Logitech is one of those ubiquitous companies — it’s been around since 1981, selling all kinds of important things that connect to computers of all shapes and sizes: mice, keyboards, cases, cameras, you name it. When Bracken Darrell took over in 2013, he restructured the company around growth, started making acquisitions like Blue microphones, and invested heavily in software. In fact, the last time I talked with Bracken, it was the end of 2019, and he laid out a vision of Logitech as a software and services company in addition to its hardware business.
Unfortunately, 2020 happened, and the pandemic sent a huge number of people to work from home, and suddenly, Logitech keyboards and mice and webcams were the hottest things around. I actually had to buy a Logitech webcam on the gray market in 2020 — demand was just that high. And now, 20 months into this thing, Logitech is making new products specifically designed for working from home.
Bracken and I talked about that, how the company met that demand, whether that changed his plans, and how the supply chain issues around the world affect his business. We also talked about how he manages Logitech’s relationships with other tech giants: Logitech is one of the few companies with close access to Apple’s tightly controlled ecosystem, and it, of course, has to sell products through Amazon, which has a long history of undercutting its own vendors.
And we had to talk about the decision to kill the Harmony remote line, the growth Logitech has seen in products for creators and streamers, the mess that is USB-C, the metaverse, and more. Bracken even told me what his favorite mechanical keyboard switches are. This one has everything.
Bracken Darrell, CEO of Logitech. Here we go.
This transcript has been lightly edited for clarity.
Bracken Darrell, you are the CEO of Logitech. Welcome to Decoder.
Thank you for having me.
The last time you and I had a chance to talk to each other was 2019. I had you on our other show, The Vergecast. You were just acquiring a company called Streamlabs. You were talking about becoming a software and services company. Then 2020 happened, and we all went home. I bought a Logitech webcam for a 300 percent black-market markup.
Oh, I’m sorry.
It was impossible to get, but it was great. It was worth it.
But just tell me about that moment in the business for Logitech; you were on a trajectory to become a larger kind of software and services organization, then everyone had to work from home. Demand for things like keyboards and mice and webcams shot through the roof. The PC industry experienced a little bit of a renaissance. Tell me about that moment and managing through that early part of the pandemic — it seemed really challenging.
It was really surreal. Around March 8th, I was in New York. We had just given an investor meeting. We kind of forecasted what we were going to do over the next several years. Of course, this COVID thing was being talked about, but it wasn’t a big deal. Then I flew home, and literally the next Monday we shut the office down. Everything was closed.
For the next month, we had a very good outlook for the year. We expected to grow 8 to 10 percent. We’ve been growing at or near double digits for the last five or six years, and along this trajectory there are these long-term secular trends: video’s going to take over audio. Gaming’s going to become the biggest collection of sports in the world. Streaming and creating is going to be the next big, big, big thing — even bigger than gaming. The mouse and the keyboards are going to do just fine.
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What happened was all those businesses went through the floor. They just dropped out of existence. Our sales completely collapsed for the first month or two after COVID, but we knew it was temporary. We knew it wasn’t going to stay like that. I don’t think people knew what was going to happen yet. Our retail business had disappeared. We knew people were buying for working at home, but we sold mostly through retail.
The toughest part of that individual moment was: what do we do now? A lot of people started cutting costs and conserving cash. I had a discussion with my head of operations; people have to work from home, but we won’t have enough inventory to supply them if COVID comes roaring back. So I said to him, “What do you think about making a big inventory bet?” He said, “Yeah, I think you’re right.”
We made a very big inventory bet and we’re lucky we did. We grew 74 percent last year because we had the inventory to sell.
So that was an early bet. You were assuming that work from home was going to be here for real. People are going to need mice and keyboards. That’s a hardware business — you have to actually make the stuff and stock it to sell. How early did you actually make that bet? What’s the timeframe between the decision to increase inventory and selling it?
We have to make that bet a minimum of two months beforehand, but in some cases you’re producing about four to six months in advance, depending on parts availability. It was a short-term bet, but we set the table for the next six to eight months. We were lucky. I won’t pretend we were geniuses. We just followed our intuition. Now it seems obvious.
