A smart thermostat company changing how people interact with their homes, make energy decisions, and help change the planet for the better.
"We started the business with really a simple idea and an insight. And the simple idea was how can we help people conserve energy, save money, and reduce their environmental footprint."
Complex ideas often begin with answers to everyday problems. In this episode of PwC Canada’s Shift podcast, we are in conversation with Stuart Lombard, CEO and founder of ecobee; a smart thermostat company that is revolutionizing how people interact with their homes. Stuart shares his Canadian startup success story and what excites him most about the future of technology.
Jon Finkelstein: Hey, thanks for joining and welcome to Shift. PwC Canada’s podcast series where we go behind the scenes with Canada’s leading organizations to hear their digital transformation stories. I’m your host Jon Finkelstein, Executive Creative Director here at PwC Canada, and I’m a lover of the Internet of Things.
Jon Finkelstein: Calling all gadget geeks - this episode is for you! We have a great Canadian innovation story coming your way. I was lucky enough to sit down w/ Stuart Lombard, Founder and CEO of ecobee. In this episode he shares how he decided to bring the thermostat, to the 21st century. Fueled by a desire to create an intuitive, connected, and eco-conscious home. We chat about competing against the world’s largest technology companies, continuously innovating ,and the future of smart homes. Have a list, I hope you enjoy and I really hope you learn something too.
Jon Finkelstein: We're here with Stuart Lombard CEO of Ecobee. And we're going to be talking about a helpful home.
Jon Finkelstein: So I’m sure it’s been an incredible journey for the company to get to this point. How did you guys come about to do this?
Stuart Lombard: We started the business with really a simple idea and an insight. And the simple idea was how can we help people conserve energy, save money, and reduce their environmental footprint. And the insight we had was that heating and cooling is 40 to 70% of your home's energies. So actually better managing your heating and cooling is the best thing you can do. And at the time, I was trying to reduce my environmental impact. So I bought the solar panels. I was on my way to buy the Prius, and my wife was like, honey, this ain't happening. We're not doing this, right I said okay, I'll program my thermostat. At the time thermostats were dumb as a doorknob. They were impossible to use. And one day we came home and we had three kids under the age of four, and our house was 10 degrees. And my wife was like, "Okay, one of you is going, either you or the thermostat. I'm not doing this anymore." Right? And that was really the genesis for how we started. It was really about thinking thoughtfully about how can we elp people solve this problem? Because we believe that people have the power to change the world. We believe that if you give people the right tools, they can make a significant difference, and we can change the world for the better and that's really how we started the business.
Jon Finkelstein: Where did the name come from?
Stuart Lombard: It was part of a long focus group at the very beginning when we started the business. When we started the business there were like three engineers and my sister said, "Three engineers, you guys need to do some branding." So we did focus groups and I remember we were explaining the concept to people and you're sitting behind the two way glass and people aren't getting it. And I'm like pulling my hair out and anyway, out of that came the name Ecobee. And it's really about a few things. One is obviously, we have an environmental positioning to our product, we are really trying to help people reduce their environmental footprint. But bees are also social animals. They help each other out, they live in hives, actually air conditioning their hives. There are lots of reasons why bees work well with what we're trying to accomplish.
Jon Finkelstein: It's fun. Yeah, the packets it's just a great brand.
Jon Finkelstein: I’m super into gadgets as you guys know, I have an ecobee at home. The thing I love about where new gadgets are going and new we'll call it smart devices is how simple they are for customers to install. Tell me a little bit about really making a connection with customers right out of the box.
Stuart Lombard: I think the first thing is, we tell people we compete with Apple. And it's not because Apple makes thermostats, but it's because the experience that we want to give consumers is the same one that you have when you take your phone out of your pocket. And if it's not that good, then consumers would say like, it's kind of crappy. Right?
Jon Finkelstein: Right.
