The acquisition itself as well as the hefty price Google will pay for Nest generated a very interesting conversation online that was focused around the reasons that motivated Google to close this deal and pay so much money for a 3-year old start-up selling thermostats and smoke detectors.
The guesses went all the way from Google’s aspirations to deepen its involvement in the Internet of Things, “a world in which everything from household gadgets to cars, clothes and pets are connected wirelessly to the web” to adding to its ranks Nest’s co-founder and CEO Tony Fadell, an Apple veteran who helped design the iPod and the iPhone and might become Google’s equivalent of Jony Ive, Apple’s Chief designer.
While it’s interesting to understand the reasons behind this deal and what it says about Google’s plans for the future, I find one part that seemed to be missing in all of this even more interesting. Yes, I’m talking about the S word.
It’s not that sustainability was totally absent – the energy savings capabilities of Nest thermostat (14-26 percent savings according to Nest) were mentioned by Larry Page, CEO of Google in the press release, as well as by Tony Fadell in a blog post he wrote, in which he looked back to the beginning of Nest:
“Starting a business focused on the lowly thermostat seemed like a crazy idea at the time, but it made all the sense in the world to us. That little device that went unnoticed and unchanged year after year on the walls of our homes was a lost opportunity to save energy and money. We knew we could do better.”
Yet, when it comes to sustainability, the story of Nest is more than just the creation of a smart tool helping families to save energy. It is first and foremost a story about the company’s ability to succeed where so many other companies have failed – making simple, beautiful, thoughtful and desirable products that among other things help people make their lifestyles more sustainable.
Now, even if we assume Larry Page appreciates this part of Nest, I truly doubt if this capability played any role in his decision to purchase the company. Somehow my gut feeling is that no matter how much sustainability is important to Page, other factors like interest in the Internet of Things, his appreciation of Tony Fadell’s work, or his priorities (design and products with daily utility) got him to give this deal a green light, not sustainability.
So I couldn’t not wonder if this is necessarily a bad thing, or maybe there’s a positive side here we should be glad about?
The reasons why it’s bad that sustainability wasn’t probably on Google’s mind in this case are quite obvious. First, it shows that even companies like Google that are interested in developing sustainability related-projects don’t view sustainability as an important factor that should be a part of every discussion about the future.
Second, if Nest’s ability to superbly connect the dots bet between innovation, technology, design and sustainability don’t play a role in acquisition and valuation decisions, it sends a troubling signal to other companies that work on mastering these capabilities about what they are actually worth. After all, if what Google is really interested in is deepening its exploration into the Internet of Things, Tony Fadell or innovative design it would probably have the same interest in Nest and offer the same valuation whether Nest’s innovation advances sustainability or not.
This is by the way in contrast to other M&A deals like the acquisition of Timberland by VF where, as Mark Newton, VP Corporate Responsibility at Timberland noted the company’s CSR expertise was taken into account in VF’s considerations of the acquisition.
Still, when you take a minute to think about it, you might get to the conclusion that after all this is not that bad. In a way this deal can be also reframed as the evolution of sustainability that many have been waiting for, where sustainability doesn’t have to be evaluated separately but is naturally embedded in the value proposition.
To understand what this means exactly let’s go back to the starting point of Nest – Tony Fadell felt all the options for a thermostat for his new house sucked – they were expensive, not smart, ugly, and basically “crap” he explained. So he thought to himself: “There’s got to be a greater way.” These thoughts eventually translated into the concept of a thermostat that is smart (the world’s first learning thermostat), thrifty and “so delightful that saving energy is as much fun as shuffling an iTunes playlist.” In other words, it was a thermostat for the iPhone generation as Fadell described it.
So what we got here is a new way to look at an old equation. Instead of saying sustainable business is smart business we should say smart business is sustainable business. In other words – sustainability is not an add-on any more that you either add or not, but a natural part of every smart solution. So just like you don’t need to say a thermostat for the iPhone generation is slick and well-designed, but take it as a given, you don’t have to say it’s more sustainable – you know it is.
This is of course not always the case but hopefully this is the case here and with every other smart solution to come. Somehow I have a feeling it will be easier to get people excited about a smart future that is also sustainable than on a sustainable future that is also smart.
Raz Godelnik is the co-founder of Eco-Libris and an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and Parsons The New School for Design, teaching courses in green business, sustainable design and new product development. You can follow Raz on Twitter.