We’re 18 months into COVID, and some people are going back to the office and some people aren’t. That’s going to play out however it plays out, but I can see now there are products designed to be work-from-home products. You have some, there are Zoom displays, there’s a new webcam startup, which is not something we’d ever seen before. There’s an ecosystem of companies and products now that are focused on a work-from-home consumer as opposed to customers buying enterprise hardware and software for their homes, which is kind of what was happening before. The bet you made to make sure you had the inventory — was that the existing product line?
When did you start realizing that you had to make new kinds of products for work-from-home?
The lucky situation we’ve been in is that those four secular trends I mentioned earlier are long-term. We were already making products that really fit into your life and into your home. We really ran the same play — instead of growing, though, at double digits, we were growing 25 percent at first, then 64 percent, then 100 percent. Our growth rates went way up, but it was really the same play. We really didn’t change the strategy or the portfolio. We were already building that portfolio for those people who were working in a hybrid environment. The hybrid environment just came much faster than we expected.
On the flip side of things, building things with chips in them has gotten increasingly difficult because of the chip shortage and the supply chain crunch. As the trend increases, the demand is there, but what I’ve been told from everyone is that the supply is the problem. How have you been managing through that?
We’re kind of lucky in that we have a very distributed portfolio. We’re in 36 different categories and probably 30 of those are chipsets, and they’re not 15 chipsets that go into 36 categories. I don’t know how many, but a lot, so when we were short on one chipset, we could try to shift our business to other products that didn’t require that chipset. Between that, and really having a good long-term relationship with our suppliers, we’ve probably managed around that better than most companies have, but we’re not immune to it.
We’ve had to develop alternative sources of supply. If you’ve talked to people like me, you know that instead of working 100 percent of the time on new products, we are working 80 percent of our time on alternative supply. We’re using a different chipset in an existing product. That’s largely over for us. I would say we’re 80 percent of the way through that. We still have some limitations, but it’s not terrible now.
When I’ve talked to other CEOs in other industries, the predictions of when the chip crunch will end are kind of all over the map, depending on the field. The carmakers are thinking it’ll be another year, maybe even more. They just seem tired. Companies that make smaller things with newer kinds of chips in them see the light at the end of the tunnel. Do you feel like the end is in sight?
I think so. I think we’re looking at six months to a year of the shortages. As I said, most of our chipset issues are resolved. We still have some left and we’re limited, but we’re just about there. The shorter-term issue for us now is, ironically, logistics. This is probably another thing that your guests are talking about — just this bizarre problem where there’s just not enough big cases to ship products over the water. It’s really a strange dynamic.
Is there a container ship loaded up with Logitech mice and keyboards just waiting to get into a port somewhere right now?
“Is there a container ship loaded up with Logitech mice and keyboards just waiting to get into a port somewhere right now?”
Oh, for sure. It was a little worse for us last quarter when going into Europe. Almost every company is struggling with this, by the way, so we’re not unique. This will clear naturally, but it will clear.
The great benefit software companies have is they can change the product at a moment’s notice. They can react to the market very quickly. I think Zoom reacted every 20 seconds, at the early part of the pandemic. But you know, mice and keyboards are physical products. Conference microphones, webcams — people are using them in ways that were sort of unexpected. You know you’re having problems shipping the products, but you still want to change them and meet the market demand. How is that competitive environment for you? Do you see competitors moving faster that are smaller, maybe? Are you moving at the speed you want to?
You’re never moving as fast as you want to, but we do move pretty quickly. We have a very fast development cycle for products. We measure that all the time. It did slow down during the pandemic, mainly because our resources were pulled into developing alternative components and suppliers. From a competitive standpoint, I love our position. I love the fact that we do occasionally meet small startup competitors who are coming into the market hungry. It makes us better. I’ve been here almost 10 years now, and I really want to feel smaller as we get bigger. That means you have to have small teams. They have to feel complete ownership for what they’re doing. They need to have a lot of freedom. You have to give up a lot to get a lot, and I love that feeling. When I was a general manager running a small team, I loved that moment, so I want to give that to more people in our company. We’re trying to organize that way, and I’d say we’re 50 percent successful. I want to get to 80-90 percent. We’ll never get to 100 percent.
This leads into what I think of as the Decoder questions. The last time we talked in 2019, you said there’s 22 brands inside of Logitech, and they have some autonomy. Have you changed that? How’s Logitech structured now?
