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Why I think Google will struggle to win the Connected Home battle in Europe

I recently watched ‘Steve Jobs: the billion dollar hippie’. More than the man, it describes the state of mind to have for innovation. Tony Fadell characterised the Apple legacy of using something that already exists, to make it better. And that’s what he did with thermostats. In America.

While his story was written and read all over the world, other start-ups began to emerge with the same ‘good idea’. By the time Nest Labs had its success of 100,000s of products sold in the US for $250, many other start-ups created a solution designed for their own country. Yes, a thermostat in Germany isn’t the same as one in Spain, which is also very far from the ones found in America. There are many reasons to this, starting with the different types and sophistication of heating systems in each country, built from different manufacturers, who have different views on opening the control of their systems, with many years of regulatory change and many other reasons I would need to explain in a 200 page book.

Then came the legendary time where Google bought Tony Fadell’s Apple-type genius for a number everyone talks about. Google, so commentators said, would use Nest’s top class innovation as a Trojan Horse into millions of houses. It as a seminal moment in the connected home revolution. And this was true. Technically.

The thing is, many start-ups have created thermostats as good as Nest but with the right technical solution for their own country.So there are lots of similar products on offer.

The billions invested by Google made several industries (including energy) realise there must be something to be done in the connected home space. If Google believes it that much then we do too! Though they didn’t have either the time nor the brand, nor a dozen of other reasons to create their own solution. So there is increasing interest from channel partners in the connected home.

When the offer meets the demand, a lot of things happen. Within the last 2 years, partnerships between energy players and smart thermostat start-ups were created all over the place, in the UK (Scottish Power, British Gas, SSE, Npower, E.ON), France (Direct Energie), Germany (RWE, EWE, Vattenfall), Netherlands (Eneco, Alliander, Essent), Scandinavia (Fortum, Vattenfall). Let’s stop here, we have a research service to give you all the details.
Some of these partnerships have involved Nest indeed (Npower, Essent, Direct Energie, Electric Ireland). But who are they competing against? They are competing against companies who are making the best smart thermostats in their own heating market. Therefore companies who have taken a product that already exists (Nest) and made it better. Does that sound familiar?

My point is Google got to scale in the US as they bought the most exciting and technically ready US thermostat. Work With Nest is no doubt a success with 5,000+ developers on it, Dropcam is also a terrific peace of mind product, Revolv is linking the dots and Google is very likely to dominate the connected home market in America because they got it right.

However the European energy industry is not the European electronics industry, where an I-Pod could for example be quickly brought to market. A US thermostat will take so much time to customise for different European countries, so Google will find itself behind the curve when it gets to a new European market and may have to develop a customised variant for a particular market, which takes time.

This is happening today as Hive, EQ-3 and Quby are shipping thousands of products per week. Qivivo is already compatible with most heating systems in France – though there are many tricky ones! There Corporation has a ready solution in the Nordics. Climote can do zonal heating in Ireland and UK for no added cost.  Wattio, Greenmomit and Cactus have tailored Spanish solutions…

Coming back to the documentary, one of the last comments was “Apple is far from being the market leader, but it is by far the most profitable in the business”. The connected home though won’t be about selling products, it will be about being in as many homes as possible and then to offer added services. We’ve no doubt Google will continue to pour market development, product development, and acquisition money into Nest and this area. On one hand, that positions them as one of the winners, or the winner. On the other hand, local products better developed for individual market conditions shouldn’t be written off providing they can get sufficient access to market and market development investment.

It promises to be an exciting battle!


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Wednesday, 21 April 2021

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