Stuart Lombard: I think that's the first thing, how do you create a really awesome experience? Then some people are tech focused, and they love new gadgets. And if you think about the way we live our lives, our lives are now, revolve around our phones. And so the ability to control my heating and cooling on my phone is an awesome experience. And then we can use science to basically help you reduce your greenhouse gas emissions. So I have $26,000 of solar panels on my roof. I have a $250 Ecobee. My Ecobee saves me 80% as much energy as my $26,000 in solar panels. It is a massive impact. And that's because we're thinking thoughtfully about we learned the way your home performs, we learn about weather, we learn your occupancy patterns, and all those things go together to help you save money, but also make sure that you're comfortable.
Jon Finkelstein: I love it.
Jon Finkelstein: What do you think people are saying about Ecobee versus Nest? If they had to kind of talk about one versus the other? I'm just curious. What do you think?
Stuart Lombard: It's interesting. I tell people when we started, we were the only smart thermostat in the category and people were giving us high fives and it was really exciting and all that kind of stuff. And then nest came out. Nest was created by a gentleman named Tony Fidel. And he was the gentleman who created the iPod. He is really like the godfather of consumer electronics. When Nest came out, it was like, Oh, geez, right? Because we thought we were champions. We thought we had this awesome product and all that stuff. But we were really champions of the North Toronto minor Bantam Hockey League, we weren't playing in the NHL. And so really credit to the team. What we did was we really retooled and we went back and really changed the way we did everything. And that has created a significantly better company. And we believe that we are really focused on innovating, on really solving problems for consumers. When you look at things like room sensors, for example, we invented room sensors. We were the first to come up with a mobile app. We were the first to spot Apple home kit. We were the first with Alexa voice integration. It's really about innovating but at the same time innovating with a purpose which is how do we solve problems for customers. Jon Finkelstein: When you said that you retooled or rethought, about how the company operates, it went from what to what?
Stuart Lombard: I think the core thing is, we always set a high bar, but I'm not sure we realized how high the bar needs to be right? I liken it to kind of when I was in high school, and you put in a paper and if you got B, you were like, "Oh, that's pretty awesome. That's pretty good." Right? And the reality is, I think, to succeed in consumer electronics, you have to provide a 97, 98, 99% experience, where consumers think it's crap. That's how high the bar is. And that's why I say when we think about how we compete, we compete with Apple, because, yeah, they don't make thermostats, but that's the experience that consumers have come to expect.
Jon Finkelstein: What is your stance on net new innovation versus taking things that exist, and optimizing them or new uses or whatever. I'll give an example, Ecobee does a great job of integrating Alexa or weather data, all these different things and bringing them together to create something new. I would say that's kind of taking the existing and putting it into new use versus, "Hey, we're going to come up with a brand new way of doing X or Y." Thoughts?
Stuart Lombard: We're doing both right. I think innovation is really about integrative thinking more than anything else, right? I think the people who are innovating are a lot of the time being able to see something in a field that's maybe totally unrelated, and relating it back to what you're doing over here in creating a new product or a new functionality or new way of doing things. A lot of innovation, I think is around that. The other thing that we've done is we've opened up Ecobee labs. Ecobee labs is really about creating dedicated time, space and resources to just work on problems, right? I think as a product company, often you're on a product release timeline, right? You're trying to get this out for that quarter. We need to get this out for the holiday shopping season as an example, right?
Jon Finkelstein: I love the fact, if I'm hearing you right, you're creating a culture of innovation. You're giving your employees permission to imagine. And you're allocating resources and time to do that. Has it backfired at all?
Stuart Lombard: I don't think so. I think, when we think about our strategic framework and how we win, being the innovator in the space is a core part of our strategic framework. I think it falls into what are our core values. Two of our core values are really important. The first one is this idea of transparency. Transparency is really about how do we make sure people have access to the information they need to do their jobs well, and so we've really tried to be thoughtful about eliminating any silos, any barriers? Nobody has offices, not even I have an office, right? You can ask me any question anytime, and I should get it. I should be able to give you the best answer I can. But also in the way that we construct our office. If you walked into our office, we have a town square. And we have a town square anthropology says that people have got together and town squares for centuries to share ideas, learn news, and all that kind of stuff. All our hallways are at least 10 feet wide, so you can carry on a conversation of three or four people and you never have to stop.