We have 22 businesses, and fewer brands. Logitech G is the big brand, but now we’ve gone from 22 to the mid-30s. We keep adding categories all the time. That’s not going to change. We always have these seed programs in development that are secret. They’re small teams, sometimes run by entrepreneurs who are developing new things. A lot of them don’t work, which is fine. We give them a bonus and they move on to something else, but it’s a very dynamic place for new category development and it’s happening throughout the company.
Do those teams cross over? Do the Blue microphone folks talk to the webcam folks to make their microphones better?
A little bit. Our teams are pretty independent and they work hard. On the engineering side, though, for example, we now have Blue microphones working directly with our gaming team. We are bringing Blue technology to the gaming mics and the gaming headsets. We definitely try to take advantage when we can take a strong capability of one team and bring it to another one, but I love the independence. I love playing basketball on a five-person team. I love small teams.
This is kind of a core trade-off, even in terms of cost structure. You undoubtedly have some technology duplication on these teams.
You could maybe have more efficiency in how you invest in engineering, if you shared more stuff, but it seems like you’re making a very clear trade-off. Some duplication is fine, as long as you go fast.
That’s exactly right. We try to be collaborative and open so teams can learn from each other. But a little duplication is going to happen.
Do you measure that? Do you think about that in terms of the cost structure of the company? We’ve got a microphone team over here and a microphone team over here?
We do. We have the debates you’d expect, and those things flare up once in a while. Then my CFO kind of hits me over the head with the frying pan and I try to shake it off — then I try to sell it and swing back at him. Yes, we do have those debates and occasionally efficiency wins, but usually creativity rules the day.
I was just talking to the CEO of Anker. He told me that they have a long process to think about how to enter a new product category — lots of memos and meetings. What’s your process to enter a new category with all these independent teams?
Our process is very organic and pretty fast. If we have a category that we think is exciting, we review the category with a very small team. I’ve got a very small corporate development team that is amazing. We’ll look at it together. The first thing we do is we try to find somebody to come in and develop it. Sometimes it happens organically: one team splits somebody off, puts them on it. Sometimes we hire somebody from the outside. I met an entrepreneur at a coffee break in a seminar, and we hired him. He came in and started a business in one of these. Then he added a person and another person.
Then we meet with them regularly. Their money is separated. They don’t get money like venture capital, where they get 1 or 2 years of money. Instead, they get a few months worth of money and some deliverables. Then I meet with them, with our very small team. We challenge them. They give us updates. We give them more money when they look like they need it. It’s a very organic process.
We look on the outside for M&A. If we see things that we can acquire that can accelerate or replace it completely, just put us in the market right away. I’m scared of M&A when we don’t know the category, so sometimes we’ll develop these teams with the thought that we might end up doing M&A, but we really want to understand the products better before we do it.
So do you put together a small team to imagine a product that would enter some new category?
Keyboards with the track ball attached — I’m just making up a category.
That’s a good one.
Then, do you say, “We think we’re going to buy something, but I want this team to understand what that product should look like and what that market should look like before we go shopping”?
I wouldn’t say, “We’re probably going to buy something.” The team would say, “You guys have to develop the best product in the world.” The team doesn’t really want to buy something. We’re looking outside for something to buy. They’re not really interested. They would want to create the thing.
How do you spend your time? You’ve got all these autonomous teams. They’re off to the races, getting things done. Where do you spend your time the most?
“I spend maybe half my time on new products and innovations.”
I spend maybe half my time on new products and innovations, whether it’s these teams or on the products teams. Probably the other half of my time is split. Most of it is people stuff, whether it’s bringing in people or talking one-on-one with people here. I love to be in touch with people at all levels of the company. Even in the pandemic, I’ve tried to not just be doing one-on-ones with my direct reports. I really want to be more in touch than that.
I want this company to be almost like the small company where everybody knows the CEO. I like that, so I try to do that. I spend a lot of time with entrepreneurs outside, too. Maybe 20 percent of my time is spent talking to entrepreneurs, between three per day to three per week. I love that because I feel I’m really on the edge of what’s coming, because entrepreneurs always are.
What kind of decisions do you find yourself making in all those meetings?
