Ring, the first provider of video doorbells, is an interesting case study in innovation. Jamie Siminoff founded the firm in 2013, and, despite walking away from an episode of Shark Tank withno money, grew it to disrupt the home security industry.
He eventually sold Ring to Amazon in 2018 for over $1 billion. Now, under Amazon’s ownership, Siminoff continues to manage Ring, which has grown to be the largest home security camera brand in the world.
This Research Byte provides a summary of Siminoff’s keynote and fireside chat at Avasant’s Empowering Beyond Summit at the Terranea Resort in Palo Verdes, Calif. in May 2022. We have organized the points of the session around two broad themes:
- Lessons learned in innovation, based on Ring’s invention.
- How to ensure success when an innovative startup is acquired by a much larger enterprise.
We conclude with Siminoff’s view on how business leaders in traditional organizations can apply the lessons in innovation.
Innovation Sometimes Comes from Ideas that Seem Obvious
The idea for a video doorbell did not come from some grand vision of disrupting the home security industry, Siminoff shared in his fireside chat with Avasant Research President Frank Scavo. Rather, it came out of Siminoff’s personal need while tinkering with other various new inventions in his garage.
People would come to visit or to deliver a package, and I couldn’t hear the doorbell. So, I thought, why don’t I just buy a video doorbell? So, I looked online for a Wi-Fi doorbell and found that they didn’t exist. People think invention is such an “aha” moment. But it was so obvious to me that I didn’t even think it was an invention. It didn’t exist, so I built one myself.
And sometimes a family member can provide insight:
Then my wife said, “Of all the things you’ve done, this makes me feel safer at home. It makes us feel like we have gates. This is the best invention you’ve done.” So, to me, it was not an invention. It was this thing to help me while I was out in the garage “inventing things.” And it just became the thing that I worked on from that time forward.
Innovation Is About Meeting Customer Needs in New Ways
According to Siminoff, at the time of Ring’s founding, the home security industry had been well established. But it was mostly focused on getting customers to sign contracts for multiyear leases of security equipment. The breakthrough for Siminoff was seeing how a smart doorbell connected to a smartphone could enable people to have “presence” in their homes and answer the door, even if they were away from home.
No one had been looking at how can you use technology to deliver presence? People now have smartphones, and they are often in places where they’re not near their homes. Now they can “presence” the knock-knock burglar. No one had done that yet, but we fell into it and got focused on it, and we were able to build out a portfolio of products around it.
But why didn’t any of the incumbents in the home security industry come up with the idea for a smart doorbell?
They built cameras to sell in the [home security] category aisle, and they fought against each other. And we just literally leapfrogged the whole thing. I visited one of the largest home security companies in the world when I was building this, and the CEO’s eyes glazed over like he thought I was probably one of the dumbest people who ever came into his office.
This is not to say that Ring might not one day be disrupted by a new industry entrant.
I am a fear-based leader. Someone came to me a couple of weeks ago with an idea for home security. And I said, “Probably not a great idea.” And then I thought about it and said to myself, You know what? At some point, you become the incumbent. And, I said, I’m probably the worst person to be asked about real innovation. Like, what’s gonna kill me? I have no idea, because if I knew I’d build it. So, I try to continue to keep an open mind. You have to refresh yourself, because it’s so easy to get into the day-to-day focus on things like, “XYZ company is selling 3.5% market share more than us.” It’s like all this reporting B.S. What really kills everything is the thing that the leapfrogs us. It’s not this day-to-day stuff.
New Products Are Most Successful When the Customer Innately Sees the Value
Products that disrupt an industry will not be successful if we must explain their value to customers. The idea must be so compelling that the customer spontaneously understands the benefits.
When we first put up the doorbell on presale, a woman bought one and later wrote me an email. She said, “This is so great because there was a burglary across the road from me, and now if I’m out and someone rings the doorbell, I can say that I’m home.” And with new products what I learned is that this was more like intuition. You don’t have the right to tell a customer about your product. You don’t have enough time. It costs too much money for me to tell you. There’s lots of things that you would buy if I had an hour to talk to you about them. But we don’t have that right as a company, ever. The best products are ones where the customer understands the benefit. It’s that combination—it’s a new invention so you can break through, and the customer innately understands that. This customer understood the benefit of this thing, and it wasn’t like, “Oh, it’s another cool toy to buy for Christmas.” It was like, this has real value.
