Nest CEO Tony Fadell on how to design products people love

Tony Fadell oversaw the launch of the original iPod for Apple, and here he tells us who he’s brought the same principles of experience design to cool and useful products for the home at his much lauded current company, Nest – which was acquired by Google for £2billion in January and launched its first product in the UK in April. He also discusses how to sell up without selling out, and how to manage a brand when the worst happens.

Nest is the company who made thermostats and smoke detectors cool. While it’s easy to be impressed by the technology within the Nest and Nest Protect, it’s their design that’s won most acclaim. The includes their aesthetics but its mainly their innovative features and ease of use – channelled through smartphone apps – that have gained them cheerleading fans in both the press and the public. And arguably it's this focus on design – as well as their public profile and the way their products neatly fit into the much-hyped category of The Internet of Things  – that has lead to them to being acquired by Google for $3.2 billion (around £2billion).

The Nest was the first thermostat system that hooked into your Wi-Fi network, and allowed you to control your heating (and air-conditioning, a big deal for Americans) from iPhone and Android apps – even when you’re not at home.

The core principles of the Nest are convenience and security. You can tell your heating to kick in earlier if you leave work early or later if you’ve popped for a swift pint or a burger at Meat Mission. It will tell your heating’s not working – though as yet it won’t tell you if it’s, for example, flooding over your wooden kitchen flooring causing many hundreds of pounds of damage (*sob*).

While here in the UK we may be more familiar with this concept from the Hive – which British Gas is selling to its customers and promoting heavily through TV, print and digital ad campaigns – the Nest got there first. You can buy it – through the likes of John Lewis – and install it yourself, and Nest has a deal with NPower to have it installed when switching to the energy supplier

The Nest Protect applied this principle to a smoke alarm, which would contact your phone if it detected smoke or carbon monoxide. However Nest discovered a flaw with its Wave function where you can wave underneath it to turn it off – a flaw that could lead to it turning itself off during a fire – and stopped selling the product. The company expects to start selling a modified version soon.

Despite this though, both products have been lauded by the tech, style and mainstream press – and have been nominated for awards including the Design Museum's Designs of the Year 2014. These plaudits are rarely for the devices themselves but for the service they provide, as the primary point of interaction with them is through your smartphone and the primary response you get from them is a feeling of control, comfort and/or security, rather than being impressed by the direct actions of the product.

Nest's approach to experience design

This focus on experience design – combining product, digital and service design in a cohesive whole – is something Tony says learned at his time at Apple, where he worked from 2001 to 2008.

Sitting in a Covent Garden hotel library in advance of his appearance at the Hay Festival, Tony (above) would clearly rather talk about his current company than his time at Apple – something that often dominates interviews despite him leaving six years ago. He’s used to being questioned about his time in Cupertino and answers with a humorous note of mock resignation – but he returns to being serious when discussing what working for Apple taught him about creating products that users love and will actively evangelise about to their friends, family and followers.

"I had already learned how to do great product design at other places,” he says. "What I hadn’t learned enough about was experience design – how you put care and attention into packaging, into customer support experience, into the retail experience. All of those things are key to a consumer going through the emotional journey of making a purchase, then a repeat purchase, and telling their friends about it.”

“I coined a phrase [for what drives this journey]: emotional momentum.”

Driving this momentum requires consideration of every facet of a way a customer or potential customer experiences the product. Apple’s elegantly designed packaging may seem an odd thing for a company to put effort into when customers don’t see it before purchase, but it helps validate the purchasing decision in a customer’s mind – and Tony notes it lead to users creating ‘unboxing’ videos on YouTube, which promoted Apple’s brand further.

Apple’s focus on experience also fundamentally changed the way people talk about technology products.

“It’s not speeds and feeds [anymore],” he says. “It was all about CPU speed and L2 cache and how much RAM you have on your motherboard. You still see it sometimes on cellphones, but I think it’s on the way out. Screen size [matters] but how many processors – quad core, octacore – no one cares.”

Apple wasn’t the first company to master experience design – Tony cites Virgin Airways almost as an influence on the Apple's approach – and it took the departure and return of their CEO Steve Jobs to change the way it designed, developed and branded its products.

"When Steve was there it was all about product,” says Tony. "Then Steve was gone and then the product was on the wane. Virgin shows up and shows [us how to do] experience design – because they never really had a product, it was all about service.

When Steve came back, Tony says the first task for the company was to "fix the product”, but then it became a question of how to create something that was more than just a piece of hardware to turn something as unsexy as a computer or a phone into something people will rave about.

Making the boring sexy

This is something Nest has managed to achieve with a thermostat and a smoke detector, so I asked Tony if he was surprised about how much buzz their products had received for in an area that’s generally considered even less sexy than phones were before the iPhone.

“It was clear nobody cared,” he says. “It was clear by the products that were [in the market already]. But everyone uses energy – and heating and cooling is by far in every part of the world the largest consumer of energy in a residence.