The decisions I make — that any CEO makes — are the ones that are left over when all the other decisions are made. Those decisions are ones nobody else can make, like the ones that cross over organizations. Like the duplication issue: should we make it more efficient or not? That’s a decision. Those decisions are the ones that I usually make. I try not to make decisions that are inside of everybody’s business, if I can. I certainly have opinions on them, but I don’t make them.
What’s the vision, what’s the strategy? What are the effectiveness or efficiency choices you can make that are crossing over things? Then I make hiring decisions for key people that I’m going to work with every day.
How many people are at Logitech?
We’ve got about 6,000.
Have you gotten bigger over the past year?
Yes. Actually, we’ve doubled in people over the last three years. Half our people are new over the last three years. A lot of them have never seen many other people in Logitech in person. It’s really weird.
It’s a good thing you guys make a line of videoconferencing products.
Are you dogfooding? You’re the CEO — are you lighting up your camera and being like, “Man, this doesn’t look good. I have to find that product manager.” How does that work for you? I would be very tempted.
I’m dogfooding all the time. I’ve got so many products around. I’m in the office right now and I actually was just using our newest product for the conference room. It’s got this really cool “follow you” feature if you move around — it moves a little too fast for me, so that’s some of my feedback. I’ve got new products spread around my desk all the time. I’m trying new stuff every day. I love it. It’s one of the most fun things about this job.
How many people report to you? What are your lines of decision-making there?
I have 23 direct reports, which is a little on the high side for most people, but I really like that. People ask, “How do you manage 23 people?” And I always say, “Well, if I have to manage them, I can’t have 23 people reporting to me.”
So I don’t manage 23 people: I have 23 people that are my partners and we work alongside each other. And so I have an hour-long meeting every week where each of those 23 people spends a minute or two and says, “Here’s what’s not going right.” Or, “Here’s a problem that I’m dealing with. Here’s what you should know about.” That’s it.
Then we have two big meetings every three months. One of those meetings looks back on what we learned, and the other one looks forward on where we’re headed. Those are different topics, so it’s a fun little rhythm and it’s not overly bureaucratic. It’s sometimes a little chaotic, but it’s super interesting and fun.
There’s a lot of excitement around entering new categories and figuring out how to do it. I feel you had to know this question was coming. The last time I talked to you, I asked about what was happening with the Harmony remotes. Just a few months ago, you finally wound it down.
That’s a flip side to entering a new category. Tell me about the decision to leave that market.
It’s really tough to decide when to stop doing something. It’s one of the hardest decisions of business. I heard Jeff Bezos on stage actually address this. An interviewer asked, “How do you decide when you stop one of those things?” He paused for a second, then said, “When the last passionate advocate folds.” The interviewer followed up: “Who’s usually the last passionate advocate?” Bezos said, “Me.”
That’s kind of the way I feel about new products. That’s the way I feel about old products. I grew up doing products for marketing, and I think we can make anything successful. I’m always optimistic all the way from the first to last day. I was optimistic about Harmony. I still think we could do something with Harmony, but it goes back to resources. Where are you going to focus?
There are people who absolutely adore Harmony, and we’re going to keep supporting them, but we’re not going to create a great business out of Harmony. We have so many great businesses, and so many more we’re creating, but Harmony isn’t going to be one of them.
But walk me inside that decision. Maybe you’re the last passionate advocate. What was the thing that made you realize Logitech could do this, but you’re not going to?
When Harmony was created, there were a whole bunch of devices sitting around you in your living room — all with individual remotes. It’s a nightmare. You don’t know where the remote went for the subwoofer. You have a couch that’s full of remotes. You’re sitting on 12 remotes.
Harmony simplified all that dramatically, compiling it all into one remote. It was super easy and it was beautiful. Roll forward: now you’ve got fewer and fewer devices. More features are integrated into the TV itself or into your Apple TV, so you don’t need as many remotes. The complexity’s inside the system itself.
Now you’ve got a whole bunch of apps instead of remotes. The real question was, “Can we be an app selector? Can we somehow be the interface between all those apps and you?” We looked at it. We all thought hard about it. We realized that app selection is the domain of players that are already in the market doing a good job. We’ve got to be able to do something special for customers.
After a lot of hard thought, we just decided that we have so many more opportunities out there that we’re going to leave that category behind.
