities\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-rctom\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/"},{"@type":"ListItem","position":3,"name":"Thrown from the nest: Nest Lab\u2019s Challenges and Opportunities"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website","url":"https:\/\/d3.harvard.edu\/platform-rctom\/","name":"Technology and Operations Management","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/20725","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/users\/2584"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/comments?post=20725"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/20725\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media\/20726"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media?parent=20725"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/categories?post=20725"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}