“Deep inside, I always thought that there was a better way,” he says, "I knew that if we applied the right principles at least there would be a nice market for a certain, a certain set of design aficionados and people who cared about technology – but my hunch was that the smartphone generation is going to yearn for that same fluid, easy–to-use experience that they had been accustomed to in their hand at all times [from their heating and air-conditioning systems).”

Tony believes that a large percentage of the population are going to want to – and expect to – a large proportion of the things they come into contact with from their smartphones or tablets.

"Everything is going to be governed through that interface,” he says. I don’t care whether it’s this big or that big or whatever.  This is your personal device. It’s going to be the extension of you and you’re going to control everything.”

As a wider point, the biggest conceptual change for those designing products and services in the home that work with smartphones – as opposed to with computers or set-top boxes or other control mechanisms – is that phones are personal and not shared by the people that live in the house.

“The home is a collective of everyone who lives in that home and who may visit that home and that home has to serve all of them,” he muses. “It can’t be so personalised that you don’t know what that button does because it’s only programmed for [one person]. It needs to work for everybody.”

Tony refers to when Apple was working on how iTunes and the iPod would coexist – deciding what features would go on the latter and what would exist only on the former.

“It was about having a quintessential consumption experience [on the iPod] – making it incredibly easy to use and just enjoy as much music as you want. On the iTunes side, it was all about configuring, managing, and purchasing media.”

Products like Nest – and also devices such as Google’s Chromecast streaming media dongle – take this a step further, separating control completely from the product. Here the reality isn’t much different in concept from the line of remote controls you have for your TV, Sky+ box or whatever – but the level and fluidity of personalised control is much greater through a touchscreen interface with feedback than with a dumb set of buttons.

For us in the UK, one of the key differences between the Nest – though not the Nest Protect – and most of what we quaintly used to call ‘home electronics’ is that it’s not a product that most of us would install ourselves, we’d have it installed by an engineer along with a new boiler or by our energy supplier. In the US though, 90 per cent of Nests are home-installed – and this was one of the reasons the company has designed the product and branded the company as it has, as it has a direct influence on consumer choice.

Tony says that his team asked themselves, "'Why are thermostats and all of these different products around us in our home designed the way they are?' They don’t seem like they’re designed for the person living in the home which they weren’t. They were designed for the installer.”

“On the other side, the consumer didn’t even know they had any choice. So [we decided to go] speak directly to the consumer, go where the consumer shops, [and] educate them – just like we would with how they purchase a TV or smartphone or computer.”

How Nest had to be different for the UK

Products designed for the American home sometimes have usability problems for owners in the UK, often because the rooms in our houses are smaller – something some buyers of Microsoft’s Kinect found frustrating – or because of different regulations or conventions. Nest had to do much more than just swapping out Farenheit in its marketing materials for Celsius, delaying introducing its main product into the UK until it could create another box called the ‘Heat Link’ to work with the radiator-based heating systems most of us have (as we don’t usually need cooling too), and allow for the fact that only 40% of homes have thermostats.

“You have to adapt the product,” says Tony. "Like this [UK model’s Heat Link. We didn’t have to do that in the US. Going into each market – really understanding families, what they use and what they don’t use – is really important. Understanding how to market and communicate our product to those users, that’s going to take a lot of time.

"We’re speeding up because we have more teams and we have more people who can do the research faster – but it doesn’t mean necessarily you can just quickly modify the product and it becomes right for them market.”

This meant Nest arrived in the UK not as a market leader, but behind the Hive thermostat that’s been heavily marketed by British Gas.

"I’m not worried about going into a market where there are other competitors,” says Tony. "I saw this with the iPod. I can’t tell you how many iPod killers I saw and they ended up on the rocks because they didn’t do the real thing. They just tried to perfume some old pig. And they all failed.”

In many ways, Tony says he likes the idea of being the underdog, as it discourages complacency.

“It’s not often you find the number one brand in anything being the absolute best at it, because they’re not challenged.

"I like the number two, the number three, who are hungry and want to get to number one because they’re thinking about it very differently.

Perhaps remembering that he’s now owned by Google and has worked for Apple – two clear market leaders – Tony says that “sometimes there are number ones that are absolutely amazing – so don’t get me wrong – but, on a whole, most of the people who’ve been on top for decade after decade, they usually get a little bit soft around the edges and they’re not as hungry anymore."

How to deal with a problem product

Nest’s development in the US hasn’t gone completely to plan. Earlier this year, the company had to take its Nest Protect smoke/CO detector (above) off the market and get current owners to apply a fix when a function designed to make it easier to use turned out to be able to turn off the device during a fire.

Tony says that the particular circumstances that would lead to this are extremely unlikely and the company has only seen this in their lab during a “contrived” setup – there have been no reports of it happening by users – but it was essential for the company to be open about the problem and act quickly to address it.