Let me ask the same question in a different category. The pandemic hits. Everyone goes to work from home. You thought mice and keyboards were going to be a nice solid business, but maybe not growing. Now that category is explosive. Are you rolling more resources at different kinds of mice and keyboards? The basics that I think about when I think about Logitech — is that a new area of investment for you?
Yes. Ironically, when I came to Logitech 10 years ago, one of the first things I did was to take 75 percent of the people out of mice and keyboards and put them into new things, because I thought it would be a slow growth category. Little did I know, those categories kept growing pretty nicely. The better we got at innovating using design in those categories, the higher the growth got.
Actually, even before the pandemic, we were growing very nicely in mice and keyboards, so we had already put a bunch of resources into it. We already had a really good strategy for growth and for attracting different types of audiences. When the pandemic hit, we were already there. We’ll keep investing. I’m excited about those businesses.
I think it’s very tempting to think of mice and keyboards as being boring, but keyboards in particular have become a cultural product. Mechanical keyboard fans are deep into what switches they’re using. Logitech actually just released an adorable keyboard.
Oh, thank you.
Influencers on TikTok and YouTube show off their office setups. Keyboards and mice have become a cultural product as much as a utility product. Was that investment in place or is that something you had to pivot? Was that something that came up to you, or did you have a keyboards product manager that insisted Logitech start making extremely adorable keyboards, because that’s where the market is? How does that work?
We have loved keyboards for years, always, but especially in the last five or six years, we just felt like we could do a lot more with keyboards. Mechanical keyboards took off first in gaming in Korea, I think. Now they’re making their way into non-gaming applications. The one you talk about — POP Keys — we launched first in China. Now it’s launching in the US and Europe. It’s adorable and super fun.
“We do have somebody who wakes up and goes to bed thinking about those adorable keyboards. That one is a big business for us and we got really excited about it.”
We do have somebody who wakes up and goes to bed thinking about those adorable keyboards. That one is a big business for us and we got really excited about it. The leader of that business got very excited about it. We’ve been talking about it for four or five years and she’s done such a great job. Art, who works for her, has also done an amazing job. We’ve got a team that are super passionate about keyboards. Believe me, to them it’s certainly not boring, and to me either.
Do you think of keyboards as a culture product? Keyboards are an interesting category. The aesthetics are really important, but those mechanical keyboard fans care about the feel. They will argue about reliability. They know the names of the switches.
Are you deeply invested in switch engineering?
We are. We’ve developed our own switches from time to time. We worked with the big switch makers too. We have a really, really deep understanding of switches. Switches are in everything, mice and keyboards. Some switches are no longer real switches — they’re actually magnets. They feel like a switch, but it’s just a magnet.
We’re deep in the technology of all that, but when you step out of it, I think keyboards already have become cultural products in some places and some applications, especially gaming. And I think it’s possible that keyboards could become even more of a cultural product, so I’m glad that you are intrigued by these new POP Keys. I am too. I love this product. You can pop off the keys and put on emojis. It’s just a cool physical thing to do. We’ll see.
When we talked two years ago before all this happened, the investment was really in gaming, and that was laddering into creators. The focus was on hardcore gamer products: RGB lights and lots of customization. You could see that from the Streamlabs acquisition. Here’s this big, growing market that is not the same as a lot of people working from home. There are Excel influencers on TikTok now, which I’m very intrigued by. All these things have happened that were not gaming. Are the products the same, or are you reusing some of that engineering? Are there new kinds of products? How are you attacking the developing trend that isn’t gaming? Do you have to shift resources to it?
Yeah, we create it. A couple things: first, I think gaming was really the most obvious and biggest thing we’ve ever done in lifestyle. We were really thinking of gaming as another category of physical products, but we discovered very quickly that these are lifestyle products. People really associate who they are with these sports. These are going to become the biggest collection of sports in the world. We realized that there’s really something there. As we started to look into it, we got really excited about streaming and creating — people like you, but on a much smaller scale, who are creating their own thing. People who want to have their own podcast or want to create music or create TikTok videos — could we help those people fulfill their passions? We ended up buying Blue Microphones and we went deeper into all the categories. We went into Streamlabs first because of gaming. Then we realized how cool this could be for general streamers. It’s an easy way to set up. They can make money and we won’t collect any of it. Streamers can create their own merch. They can have hats and shirts just with a click of a button. We decided this is really, really cool. We can enable a whole generation of people to try to make a living — or at least try to make a following — in that space. A lot of that was existing technology. Some of it is new and we’re developing it right now. We’re super excited about this space, just like we were excited for gaming. I think general streamers are a bigger space by far than gaming.
