Google Buys Smoke Detectors, Thermostats...and Some of Apple’s Innovative Culture

The announcement of Google's takeover of smart home-appliance maker Nest for $3.2bn is potentially hugely significant for Google.

Google is a highly acquisitive company, completing dozens of takeovers every year in a wide range of technologies and markets. However, there has been particularly intensive media coverage about Google's takeover of Nest.

Part of the reason for the takeover (and some of the concerns raised about it) is due to what Nest does. Nest makes smart appliances. For example, it produces a thermostat capable of learning user behaviour and working out whether a building is occupied or not, using temperature, humidity, activity and light sensors. Nest also makes an acclaimed smoke detector and carbon monoxide alarm.

The takeover is seen by some observers as being a significant development in the growth of the "internet of things" - household and other devices being controlled by operating systems (including Google's Android OS), capturing and transferring data about those "things" and the people that use them.

However, there is potentially something much more significant about the Google takeover of Nest and it concerns the entrepreneurs and team who have built Nest so rapidly (it was formed way back - in 2010!).

The Nest CEO and founder is Tony Fadell. His is probably not a name you are familiar with. However, you will be familiar with two products that he helped create - the iPod and the iPhone. Fadell was a key member of the design team at Apple and worked closely with Steve Jobs. He is said to share many of the attributes of Jobs in terms of his leadership style a vision. Perhaps not surprisingly, Fadell has recruited many ex-Apple employees as he has grown Nest.

The FT suggest that the key feature of the $3.2bn takeover is that Google is effectively buying some of the innovative culture of Apple - te Apple "genome" as well as a fast-growing business. As a result, the potential revenue synergies from the takeover could be significant. However, things could go wrong, as explained here on CNET.

Some key quotes from Google and Nest in their respective announcements about the takeover help explain the rationale for the deal:

Tony Fadell (Nest)

"Google will help us fully realize our vision of the conscious home and allow us to change the world faster than we ever could if we continued to go it alone".

"Google has the business resources, global scale and platform reach to accelerate Nest growth across hardware, software and services for the home globally. And our company visions are well aligned – we both believe in letting technology do the hard work behind the scenes so people can get on with the things that matter in life. Google is committed to helping Nest make a difference and together, we can help save more energy and keep people safe in their homes."

"I know that joining Google will be an easy transition because we’re partnering with a company that gets what we do and who we are at Nest –and wants us to stay that way"

Larry Page (Google CEO)

"Nest’s founders, Tony Fadell and Matt Rogers, have built a tremendous team that we are excited to welcome into the Google family. They’re already delivering amazing products you can buy right now--thermostats that save energy and smoke/CO alarms that can help keep your family safe. We are excited to bring great experiences to more homes in more countries and fulfill their dreams!"

The excellent Lex team at the FT explore the takeover in a little more detail here - some excellent analysis for students who want to add this example to their research:

This Bloomberg interview also looks at the deal: