Microsoft’s Fear Of Missing Out, or How NOT to design a Smart Thermostat

Last week, with a fair degree of razzmatazz and press coverage, Microsoft launched a smart thermostat called Glas.  Except it wasn’t really Microsoft’s.  And whilst it might be pretty, it certainly isn’t smart. 

If you look behind the promotional video, it’s clear that it’s not really driven by any desire to be smart.  It’s come out of Johnson Controls, who have been designing dumb thermostats for many years, and it perpetuates the dumb elements of control, which means it won’t save users as much money as a proper smart device could.  However, small things like the truth didn’t stop them headlining it as “reinventing the thermostat”.   I suspect the only reason that Glas exists is that Microsoft are currently in a poor third place in getting their Cortana speech recognition capability into the market.  I quite like Cortana, but compared with Amazon and Google’s success in persuading consumer product manufacturers to support their offerings, Cortana is definitely an also-ran.

What you see if you watch the video carefully is an outdated control system, a user interface that was probably inspired by Bishop Berkeley and an attempt to break the second law of thermodynamics.  All of which details appear to have slipped past the rose-tinted editorial glasses of the technology press, who have just said “Shiny – want one!”.  So let me explain why it’s another smart opportunity missed.

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Smart Metering 2.0

Over the last few months it’s been interesting to look at the coverage of smart meter deployments, as people are starting to question as to what the benefits have been?  Did the billions of dollars invested in them help either the grid or consumers?  The pace of deployment has certainly slowed in the US and Europe and in recent months there seem to have been as many headlines about smart meters being replaced with old analogue ones as there have about new deployments.  At the same time the interest of energy suppliers in smart metering has been waning.  Instead they’ve fallen in love with smart thermostats as the way to woo consumers with energy savings.  British Gas’ recent purchase of AlertMe for £44 million (a tad short of the $3.2 billion that Google paid for Nest) is the latest example of that trend.  And with energy prices falling, any claim that smart metering will engage customers in energy saving is looking increasingly spurious.

But that’s a malaise specific to the North American and European energy suppliers, who are probably beginning to feel that they’ve been mugged by meter manufacturers into deploying white elephants that have turned out to be little more than an overpriced AMR system.  If we look at the next generation economies, like Brazil and India, they have a very different set of problems.  The most important of which is the amount of electricity which simply disappears.  In India around 25% of electricity “goes missing”, equivalent to almost $20 billion of revenue every year.  In Brazil around 11 GW is stolen, equating to 20% of generation. The effect of this is not only lost income, but power outages associated with illegal connections and tampering.  It is a level of disruption that calls for a very different approach to the one provided by the expensive, over-specified meters of the Western world.

These problems require a far more pragmatic approach to smart metering – generating a new breed of solutions which I refer to as Smart Metering 2.0.  Whilst the western deployments should have been about data, they ended up being little more than new billing solutions because the systems were designed from the wrong perspective.  That’s largely because they were designed by people who didn’t really understand the architecture of end-to-end systems and were hung up on a legacy approach.  In effect they made the meter more complex so the head end could stay simple.  That was all about not rattling the cage of the utilities’ IT departments, most of which don’t want to have to deal with more data.  The new meters are taking the correct view of keeping the meter as a simple source of data and adding value in the comms and head end.  It’s no surprise that these are being spearheaded by companies with a background in comms who understand how M2M and the Internet of Things systems work.  It’s an approach which drastically reduces the cost of deployments and allows utilities to upgrade their capabilities as they need them, rather than trying to do everything from day one.

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Is Google and Nest’s Thread a ZigBee Killer?

Today Google and Nest launched the Thread Group – a new wireless network for home automation. It’s not the first and it won’t be the last, but it has some important names behind it. The big two are Google and Nest, not least because Nest’s products may already be using it. But others in the consortium are interesting. ARM is there. Today they power most of our mobile phones, providing the IP behind the processors in billions of chips. But they have a vision of being the microprocessor architecture of choice for the Internet of Things. They processors will be smaller, cheaper and lower powered, but will provide the first opportunity for chip vendors to think about trillions. ARM’s inclusion in the group is an obvious step in their process of acquisition and investment in IoT companies.

Samsung are there (aren’t they always), but so are some very large names in home automation, such as Big Ass Fans and Chubb. And what must be worrying the ZigBee community is that Freescale and Silicon Labs complete the list of founder members.

The important point here is that Thread is not ZigBee. It works in the same spectrum and can use the same chips. It is also a mesh network. But it is not compatible. As the Thread technology backgrounder says, they looked at other radio standards and found them lacking, so they started working on a new wireless mesh protocol. To put it more crudely, it’s Google and Nest saying “ZigBee doesn’t work”.

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Acquire a Tech Visionary for just $3 billion

Today Apple announced their purchase of Beats Electronics for a spectacular $3 billion. It’s left many industry analysts scratching their heads. Although a little shy of the original, anticipated $3.2 billion price tag, it’s surprising how close it is to the amount that Google paid to acquire Nest earlier in the year.  So what’s behind the new $3 billion price point?

There are some interesting similarities in the two acquired companies. Both were started for similar reasons – their founders were exasperated with the quality of products which were currently on the market. In the case of Nest, Tony Fadell wanted to design thermostats and other household products which were intuitive and worked, whereas at Beats, Dr Dre was exasperated that expensive music players and smartphones shipped with low quality earbuds which cost less than $1 and failed to reproduce the music. (The Register has a nice opinion piece on whether they succeeded.) Both companies have produced high profile, high end products to address these deficiencies along with very high media profiles for themselves and their founders in industries which have historically had little branding.

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A Tale of two Thermostats

Once upon a time there was a start-up in California that thought that the world needed a smarter thermostat. Headed up by some ex-Apple executives, they raised over $80 million for their company and three years later sold it for $3.2 billion. That company is Nest Labs.

Four years before Nest was formed, two experienced technology start-up executives in Cambridge thought that the world would benefit from energy use reduction. Their solution was to design a smart in-home display which showed householders how much energy they were using. They’ve sold almost 1.5 million of these. From that experience they also decided that the world needed a smarter thermostat. Because they had limited funds to complete its development (largely because DECC had constantly delayed the UK smart metering market for their IHDs), they decided to use the crowdfunding site Kickstarter to raise enough to make the first prototypes. They didn’t raise $3.2 billion. They didn’t raise $80 million. They only just scraped together $32,000 before the Kickstarter campaign finished. To put it into perspective, that’s equivalent to the UK retail cost of just 80 of Nest’s smart thermostats. This company is GEO.

I don’t know whether GEO’s smart thermostat – called Cosy, is any better or worse than Nest’s. They both look attractive, competent products from companies that know what they’re doing. GEO’s appears better suited for a Northern European climate, where most energy expenditure goes on heating in winter. Nest’s is probably better for homes with air conditioning as well. But the one hundred thousand times difference between $32k and $3.2 billion that investors are prepared to put into two different smart thermostat companies suggests that certain sectors of the smart thermostat market may be at serious risk of overheating.

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