What You Offer Should Not Just Be Your Product but a Larger Experience
Early in Ring’s formation, Siminoff saw that the community aspect was an important part of Ring’s business model. Ring launched its free Neighbors app, which allows anyone in a community to see and discuss neighborhood problems and issues, such as crime, lost pets, and other things of interest to the community.
Early on we saw the community aspect and started doing testing to see if we could reduce crime in neighborhoods by delivering presence. And there was a surprise. We thought we had to put the doorbell on every home. But we only got like 30% of the houses in this neighborhood. So, we didn’t think the test was going to work. And then the crime in that neighborhood actually went down—a lot. What we realized was that by delivering presence into the neighborhood—even though it wasn’t every home—it made it feel like there were more people in the neighborhood.
Criminals don’t burglarize an empty home, Siminoff said. They burglarize an empty area.
You can’t break into a house if there’s someone watching from the house next door. So, we realized that we could productize that. So, we start referring to our customers as neighbors. We realized that we are not just selling to the house that the Ring gets put on. Really, we’re helping everyone. Everyone’s our customer in the neighborhood, and we care about the neighbors. So, it did broaden out how we would invent every part of our business including with this Neighbors app, which is I think still the largest crime and safety app in the US.
The popularity of the free Neighbors app made Ring much more than a doorbell company
We’re not an alarm company. We’re not a camera company. We are a neighborhood company, and making neighborhoods better is what we do. And so, we build products and services that make neighborhoods better, whether it’s through a free app, a doorbell, a camera, or whatever it is.
The most exciting thing to Siminoff is seeing the impact that Ring has had on neighbors and the stories they tell daily.
One of the great stories from a couple of weeks ago was about an Amazon driver who just happened to be in a neighborhood where there was an old woman out walking, and she had dementia and didn’t know what was going on. He saw her, and she said, that’s my house. So, he brought her back to the house, but the door was locked. So, he used the Ring doorbell to contact the family, who were not at home. The home is such an important place, and there’s security stuff that we do all the time, catching criminals. But it’s also been amazing to be able to give people that presence and bring people back to their homes when they can’t be there and bring neighborhoods together and see the impact we’ve had. So that’s been probably the most fulfilling thing I’ve had through all the years of building the business.
The technology industry is riddled with cases of entrepreneurial startups being acquired by larger companies and losing their innovative spirit, whether it be through neglect or mismanagement. But this was not the case with Amazon acquiring Ring.
The Key to Success in an Acquisition Is Having a Common Culture
Certainly, going from 1,500 employees at Ring to being part of Amazon with 1.5 million employees was “a shock to the system.” But ultimately, Amazon and Ring had a common culture that Siminoff credits as the reason the acquisition was successful.
The number one reason that Ring and Amazon combined successfully is culture. At the end of the day, it’s really just people, people, people. And so, we focus on that. Amazon really works by its leadership principles. If you don’t know the Amazon leadership principles and you’re interested at all in Amazon, that’s Amazon. There are now 16 of them. They really are one of the best thought-out ways of running a business that I’ve ever seen: Things like focus on the customer, frugality, dive deep, invent and simplify, hire the best. And Ring had very similar principles, though mine were not as well written out. Our No. 1 was around our mission of making neighborhoods safer. We called our customers neighbors, and we are still to this day highly focused on that neighbor experience. And that’s translated well at Amazon.
The Challenges of Setting Goals and Budgeting in a Period of Hypergrowth
Performance goals and budgets were areas where Ring needed to make adjustments as part of Amazon. But this was a challenge in an environment where Ring’s growth was doubling or tripling every year. This is a lesson for any business that is experiencing non-linear growth.
We never had goals at Ring in terms of running a budget or a P&L. What I quickly learned is that as a public company at Amazon, you have to run with these things. But the goals are really a ceiling and not something to strive for. When you have the kind of growth we were having, you can’t set a goal to go from, say, 30 million to 170 million. How can I tell my board that we’re going to grow the business 6x next year? No one would believe you. So, goals can become ceilings. And so, I try to keep it so that we can still get that accelerated nonlinear growth while still being in the structure of reporting at a large company. This is something we’ve been figuring out and striving to be greater than the linear. You have to use your goals for financial reporting and building the base case. But, how can you really unlock people’s abilities?
