When Google purchased Nest, I wrote a memo for my Microsoft leadership laying out what Google was trying to do.   The gist was that they wanted to build an IoT service platform, but the essential ingredient was users.   One can build a lot of cool APIs but if you want device manufacturers to rely on your services instead of their own, you need people on your platform.   And consumers don’t pick a platform based on APIs, they pick it based on shiny devices they want.

As an aside, this is exactly what Charlie Kindel and the Gang at Amazon are doing now with Echo and Alexa.

Google’s strategy was nearly perfect:   Get the most popular IoT device company (Tony Fadell’s Nest, for $3.2B), infuse it with the money and services they lack, gather millions or 10s of millions of users to the Google platform, and then get all major device vendors to rely on your system.   It was brilliant.

But then reality happened.   Nest and Google didn’t get along.   Google didn’t bring services and machine learning into Nest, and Nest didn’t fully adopt Google’s platform.   Fadell um, left, and Nest was absorbed into Google.   Jim Alkove came and went as engineering Czar.

In the meantime, my Nest thermostat and Nest Cameras languished.   In three years, they’ve gotten only trivially better with tiny feature releases.   My predictions were proven wrong as the Google mother ship’s assets didn’t show up as smart image recognition for cameras, smarter thermostat learning, or better synergy with other Google services. The devices remain stylish and lovely premium standalone products.

This week I went shopping for new cameras for home and security for the headquarters.   It didn’t take long to end up at Amazon and find the recommended by Amazon Yi camera products from Yi Technologies.  For $39 I found a home IP camera with software, apps, and cloud that easily rival and in some ways surpass what Google offers in Nest.     They offer people counting and false alarm rejection that’s beyond what Nest offers today, for 25% of the price if you can live with 720p video.   They add a cloud offering and can record video locally on microSD memory.

What a pity!   This apparently small company has now entered the scene and now can offer equivalent features to Google.   Imagine if Google and Nest had worked together well – they’d be 3 years ahead and be protecting their price premium with a software and services moat.   As it is, it’s hard to see how Nest survives now that smaller, lower margin players can enter the scene and destroy their margins.   Politically, it’s hard to imagine Google doubling down and investing to get ahead.

Sun Tzu said “strategy without tactics is the longest road to victory”, but this case is likely to show that, like tactics without strategy, it can also be the noise that precedes defeat.