I was asking our team for their questions for you. They noticed that there’s a flood of new consumer products and productivity products from Logitech. But the cadence of gaming products has slowed down. Is that a choice that you’ve made where you’re rolling resources towards these bigger markets?
Well, I think your team is probably right. We discovered that we were launching a whole lot of products in gaming, and they were good, but they were small. Once in a while, we would launch a product like G502, which is the biggest selling mouse in the world. It’s a huge product that took us a long time to develop. So we decided that it might be best to ramp that up and really develop fewer products that have a big impact.
Our [gaming] leader Ujesh Desai made that call. I remember him talking to me about it. I said, “You know, I feel like we can do better than this.” We’ve slowed down. Now when we launch a product, man, is it big! We launched a super light mouse that weighs 64 grams. The pros love it. And that thing is a monster. It’s the biggest gaming mouse ever, I think, next to the G502. So we are slowing down, but launching better, bigger products in gaming.
Do you think that on the flip side, you’re putting out more products now to figure out where the hits will be in the consumer and productivity categories?
I’m going to give Ujesh credit for that, because even though he was launching a lot of things that were smaller, it actually paid off because he found the right big one. The inverse is actually true and false. On the one hand, it is true that launching more products is a great way to discover new things. On the other hand, we already know the categories in the core productivity mouse and keyboards so well. As we’ve ramped up, they’ve become big products overnight.
As we launched these things, we launched MX Keys, which is a very high-end keyboard — the highest end keyboard I think we’ve really ever sold. It’s a monster. It’s one of our biggest keyboards now. When we launched those keyboards and mice in the productivity section, they’ve all been huge. MX Master 3 is a monster in size and in revenue. We haven’t had to do as much experimentation there. POP Keys — that cool and sexy-looking mechanical keyboard — might be viewed as an experiment, but I bet it’s going to be very big.
Are you a mechanical keyboard person?
I go back and forth. For a while I used one of our gaming mechanical keyboards when I was in the office. At home I used a predecessor to MX Keys, which is a very quiet key feel. I like the substantial feedback of a mechanical key, but I also like the total silence of an MX Key, so I really go back and forth.
This is a question direct from our staff: what’s your key switch of choice?
I’ll be killed for this if I answer it, but I’ll do it anyway because I’ll never step away from answering. I like Cherry, I really do. They do a really nice job. I think we’ve come up with keys that at times have been better, but they’re consistently very good keys. They’re very good switches.
Were you expecting the biggest controversial moment to be about key switches?
No, I wasn’t. Had I been expecting it, I’d have mentioned it sooner. I still would have answered that question truthfully.
You make your own switches and you use some other switches. Cherry is a famous supplier of switches. I don’t believe that we often think about those suppliers the way that you might. Why decide to invest in your own versus going out and buying Cherry switches?
“We only invest in areas where we feel like we could really do something substantial and different.“
We only invest in areas where we feel like we could really do something substantial and different. We felt like we could do something better, and we did. We’ve worked with alternative suppliers. There are two or three different companies doing switches for mechanical keys, and they’re all good. I think ours are very good. We do use Cherry. We use a range of things, and I suspect we’ll keep doing that.
I like the competition, too. I think the switch makers have gotten a lot better. One of the reasons why people like mechanical keys — and non-mechanical, the ones that are quiet — is that the switches have just gotten a lot better. The competition has really helped, the market size has grown, and it’s made it a more exciting place to be for investment.
With that market size growing, does that mean a bigger split? Are you selling more mechanical keyboards than standard ones now? Is that going to keep growing?
No, we’re not.
Do you think it’s still pretty niche?
Gaming’s not a niche market, so it’s hard to call that niche.
I see what you mean.
