Innovating by leveraging your core competence


We all have one (or more) installed in our home and it isn’t a product that we think too much about. A thermostat controls the temperature and these days most of them can be programmed. It’s nice to get out of bed in the morning to find a warm and comfortable home so you won’t shiver when you sit down and have your cup of coffee. But during the day and evening most people often override the program to set the temperature manually only to forget to switch the program back on later.

Recognise this story? It probably isn’t because the devices cannot accommodate our needs, all of them have a wide range of functions and programmable features. But paging through a manual to find out how to use it is not very appealing and so nobody makes the effort to learn. And when you have to buy one they all seem the same, ugly boring beige boxes.

So how do you innovate something as common as a thermostat? A startup company in the US is showing how this can be done. Nest was co-founded by Tony Fadell, the man who led the team that gave us the iPod and now turns his attention to a completely different device. But there is a rationale behind his decision to focus on thermostats which comes down to answering 3 key questions:

  1. Is there a need (for a different device)?
  2. Can we offer something that is different and better from what is available?
  3. Is it an attractive business to get into?

You do not need a detailed business case to address these 3 questions, something many companies require their employees to develop once they have an idea. People who recognise that business cases in this stage are usually innacurate or create false expectations focus more on the story behind the idea and how convincing it addresses the above questions. Is it a compelling story? Do you see how you could experiment to learn about the opportunity and reduce risk?

Mr. Fadell story (see the video below) addresses these questions in a simple, sensible way. People like to have nice things in their home that are simple to use, this device controls 50% of your home energy consumption so it is important and there are over 250 million devices installed in the US with an annual consumption of 10 million so it could be worthwhile as a business. Furthermore there is not a lot of differentiation in existing products and with Mr. Fadell’s experience he feels confident that he can create something different that appeals to the consumer rather than contractors.

The Nest thermostat that the team created learns your behavior as you control the temperature manually for a few days, there is no need to programme it yourself. It is equipped with various types types of sensors so it knows when to turn down the heating if you’re not at home and when to turn it back up if you are.

The final design of the Nest shows the team that created it has a deep empathy for the consumer by understanding their behaviors and were able to translate common needs into a thermostat design that feels more like the experience people have with an iPhone. Looking at this in a more systematic way it means that core competence can stretch innovation into new territories, in this case from iPods to thermostats. Makes you think what could be next on the Nest team radar?

And the result? Mr. Fadell’s team has taken thermostats from being a boring beige box on your wall to something you’d buy because it looks cool and beautiful, is easy to use and saves energy. The only thing they underestimated was its appeal as it is currently sold out!




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