In mid-February, Business Insider ran a story on internal struggles at the smart home company Nest, primarily basing its conclusions on complaints from former employees. We questioned whether the problems were as deep as claimed.
Turns out they were accurate -- and, as new reporting suggests, likely understated.
Reed Albergotti, a reporter at The Information, published a piece yesterday with a lot more on-record detail about conflicts inside Nest over delayed product releases, the acquisition of Dropcam, and Tony Fadell's management style.
Albergotti, who is co-author of a brilliantly reported book detailing Lance Armstrong's doping, was able to get Fadell, Nest co-founder Matt Rogers, and former Dropcam CEO Greg Duffy to talk candidly about their problems with each other.
Among the juiciest details: Duffy calling Fadell a "tyrant" and saying that he was embarrassed by Nest's handling of Dropcam's product set. According to the story, Nest's $535 million acquisition of Dropcam has been fraught with problems since it closed in June of 2014.
Below are some of the most dramatic moments documented by Albergotti.
According to a recording of a staff meeting at Nest, Fadell dismissed the exodus of 70 employees as a problem with "victim mentality."
Tony Fadell, the company’s CEO, interrupted, pointing out that many of those departing employees had come from either Google, which acquired Nest in early 2014, or from Dropcam, maker of connected security cameras that Nest bought in mid-2014. Mr. Fadell went on to urge employees who have a problem with the way Nest is run to step up, rather than take on a “victim mentality.” Victims are “not long for the world,” he added, according to a recording of the meeting made available to The Information.
Since Google's $3.2 billion acquisition of Nest in early 2014, the parent company (now Alphabet) has put some financial limitations on the company, according to Fadell:
In an interview with The Information, Mr. Fadell acknowledged some management difficulties, which he said stemmed from the speed at which the company has grown. Growth “didn’t happen as dramatically at other places,” he said, referring to other companies he’s worked for, like Apple and Philips.
He said that Alphabet was tightening the financial screws. “The fiscal discipline era has now descended upon everything.” Alphabet’s message is now, “Hey, show us your business plan for the year. We’re going to hold you to those numbers.” Mr. Fadell said Alphabet is putting the same pressure on all of its subsidiaries it dubs “other bets.”
The story also documents Dropcam co-founder Greg Duffy's frustrations with Nest. According to Duffy, Nest delayed multiple products after buying Dropcam, including an outdoor camera that customers were asking for in droves:
Mr. Duffy lost the debate. The outdoor camera was put on the back burner. But it was a full year before the changes were added to the indoor camera, which was released in June of last year, renamed the Nest Cam. Initial consumer reviews on Amazon were weak. A Nest spokeswoman said that was a result of Dropcam customers not liking how the camera was integrated into the Nest app. Over time, reviews improved and the product is now labeled a top seller on Amazon.
After a while, these problems forced Nest to freeze development of new products from the Dropcam line:
More than half of the 100 Dropcam employees hired by Nest have now left. In an interview with The Information, Mr. Fadell blamed the Dropcam team for the problems with the acquisition. “A lot of the employees were not as good as we hoped,” he said. It was “a very small team and unfortunately it wasn’t a very experienced team.”
A spokeswoman for Nest later said Mr. Fadell does not feel that way about Dropcam employees who are still at Nest.
Mr. Fadell said he hit the pause button on other projects after Dropcam was acquired and moved so many resources to the rebranding of the Dropcam that “we changed our product road map dramatically,” he said. “Things that were in flight, we decided we’ll leave those for another day,” Mr. Fadell said.
Duffy became so frustrated with Fadell and Nest's priorities that he quit. He said he regretted selling his company to Nest:
Mr. Duffy said he was embarrassed by the upcoming Nest Cam and by the other products that had yet to launch. “On top of that, I think you’re running this company like a tyrant bureaucrat and it's holding back all progress,” Mr. Duffy recalls telling him.
Mr. Duffy suggested he take full leadership of the camera division and operate with relative autonomy, answering to Mr. Fadell instead of Mr. Rogers but not ceding veto power to him over decision-making.
Mr. Fadell told Mr. Duffy he could play a more involved role in decision-making, but there was no way he would put him in charge of the camera division, Mr. Duffy recalls. In fact, Mr. Duffy would not even be allowed to report directly to him.
Nest confirmed the exchange. “You can’t report to me because you haven’t earned it,” Mr. Fadell told Mr. Duffy, a spokeswoman for Mr. Fadell said.
The conversation effectively ended Mr. Duffy’s tenure at Nest.
Nest co-founder Matt Rogers also talked publicly about his up-and-down relationship with Fadell:
Mr. Fadell attended Mr. Rogers’ wedding last year. Afterward, Mr. Fadell ordered Mr. Rogers to cancel his month-long honeymoon in June, Mr. Rogers confirmed. A spokeswoman for Nest said it was a critical time at the company: Nest was announcing a refresh of its entire product line. When Mr. Rogers refused, Mr. Fadell told him that if he went, he wouldn’t have a job when he came back. Mr. Rogers went anyway. Mr. Fadell did not follow up on his threat.
Mr. Rogers likened their relationship to a marriage. “In all long-term relationships, you have your spats. Especially in design, when things are inherently subjective, you have tension. But you work the tensions out,” he said.
These issues are reportedly impacting Nest's growth. According to multiple sources familiar with the company's projections, sales in 2014 "fell short" of what Google and Nest expected. There were no hard numbers mentioned, however.
Read the full story here.