The first iconic home thermostat, the T86, was designed by Henry Dreyfuss and manufactured by Honeywell in 1953.  The T86 was called “the Round” circular thermostat and was made of plastic, brushed metal and raised gold digits.  Its design has been used ever since and is the most prolific thermostat worldwide.
The age of IoT, Internet of Things, has pushed forward wireless-connected chips into common household items. The Internet of Things was coined by Kevin Ashton in a presentation for Proctor & Gamble in 1999.  Connectivity was being added to everything from washing machines to doorbells to thermostats. By 2011, a start-up by the name of Nest announced a smart thermostat with adaptive technology to adjust the temperature in your home based on your habits.  Nest was lauded for creating a beautifully designed, internet-connected thermostat in response to the traditional thermostats currently on the market. Once Nest got an end cap in Home Depot it was a great success for Nest and a shock for Honeywell.
Now Honeywell is a leader in home products and advanced technologies such as air filters, humidifiers, portable generators, fans, heaters, and more. Honeywell should have been able to anticipate this digital transformation and be first to market with a well-designed version of their original T86 thermostat to beat out any start-up or established competition. Because of Nest’s first to market move, Honeywell has suffered in being the leader in home IoT devices.
Honeywell launched their response to Nest almost two years later in July 2013, called the Lyric. The Lyric was an evolution from the T86 Round, but had a more modern design in line with Nest’s product. This was Honeywell’s move to keep themselves relevant in the rapidly accelerating IoT device revolution. Honeywell also decided to sue Nest for patent infringement. Both companies volleyed patent suits against each other for 4 years until they finally reached an agreement for “patent cross-licensing” between the two companies.  The Lyric’s price of $279 was aligned with the premium $249 Nest product.  Compared to the $39 value of the Honeywell “Round” thermostat, both the wifi-connected smart thermostats provide a luxury item for the early adopters in the connected home ecosystem.
Honeywell has many more product lines and should take preemptive steps to ensure they maintain market dominance by embracing the digital transformation in all industries. Honeywell is at an advantage in that it creates many of the products in the home already, whereas Nest only creates a thermostat, smoke detector and security camera. Honeywell’s home cleaning product could be made into an iRobot competitor, their door knobs and locks could be made into an August Smart Lock competitor, and their home fan could be made into a Big Ass Solution’s Haiku ceiling fan competitor. [7,8,9] Honeywell needs to increase their R&D investments to stay relevant with home fixtures and products including internet connectivity as a standard feature. Communicating with “hubs” in the home such as Amazon Alexa or Google Home will further accelerate user adoption by reducing cost and technological friction. If it’ll take too long for Honeywell to get their R&D team built up, then their next step should be to acquire some of these startups like August Home Inc. This will give them a foothold in the Silicon Valley technology sector, allowing them to have an “innovation center” like what Ford is doing in Palo Alto.  This move will announce their intention to the industry and innovation as well as increase retention and recruitment initiatives for top human capital. It is up to Honeywell ultimately to decide whether to dial up the heat and innovate or stick with their status quo and freeze.
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