When Tony Fadell announced his plan to step down as Nest CEO last week, the news wasn’t all that shocking. Amidst reports that Nest employees were unhappy with Fadell’s managerial style and that key engineers were already eying the door, it recently became clear that Google’s $3.2 billion acquisition of Nest was hardly the perfect marriage many initially assumed it would be.
One of the more interesting aspects of Nest’s fall from grace is that the higher ups at Alphabet were none too pleased by the progress, or lack thereof, that Nest was making. What’s more, a new report from The Verge indicates that everything at Nest changed once Google restructured itself as Alphabet this past August.
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Upon joining Google in early 2014, Tony Fadell and other Nest executives, while wary of joining a large company, were nonetheless excited about the prospects of leveraging Google’s resources to further expand the Nest brand across the globe and ramp up development of new products. And as we noted earlier in the week, the impact of Google’s vast resources was rather immediate: not only did Nest’s employee headcount more than quadruple, but the company was given a “virtually unlimited budget” to boot.
So where did things go wrong? Well, once Google became Alphabet and Nest became a standalone subsidiary, the pressure for the Nest team to deliver new hardware and profits intensified. Whereas a property like YouTube was given a number of years to secure its footing, it soon became clear that Nest would not be afforded the same luxury.
Alphabet money is not like Google money, according to several sources at Nest. Whereas Google was content to float the company, under Alphabet Nest was tightly constrained and asked to demonstrate a level of financial discipline at odds with what the founders had expected when they sold to Google. For a five-year-old hardware startup in a still-unproven market, that meant Fadell’s role immediately changed — and that Nest’s conversations with their corporate parent went from being focused on growth and investment in technology to what one source called “effectively finance meetings.”
That pressure may have led to the slow pace of new product introductions.
That notwithstanding, Nest doesn’t appear to be going anywhere soon. The company has a new CEO with Marwan Fawaz taking over while Nest co-founder (and former Apple engineer) Matt Rogers will now spearhead product development. In the months ahead, it will certainly be interesting to see if we start seeing Nest move more quickly on the product development front. It will also be interesting to see what happens with Nest now that Google itself is interested in releasing products like Google Home, a device that fits right in Nest’s wheelhouse.