It’s mostly gaming today. There are places in the world where a lot of mechanical keyboards are used for non-gaming purposes, like China, for example. This generation that grew up playing games on mechanical keyboards want that feel in their regular keyboards. They’re the ones that are going to continue to grow that market long-term.
I’ve pushed you on keyboards enough, so let’s talk about some other markets you’ve entered. Logitech has a little bit of smart home stuff in your portfolio now: you have a camera and a doorbell. That is a crowded, difficult market to be in. You have to integrate with the two major smartphone platforms and Alexa, three gigantic companies that are always in a frenemy situation.
Yeah, you’re right.
How is that going? Why decide to enter that category, which is crowded and messy, versus something else?
We’re in a lot of categories. You mentioned a couple of them that are in the home. They’re relatively small for us. We stay in those categories because we think it’s a lot easier to learn your way around if you live somewhere than looking in from the outside. We’re learning. We’re looking. We may discover that we’ve got a big play in there at some point. Right now that category doesn’t look really big and you don’t hear us talk about it very much, but I like having a little scouting force in that area, always looking around to see what’s there. Then if we get started, we can move fast. I like it. I like our doorbell a lot, by the way. It’s really cool.
A doorbell is a really interesting product. You mount it on the wall and never really think about it unless it breaks.
But the cost structure requires running a cloud service and an app developer thinking about the doorbell app on two different platforms, at least.
That’s right. You do know our business.
Amazon’s going to do something wacky with Alexa tomorrow. If this category is just a little scouting force, that’s a long cost for something that people can’t have break. How do you balance that?
Think of how many things you learn from that: you learn how to manage a cloud service and how to work with Apple, Amazon, and Alexa. Those are capabilities that are super valuable as you enter new areas. Most of what we do tries to make the experience of one of those big platform players better. It also gives us experience with software engineering and services. I’m always in learning mode, and I love these categories because there’s a lot to learn. There’s a lot of stuff happening in the home. I think the home category is kind of still a mess — at least mine is — but I do think it will eventually clean up. It’ll be interesting to see how the home area starts to get organized.
Working with Apple opens the door to a number of questions, but more importantly, most of your products right now connect to a computer or some other system through a standard, right? Mice, keyboards, webcams are all USB. The USB standards body is bad at naming things, but it exists and the USB standard continues to operate. You have a lot of Bluetooth products. The Bluetooth standards body is similarly messy, but existent.
Smart home is not there yet; they just rolled out a new standard called Matter. The three companies say they’re all going to work on it together. There is a new radio standard called Thread. Are you in those conversations? Are you saying, “We’ve gotta drive this,” or are you sitting back on the new standards?
We’re very in there, especially in Matter. We’re super interested in it. We’ve got a team that looks at that all the time. It’s just really important that we understand where the standards are going — where Bluetooth is going, what’s included, who’s getting on it. This is the arteries and veins of our business. We really have to know what’s in there and we have to be able to play. We have great people who look at that all the time for us and help us guess where to go next. We’re not always right, but you have to time it correctly.
Are you in a position to drive the standards body, or are you in a position where you’re watching and seeing what happens?
We’re not going to drive the standards. We’re going to ride the standards. We’ll let the big guys go.
This is the second episode of Decoder in which I’ve fallen down the USB-C rabbit hole with a guest, but that standard is a mess. One connector for everything is a beautiful dream. I have no idea what’s going to happen when I see a plug like that, and that is something that directly affects a ton of the products you make. Are you in a position to say, “Hey, we actually are the ones that plug in to your computers. Our customers are confused,” or is that just a cost you bear because the big companies have decided they’re all going to use one connector?
It is confusing, but USB-C is cool. I do like that the big companies seem to all be moving in that direction. It’s helpful for us: if everybody can get to one standard, then it’s more efficient on our end. Most importantly, USB-C is just easier for users. You don’t want everybody to be trying to figure out, like I was a few minutes ago, trying to find a cord to plug into a port. I was running around the floor out here, looking at people’s desks trying to scavenge a USB-C cable.
The CEO is stealing headphones.
I’m on video now. I may be fired tomorrow. But yeah, you don’t want people to have to do that. Things will always change, but it’d be nice if they change from one thing to the next, rather than from three things to four.
