Lenny's Podcast: Product | Career | Growth
00:24:13 · Tony Fadell
And so now let's put that together in a much cooler looking attractive package that costs five to six times more than the things that you're buying today. But that was the crazy opinion-based decision was, okay, yes, it's going to cost 249, but it's going to save you 800 to $1,200 a year. So it could pay for itself literally within a year or two. So that was the big idea. And AI was brought to bear on that old problem and hopefully solve it in a new way. So it starts with the pain, longtime pain, maybe habituated away pain that you have to discover and new technology bonded with that to then bring innovation in, revolution in, and then redefine the space in a way, which is what we did, which is not with just the product but how you installed it. It was always installed by third party installers as opposed to yourself, how you bought it, which was you bought it through the installer, you didn't buy it in Best Buy or somewhere else. So we had to reinvent many different pieces of the puzzle to get Nest to be the Nest. It wasn't just the product. It was all the other things. Just like the iPod wasn't the iPod or the iPhone wasn't the iPhone. It was the iPhone plus the app store, iPod plus iTunes and then the iTunes music store. So you have to think about the full thing you're trying to build, not just the one piece, even though that's what you might remember, you have to remember it's a system that you're going to innovate with.
00:25:47 · Lenny Rachitsky
[00:25:47] S1: So these two part formula you shared here, pain and new technologies. The second part is really interesting. Essentially it's what's the why now? What's the new tech that has emerged that now allows us to solve this pain? It feels like that's a core part of it. Okay. It's because it's interesting because when you talked about the iPhone keyboard, it was a similar story of, okay, we can actually sort of do this virtual keyboard for the first time in history.
00:26:10 · Tony Fadell
[00:26:10] S0: Right, exactly. It could because of multi-touch. That's really what it was. And then we were just on the verge of having fast enough processors, and we were just on the verge. If you look at the iPhone, or you're with Nest, iPhone or iPod, you can see where all these technologies were just coming to light. So in the iPod, it was just now mass storage that was portable and battery operated. That was really what it was. And it was also MP3s or digital music. And we also had high density. We were the first products to have lithium ion or lithium prismatic polymer cells. So it was new battery technology, new mass storage, portable mass storage and this new generation of digital music and we had ARM processors. And really, really low power. So all of those things had to come together to do that. And then on the iPhone, it was multi-touch, but it wasn't just that. It was also the fact that now we had wifi everywhere. And we knew that 3G was coming because we was only 2.5 G when that was, and that was very slow, but we had wifi. And we had digital cameras. We had the digital camera, we had digital video, which we had YouTube at the time. So it was all of those things just on the verge to say, this is what's going to be very different than what just came before it, like a Blackberry. Which was really just a texting machine and nothing else.
00:27:38 · Lenny Rachitsky
[00:27:38] S1: I want to close the loop on your advice on finding a great idea. I'm curious about the flip side of when it's not good enough. So there's like so many gadgets out there that are solving some pain level. Maybe there's a new technology that they integrated, but it's not a big business. It's not a real company. What's the threshold? What's a sign of, hey, this isn't big enough?
00:27:59 · Tony Fadell
[00:27:59] S0: Well, the iPod wasn't big enough. It took three generations of the iPod before it became successful. Well, anyone who knows if they remember iPod before iPhone, because iPhone swallowed everything. It's the black hole of everything. But iPod, the first generation was only successful with the Mac Geeks. And the Mac Geeks were less than 1% of the market. And then the second generation was also that way. We'd sell everything we could for the most part in the first quarter and then it would die, because it was just the Mac aficionados, the loyalists who'd come and buy everything. And it wasn't until the third generation where we made it work on Windows. And we had the iTunes music store. Did it actually start to take off? So sometimes you have to say, "We're on the right thing, but we need to make some changes to get this market going. And that was a real opinion-based decision. The team that I was running, we were really clear that we had to have Windows connectivity out of the gate, or not out of the gate, but just after the first iPod shipped. And Steve said, "Over my dead body, no way. This is going to help us sell more Macs." And then we're like, "Okay, we're making the second one. Oh, we're going to keep it with Mac only. We just got to fix a few of these things and then all of a sudden it'll take off." And it was like, it didn't take off. So then it was a long story about how we finally got Windows connectivity, but there was always this skunk works thing project behind the scenes doing that. I did the same thing with Stylus. Steve never wanted a stylist on the iPhone or the iPad. He never wanted it. He's like, "The finger is good enough. And we can't do it with the finger." And I'm like, "But we're going to have the B2B context and we're going to have form filling, and people are going to write." And he's like, "I don't care." That means we're going to get to Windows pen because he thought it was going to be like Windows pen, which was you had to use the pen for everything as opposed to using your finger. So it was like, "Instead of pen dominant, I want it finger dominant." But that's what he was saying. But then when we added the stylus, which was another skunk works project, all of a sudden it came out and it was like, "Well, we had to have stylus." And now it's a big feature of the product.
00:30:21 · Tony Fadell
Not everyone uses it, but it is a big feature for certain professionals who really want that, and artists and hobbyists and stuff. So sometimes you have to have those skunk works things that even if the opinion- based leader doesn't like it, you're like, "That seems like the right thing." Maybe not right now, but you can see it on the horizon so you just keep working on those things. But we had to, like I said, the iPhone wasn't a hit right away. It was like a, "Oh yeah, it worked on AT&T and it was two and a half G and it was this and that." It only worked in the US. So we had to get multiple versions till we got out. And that's in my book, it's called, I think it's three generations. Everything needs three generations. Yes, Bill, there it is. Three generations. I've learned, you make the product, you fix the product, then you fix the business. I've never seen anyone get it all right the first time. You would like to, but you get close. But make the product, fix the product after you get customer feedback and then make the business, which means make the margins. Like on the first iPods, we weren't making any money. First iPhones, we weren't making any money. The second iPhone and second iPod, okay, we started getting a little bit better numbers, but we got more or less the features dialed. Third one was like, okay, Windows, we got the margins, we're getting up the volume, we got all the right [inaudible 00:31:48]. And like go. Reliability, whatever else it had to be. So you need to stick with your idea even if it's not necessarily going the first time, unless your brain-damaged about whatever it was, you have to restart. But sometimes you have to hang in there. And same thing with Nest. We had to hang in there with two generations of the smoke detector and a few generations of thermostat before we made the business work, not just make the product work.