Jon Finkelstein: Is that right?
Stuart Lombard: Yeah, all of our walls are whiteboard wall. So if you have an idea, you can jot it down. We believe people learn visually, and we give people tools. So we have things like Creative Labs that have all kinds of construction paper and markers and sticky posts and plasticine. We have 3D printers. Really trying to enable people to be creative, but then also giving them time. We do things like hackathons where people spend two or three days and they can work on ideas that they'd like to. There's some amazing things that come out of those hackathons. And really this idea that good ideas can come from anywhere. And how do you enable your employee base who are working most directly with customers who are on the front lines, who are seeing challenges and opportunities to surface those in an awesome way until we try and do a lot of those things.
Jon Finkelstein: Amazing. I love it
Jon Finkelstein: Are you surprised at how quickly sort of home automation has become a bit how lucrative it is, how willing and open people are to adopt it?
Stuart Lombard: I think connected home is probably one of the three most interesting areas in consumer electronics right now. And if you had told me that when we started, I would have never believed it, right? I think especially the thermostats would be at the center of that connected home, right? It's interesting because when I started, I had this cushy job. I was working as a partner in a venture capital firm. I was 44th floor of a tower, I had an assistant and I was like, whatever. And I gave it all up to start a thermostat company, and my wife and my friends were like, you are crazy, right? It is like, "Why are you doing this? Nobody cares about thermostats. What are you going to do six months from now?" And the implication was that thermostats were as good as they were ever going to be. I think one of the things that we're very focused on is this idea of continuous learning. If you think about our products today, we're talking about machine learning and AI, we're talking about voice recognition, we're talking about digital assistants, all kinds of things around Smart Grid, it's really changed. But everything that we knew ... when we started, people say like, how did you start the company? Were you in the HVAC business? Or did you know consumer electronics? None of us had ever created consumer electronics product before. And none of us had ever been in the heating and cooling business. But I think we had this core belief that if you can open up a book, you can learn anything, right? And I think that's carried through one of the things I'm really excited about for the company is that it's really sort of carried through and you see it every day. Every day we're learning something new. Every day we're different and we're a very different company today than we were three years ago, than we werewhen we started and we'll be a very different company three years from now.
Jon Finkelstein: I heard through the grapevine that you can spend days of your time answering calls, service calls yourself, tell me a little bit about that. What's up with that.
Stuart Lombard: I think we're very focused on consumer led innovation. Consumer led innovation is really about understanding what your customers are saying. And I think certainly as we've gotten bigger, it's been easy for me to sit in the office, I don't have and say, "Hey, everything is wonderful." Right? But actually getting down to the trenches and listening to your customers and hearing what they have to say is incredibly valuable and therapeutic. Every time I do it, I come back with insights or ideas about what we could do, or maybe things that we should fix or things that don't make sense. We encourage everyone in the business to do it. When we started, actually, everybody in the company used to get every single customer service email. We can't do that anymore. But it's really that idea of how do you understand what your customers are saying about you
Jon Finkelstein: Right. When you're on the phone with customers, do you tell them who you are?
Stuart Lombard: It depends, sometimes I do. Particularly difficult ones I do.
Jon Finkelstein: You know I'm ...
Stuart Lombard: Sometimes you have an irate customer is it helps to say, "Well do you know you're speaking to the CEO of the company." Some of them are like, "Go on, I don't believe you."
Jon Finkelstein: That's like, "I'm really irate right now, let me speak to your manager." "Well, actually, I'm the CEO."
Jon Finkelstein: Let's talk about privacy for a sec. Do you feel like people ... give a moment's thought around the privacy, especially around Alexa. There's been so much in the news and people talking about that, privacy concerns. Let's talk a little bit about that what do you say to skeptics who are wary of either, "This is something that's going to break, I'll just stick with the mercury thermostat. Thank you very much." Or "I'm worried about Alexa listening to me, or what are you using my thermostat data for my queries?"
