Nest shows the importance of planned business models for IoT devices

There’s good news for Nest Cam IQ indoor owners today: The smart cameras now have Google Assistant capabilities built in. The feature is optional — you can enable or disable it — and there’s no additional charge for the functionality. If you choose to enable it, you now have another microphone and speaker for home control, informational queries, setting reminders, and more. I wouldn’t suggest playing music through the small speaker found in the Nest camera though.

Nest also expanded its Nest Aware subscription offering with a new five-day plan costing a dollar per day. That’s perfect for non-subscribers or folks who don’t want to pay for a monthly plan if they’re only going on vacation for a few days. Person Alerts are also new for the suite of webcams, helping to identify a person compared to some other moving object in your Activity Zones. Again, no charge for this new feature.

This news reminds me of a recurring theme that we discuss on the IoT Podcast: When it comes to IoT are you buying hardware, services or both? More often than not, the answer is the latter.

But if you bought a Nest Cam IQ, did you expect new services like Google Assistant or not? If you were promised a future service but never got it for your next IoT device, would you be upset? (You probably would and so would I.) Lastly, if you bought an IoT product and the service offerings were scaled back or changed from free to paid services, how would you feel?

All three of these examples highlight the importance of IoT companies clearly defining and communicating their business models, both internally and externally. If they don’t, they run the risk of quickly upsetting loyal customers or failing to account for their true operational costs.

Take the recent case of Canary, for example. Last October, the company removed some of its free service features from customers who bought the hardware with an understanding that they’d have such features, even without a paid service plan.

Night Mode, which captures video from motion detection at night when you’re home and presumably sleeping, went from free to paid. Video recordings were limited to just 10 seconds under the scaled down free plan. And downloading or sharing video clips was eliminated unless you decided to now pay the monthly service fee.

That’s a very different approach from the recent Nest news. Some of it very likely has to do with resources. Since Canary isn’t in the business of running cloud servers for its services, it has to pay for Google Cloud, Amazon Web Services or Microsoft Azure in order to provide these capabilities. Being part of Google, Nest has “in-house” cloud services to use.

But that’s irrelevant to the people buying IoT devices: To them (and me, since I’m a Canary owner), they don’t want to feel like they’re in for a “bait and switch” when purchasing a connected home hub, sensor, webcam, door lock, or what have you. That’s why if you plan to sell any type of connected device with some type of service, you have to plan ahead early in your design process. And if you commit to a level of free services, but later have to change them, existing customers should be grandfathered in, if possible.

I’d argue that Nest has done a better job at this than most. And the Canary example is more of an outlier than the norm, thankfully.

However, I’d bet a month’s worth of my Nest Aware subscription that Nest planned for Google Assistant capabilities when designing the Nest Cam IQ before it launched last May. This way it would make sure that the hardware could handle Assistant queries and be loud enough for responses, while at the same time lining up the necessary software to hook into Google’s cloud for digital assistance.

Besides the hardware and software though, Nest surely did the math on costs for Google’s cloud. Maybe those are free or maybe they’re an internal transfer for the accountants. I suspect it’s the latter, along with analysis of how much of the cloud costs could be recouped through growing hardware sales based on new or additional features.

The point is: If you’re in the IoT device business, service planning may be the most important aspect of your product’s life-cycle. Make sure to do your homework well before the product hits the shelves and begin with the customer in mind.