Budgeting is also a problem in times of non-linear growth. Ironically, the problem is not that there is not enough money available, but that there is too much money ready for the asking.
We didn’t have budgets at Ring. We just did what we thought would work and invested in things that were going to bring a return and didn’t invest in things that weren’t. But obviously, as you get into bigger companies, you have to deal with budgets. What I found with budgets is that they actually can over-fertilize and over-water the plant. As you know, the best wine comes from a grape that is stressed. So, they grow the grapes on the side of the hill, and they don’t give it everything, because if you give the grape all the fertilizer, all the water, all the love, all the care, it becomes a big, juicy, fat, lazy grape, and it makes a terrible wine. And we have to figure out in a large company how to keep ourselves stressed. As a startup it was easy—we just didn’t have enough money. But when you get into a larger company, it’s almost a curse because you can actually get the money you ask for. So, how do you keep that stress in the business? I think it is one of the most important things to do.
The Subscription Business Is Not Just to Make Money But to Deliver More Value
In addition to product sales, Ring also has various subscription services, including storage of video history, alerts, extended warranties, and professional monitoring. But how important are subscriptions in Ring’s business model?
Hardware is a tough business. It’s a commodity business. It’s sort of like a race-to-zero business. Services are definitely a more valuable thing and also, I believe, they align you with your customer. If I could, in a perfect world, I would have it break-even on the first sale, and then I want to be with you on a journey. And if you keep paying these fees, I’m providing you value, and together we’re on that journey together. That’s where I get my value and that’s where you get your value.
But it can’t be just about making more money. Many companies want to add subscription services to their business model because it makes the company more valuable. But this way of thinking is one-sided.
I’ve never heard a customer say “I want to pay you because it’s valuable for you, and I want you to be a successful company. So let me give you a subscription because I love you.” So, you must look at your customer and ask, how do you align with them to supply value? How can they feel they are getting value that is greater than that monthly subscription? It’s hard, but if you can do it, it’s a very beneficial thing.
At the end of the session, Siminoff turned his attention to how business leaders can apply the innovation lessons learned in larger traditional organizations.
Ring’s Lessons Can Apply in Larger Enterprises, But You Have to Be Willing to Take Risks
Some business leaders may think that innovation is a lot easier in a startup, or in a large innovative company like Amazon. These lessons can apply in a traditional business, but you must be willing to do things differently.
If you want innovation that grows ahead of the market, you have to do things that are not linear on the input side. That’s what everyone misses. They want the output to be nonlinear. But they want the inputs to be what everyone else is doing. And they want 10x growth. Well, if you’re doing everything that everyone else is doing, you’re probably going to grow at about whatever the market is growing at.
It also requires a willingness to try ideas that sound stupid.
You have to be willing to listen to the stuff that scares you, to the person who sounds stupid—because it is stupid. Innovation is dumb. Building a doorbell was ridiculous. People laughed at me. If you put yourself back into my shoes of 2012, only 7% of people had a smartphone. I was building a doorbell in my garage. It is a joke. It is hysterical.
The reason the incumbent home-security companies did not invent the video doorbell was not that they couldn’t do it, but that the idea seemed ludicrous.
They all saw what I was doing. I was hiding in plain sight—on Shark Tank! They saw it on TV. But they did not copy me for 10 years. Why? Because it was a joke. What, now these big companies were going to build a doorbell? No, it’s embarrassing.
Innovation is like baseball. You have to be willing to swing at a few new ideas.
You’re going to strike out on some of them. But when you do hit one, unlike baseball, it can be a 1,000-point run or a 10,000-point run. So, take some of those swings. But don’t take them on things that are linear. It’s got to be something where you feel, this is crazy, I should be getting fired for this. Unless you feel that in your gut, it’s probably not going to be an outsized thing.
On an interesting side note to the Shark Tank story, Siminoff is the first person to ever go from contestant to guest shark, appearing on the season premiere in 2018. It’s a fitting chapter in this innovator’s story.
By Frank Scavo, Partner & President, Avasant Research
Direct quotations in this Research Byte have been lightly edited for length and clarity, and in some cases re-sequenced from the spoken presentation.