Stuart Lombard: Privacy is really important. It's something that that people care about. We've been very thoughtful about privacy, and we believe that customers data belongs, frankly, to customers. It's not ours to decide what to do with it. It's really yours to decide what to do with. One of the things that I think makes us very different than lots of other companies in the space is what our business model is. We're not trying to monetize you by selling advertising or we don't have some other business model. We consider ourselves invited guests into your home, right? And if we want to do well we need to provide products and services that you value, and we need to be good guests in your home. When we stop being good guests, you're going to say, thank you very much you're out of here. We really live that, every single day. It's about being really explicit about how we think about your data, what we do with it, those types of things in a very transparent way.
Jon Finkelstein: Consumer electronics, home automation, all the smart stuff, it's a very competitive industry for talent. How do you keep morale high? How do you develop talent and really make sure that people are kind of performing their best and not losing sight of what the company stands for?
Stuart Lombard: I think we're trying to create the company that we all always wanted to work for, right. I think as entrepreneurs we have the opportunity to actually create a different future, right? It's interesting, we were sitting in the room and we were like, "Yeah, I think we can do that. Yeah, we can't do that. We're in charge." Right? We try and create, first of all, a company that people want to work for. That's about a company that has strong values, that has a point of view, that sticks to that point of view. Maybe does some things that people wouldn't think we would do, right? One of the things we have is a program we call A Better Tomorrow. And a better tomorrow is all about how we make our cities more sustainable. We're working with Community Housing groups where we donate literally thousands and thousands of thermostats, to help bridge the energy poverty gap. We're also working with researchers, and all kinds of institutions, really trying to solve all kinds of problems, everything from energy efficiency problems, to how do we help seniors live longer in their homes? And one of the very cool things we did is, we work with this group in Indiana. We proved that they didn't need to build a billion dollar gas fire generation plan. We saved the ratepayers of Indiana billion dollars. But we also say massive amounts of greenhouse gas emissions and those types of things. If you think about the future you want to have and how you create a company that's both compelling for consumers but compelling place to work, you can be both aspirational, and build a good business. One of the things we say is that we're very optimistic about the future because we believe that we can help people create a better future.
Jon Finkelstein: What do you think the future holds?
Stuart Lombard: As I said, I'm really excited about the future. I think there's lots of negative news about climate change that you read almost every single day. But I think the reality is that there are three seminal trends that will change the future of climate change. The first is that renewables are the cheapest energy that's out there today. If you're in California, you can buy renewable solar power at two cents a kilowatt hour. It is the cheapest power, cheaper than the fuel that actually goes into a gas fired power plant, right? Over time, you're going to see more and more renewables come on the grid. The second is electrification of transportation. If you have met anyone who has an electric car, they will tell you hands down, it is a better car today already, right? That trend is only going to continue. And 10, 15 years from now we'll all be driving electric cars not only because it's good for the environment, but also because they're just way better, right? Then the third thing is increased urbanization. With increased urbanization, people tend to live in smaller dwellings and people living in smaller dwellings tend to consume less energy. Overall, you're going to see a significant reduction in the amount of greenhouse gases that come over the next, call it, 10 to 20 years. I think that bodes incredibly well for the future.
Jon Finkelstein: Is there anything else that you could talk about what you're working on right now that's really getting you excited.
Stuart Lombard: I think artificial intelligence and machine learning will change the world. And I think they will change the world, not to similarly to the way that the internet changed the world. We're really at the forefront of that revolution. I think it will change the world in so many different ways almost like the internet, where it's really impacted virtually everything we do. I think you will see machine learning and AI change the way we do everything. We use it today to do everything from predicting, like how many thermostats, we're going to sell on a Best Buy store on a given day to how do we make our products easier and more intuitive to use? Right, and it's really amazing what those tools can do for you.
Jon Finkelstein: I can't wait until whether it's my thermostat or my home automation greets me when I come in.
Stuart Lombard: Yeah, yeah.