“We didn’t want to be like GM where they spent 15 years covering stuff up,” says Tony, "and then finally it comes to light and [it turns out] they put all these people in danger.”

Nest's choice to stop selling the product in the face of a problem that it could have kept secret isn’t just the right decision morally, it’s also good business practice for a company that wants to have long term future – and actually enhanced the public’s perception of the brand.

“Given that we’re a nascent brand, if we didn’t do what we did and something happened because of it – because we were trying to cover it up – we could have killed the company just overnight,” says Tony. “[We decided that] "The best thing to do is pause, assess what’s going on and then – when we really understand [the problem] – bring it back to the market. And only a couple weeks after, people were more bullish on the brand than ever because we did the right thing.”

Luck was also on Nest’s side, as the emergence of the GM recall made the company’s transparency even more of an asset to its brand – enhancing it more than than the product’s issues were detracting from it. This led, Tony says, to calls from consumers and fire safety professionals for the company to reintroduce the product – which further contributed to the brand.

“Fire officials [said], 'this is a great product. You need to get it back on the market'. We had consumer stories where their lives were saved or property was spared and they said ‘bring it back on the market’."

Before Nest could re-release the Nest Protect, further testing was necessary. Tony says that Nest created three times the number of test cases – and expects to announce when a modified version of the Protect will be on sale “in just a few weeks”.

However, he doesn’t see the problems with Nest as a failure on the part of his designers. "I say to the team, 'Look, we’re all allowed mistakes – just don’t do it a second time'. So, let’s learn from it."

Nest’s transparency and its respect for its customers was called into question when it was acquired by Google in January for £2billion (more than the $1.8billion Apple has just paid for Beats). Deserved or not, Google has a reputation for harvesting and hoarding users data, and some customers and commentators were concerned about whether data from the Nest and Nest Protect would be recorded and passed to Google – such as when individual people were at home or how their boiler was performing. Some suspected they would start seeing takeaway ads when the Nest knew they were home, or offers on more efficient boilers if they were consuming a lot of power.

Tony calls such stories "lots of fabrications”, but admits that it’s something his company has to acknowledge to do business when many people have a worldview coloured by Edward Snowden’s leaks about the NSA, pre-conceptions about targeted advertising and stories about the Heartbleed bug – a world where reviews of Dave Eggars satire of Google as wanting to create a worldwide dictatorship, The Circle, call it “scarily accurate”.

“It’s about transparency again,” he says seriously. "For people to trust you, trust your brand, trust your products, you have to have a transparency. Our terms of service are exactly the same as they were before.  We believe a customer’s data is a customer’s data. We don’t sell it – we only use it to improve our products – and we don’t share it.

"With the Google piece of the puzzle, it just stirred that stuff up. Whether it’s real or not, people have a perception that those kinds of things happen at Google. I’ve only been there 12 weeks. I haven’t seen anything like what people are throwing at Google.”

How to get bought out without selling out


Google first discussed purchasing Nest with Tony in 2011, when he first demoed a device prototype to Google co-founder Sergey Brin. Nest turned Google down and took investment from the firm’s Google Ventures fund.

Later, when Nest was looking for its next round of funding, Google came calling again and this time Tony was more receptive, as he says he was aware that Google was developing technology in areas Nest was looking at for the future, and he didn’t want to compete with the data-driven behemoth.

“I said, 'We don’t need the money and I don’t really want to be acquired – but I do know that looking out three to five years from now, a lot of the technologies that I know you’ll be working on [will be] very relevant to what we’re doing. And the last thing I want to do is recreate all of those things, when you might already be competing with us at that point.”

In the shorter terms, being acquired by Google was a way to expand Nest, making it easier to recruit talent and tapping into their worldwide business infrastructure to make it easier to grow into other markets.

“Before when we came to the UK we had to beg, borrow, and steal office space,” he says, “but Google has great offices here – and they have office space around the world.”

Tony describes working on the deal as like a long courtship, taking over four months before even settling on a figure. For him, it wasn’t just about swapping money for ownership, he wanted to ensure that he would still be at the helm of Nest after the acquisition. He didn’t want to be pushed into a different role at Google that the company would see as more ‘core’ to its main business – something I’ve seen time and again across everything from creative agencies to tech startups that have been acquired by much larger companies (and which usually leads to that person leaving the bigger firm as soon as possible, so no-one wins).

“[I asked them] ‘Do you want me to come and run cellphones and tablets for you? That’s what you want me to do? Been there, done that. No, I don’t want to do that. You want me to work on the Chromebook – I’m not doing it.”

Tony recommends that any business owner approached about being acquired takes a hard look at what a new owner will want from you personally – as well as your company – before saying yes, but if you like the sound of the outcome – go fot it.

Note: We may earn a commission when you buy through links on our site, at no extra cost to you. This doesn't affect our editorial independence. Learn more.

Read Next...