With exec departures and reorg, Nest is growing up

About a year ago, Google said it would pay $3.2 billion for Nest, a company that had sold fewer than a million connected thermostats and fewer than 440,000 connected smoke detectors — which it would later have to stop selling because its most innovative feature might also prove deadly in a fire. That was a lot of money for a company that had a lot of potential, but was still facing a lawsuit from a giant in the thermostat world, and was trying to sell a pricey product that the mainstream market wasn’t quite sure it understood.

Now, as it reorganizes in the wake of what looks to be the surprise departure of two executives, the company is doing what it has to do to prove that $3.2 billion price tag. Google didn’t buy Nest for its beautiful thermostat — it bought into Tony Fadell’s vision of a connected home full of better products that would learn from users and improve their lives. Along the way, if it helped Google get into hardware and collect vast amounts of data that might one day help solve energy crises or improve computer vision, that’s all to the good.

Greg Duffy DropCam Mobilize 2013

Greg Duffy, CEO, DropCam Mobilize 2013 (c) 2013 Pinar Ozger [email protected]

But to do that, Nest has to get big — moving beyond thermostats, smoke detectors and cameras. That requires a lot of discipline. So when I saw reports of a culture clash leading to the departure of Greg Duffy, the former CEO of Dropcam on Friday evening, it didn’t surprise me. The report alleged a “culture of meetings,” and Duffy appeared to confirm his departure via a tweet. Duffy wasn’t the only one who left: Nest’s VP of Technology Yoky Matsuoka also left, reportedly heading for a role at Twitter.

This did surprise me, as a Nest employee and official spokeswoman offered to have Matsuoka come to my house to fix my Nest as part of a joke, on a call with me on Thursday. I doubt they would have offered that in jest if her departure was common knowledge at that time. In an article about memos acquired by Tech Crunch after the loss of the two executives, several issues stand out, but all of them point to a company trying to scale up to become a multi-billion-dollar business relatively quickly.

The first thing that jumps out is the crazy work schedule — employees were being asked to work Saturdays until April or May, tied to an ambitious product release schedule for Project Quartz and Black Quartz, which TechCrunch says are two camera updates. Nest’s competition in the smart home space is offering not just cameras, but security systems with embedded sensors and learning systems that can learn who is in your home and react accordingly. I don’t know what Project Quartz and Black Quartz are at this time, but I can look at the market and say that while easy to use, Dropcam’s products aren’t particularly noteworthy compared to other Wi-Fi cameras out there, and bigger names are getting in the game every day.

The work schedule is one thing, and something that I would imagine would prompt a lot of angst, but the second element of the memos was a reorganization dividing the hardware side of the business and the software and services side of the business. Other roles are getting reorganized as well, with what appear to be clearer reporting lines and a definitive “management” layer.

So will this help Nest build the products it needs to sell tens of millions of connected gadgets, and design dozens of devices over the years?