Jon Finkelstein: I don't know if anybody is doing that right now. But I would love it to be that kind of thing where you walk in it's, "Hello, John, welcome home. Would you like me to set the temperature to 18 degrees and pour you a drink?" Or whatever. My future companions are always English.
Stuart Lombard: I think those are all reality. Right? I think those are all coming in and they're all within the next three to five years for sure.
Jon Finkelstein: Well, it's amazing.
Jon Finkelstein: Let's do. Okay, it's the lightning round.
Jon Finkelstein: Okay. Best place you've ever traveled.
Stuart Lombard: China.
Jon Finkelstein: Was it for work?
Stuart Lombard: I was in China. I lived in China in 1992. And at that time, China in that period and where I was right in the middle of central China was unbelievable.
Jon Finkelstein: I've not been there. What about favorite movie?
Stuart Lombard: I don't watch movies,
Jon Finkelstein: Okay, biggest pet peeve
Stuart Lombard: I would say it is, dishes in the sink.
Jon Finkelstein: Dishes in the sink. If you could meet three people who passed on, who would they be?
Stuart Lombard: Ben Franklin would be number one.
Jon Finkelstein: Ben Franklin.
Stuart Lombard: Ben Franklin's amazing, I got a chance to read his biography, amazing. What he was able to accomplish. Ben Franklin would be one. I think Leonardo da Vinci would be two and maybe Einstein would be three.
Jon Finkelstein: Wow, that says a lot about you. I'm totally getting a good picture of you right now. I'd like to come to that dinner. What's your favorite food?
Stuart Lombard: Well, you didn't say people who are still alive.
Jon Finkelstein: No, no, that's great. But I mean, it's like they're all very similar in a way right? Inventors?
Stuart Lombard: They're super similar.
Jon Finkelstein: Favorite food?
Stuart Lombard: I don't know.
Jon Finkelstein: Well, let me ask you this-
Stuart Lombard: Brussels Sprouts, how about that?
Jon Finkelstein: Okay. Wow. I was going to say if it's not favorite food, do you like breakfast lunch or dinner the best?
Stuart Lombard: Breakfast.
Jon Finkelstein: Breakfast. You don't have breakfast-
Stuart Lombard: Brussels Sprouts don't go breakfast.
Jon Finkelstein: They don't really go for breakfast. My wife has these Brussels sprouts with a pan fries, they're so good. I love them.
Stuart Lombard: Yeah, those are awesome. Yeah.
Jon Finkelstein: What is the best piece of advice that someone's ever given you?
Stuart Lombard: Be focused?
Jon Finkelstein: Are you scattered? Or that was just something that they said?
Stuart Lombard: I think when you start a business, you think you're going to be like the Maytag repairman, which is maybe I'm dating myself, but this sort of idea that you're going to sit there at your office or your desk, and nobody's going to call. And you're going to be worried, what am I going to do next? I think the reality is that once you get into it, there's so many options, there's so many things you could do that really focusing on the things that are really important and cutting everything else out is really the key to success. Being focused, being able to say no, that is the hardest part, I think.
Jon Finkelstein: Awesome.
Jon Finkelstein: Well, that wraps up another episode of Shift. Thanks, everybody for listening. Stuart, thank you so much for spending your valuable time with us and sharing some insights about Ecobee the company and how much you like Brussels sprouts. Which I do too. Hopefully everybody got something out of it. And thanks so much for creating a great product. I love my Ecobee and I certainly recommend it to my friends when they come over, it's right in the front. Until next time, this is John signing off for shift.
Jon Finkelstein: Thanks for listening to this episode of Shift. You can get more details at pwc.com/ca/shift. If you enjoyed this episode and want to hear more, subscribe to our podcast series, and make sure you rate us on Itunes. You can find us on iTunes, Spotify Google Play or your preferred podcast platform. Have an idea for Shift? We want to hear it. Let us know on social by submitting ideas with #shiftpodcast. Just so you know, this podcast has been prepared by PricewaterhouseCoopers LLP, an Ontario limited liability partnership, for general guidance on matters of interest only and does not constitute professional advice. Until next time.