For something like Bluetooth, for example, Apple has its own proprietary extensions to Bluetooth that enable features on its headphones that Logitech could just never do. As you think about the veins and arteries of the business’s connection standards, the platforms are integrating more features and rolling out more proprietary extensions. How do you think about that threat? How do you model that out?
You mentioned Apple; I think Apple has done an incredible job of making easy products and including the connection. The AirPods are just a tour de force of simplicity.
I will note that Bracken is currently wearing some AirPods.
I am wearing AirPods, and I’m really impressed by how they made something in which the differences are small but so meaningful. I love that because I just think it’s amazing and so valuable if you can remove steps from a process. Removing steps is maybe the most valuable simplification there is. Nobody’s done that better than Apple in the tech world. It’s just magnificent. As part of that, Apple is actually pretty good about opening up. People talk about the closed system of Apple, but they’re also open in many other ways. The App Store is one of the most open systems there is, and they also open up and let you physically connect into their devices over time. As long as you deliver the quality of experience that they expect for their users, you can do it.
Apple’s standards are high, but that’s good. As long as you deliver against those standards, you have a pretty good shot at being able to be part of that. Most of the big companies in tech are that way in some way, shape, or form.
Obviously, I love this business, so it’s hard for me to be anything but excited about the future. I do see things getting simpler, whether it’s those veins and arteries or the products themselves. I’m excited about what’s coming.
Let me push you on that. Every time Apple comes out with a new iPad, they make a keyboard and case for it. They’re the only company that uses their own keyboard connector on the back of the iPad. They’ve got the three little dots that make their own pogo pin connector. They have told me a thousand times that connector is open and anyone can use it, but I keep asking, “Where are the other companies that use it?”
At the same time, every time Apple comes out with a new iPad, there’s a Logitech version of the keyboard that they’ve obviously developed with you all because your version comes out right away, it works, and it fits a different part of the market. I just see that as Logitech maintaining a privileged position with Apple where they get out ahead of competitors, but you’re still not using the open connector on the back of the iPad. You’re making the products early and you get to be at the front of the line, but it’s still not as good as Apple’s product that uses their own connector. What is the dynamic there?
Actually, we do use their connector. I’ve got one sitting in front of me right now that does use the smart connector from Apple. They have opened that to us from time to time. I can’t speak for Apple at all. They’re very secretive and they don’t share secrets with me. I’ll speculate a little bit, though. I really think their rulebook on this is more about delivering an amazing experience for their users, because that’s what their users expect and that’s what Apple wants to deliver. Apple will occasionally let somebody in that walled garden, as long as they can deliver that experience. If they can’t, then they’re not in. There are probably companies that could, that won’t get in because they haven’t proven that yet, but I really respect Apple’s position. I think it’s a tough standard, and it’s made us better.
One thing that we’ve observed is that phone vendors have to compete with AirPods. If you buy a Pixel phone, the best headphones to buy are the Pixel buds. If you buy a Samsung phone, the best headphones to buy are Samsung’s headphones. The ecosystem is getting wider into proprietary lanes — not just Apple, but every company. Do you see that as something that you have to push back against, or are there categories where that just isn’t happening?
It’s always been true that there were proprietary devices or peripherals that came with the primary devices, and it puts pressure on us to deliver a better experience and better products and know the customer even better. The only advantage we have is that we don’t exist if we don’t do it better than the peripheral that’s in the box. That puts so much pressure on us to innovate well — you can tell that I love that pressure to innovate. I would much rather be in that spot than a commodity business where I just have to sell more pegs than somebody else. I really want to innovate better than other people, so the pressure’s on us. I like that. I’ll take it.
Let me ask you about that commodity product concept because that’s kind of the flip side of the business: you can make great products, you can innovate well, you can invest in basic components like key switches, but you also have to market and retail the products. That has changed a lot in the last year, but Amazon is notorious for noticing that a product is selling well so they immediately release an Amazon-label version. What’s the dynamic? How has the sales market changed, and how do you think about that? Logitech products command a premium because of the brand and the investment, but you’re next to a lot of commodity versions of your own products now.
It’s really interesting: when the company started, we were an OEM manufacturer for HP, Apple, and Dell. We were still an OEM manufacturer until about five years ago when we exited. At that point it was about 10 percent of our business. Because we were an OEM manufacturer, we also had our own products that sold at retail right next to the same products we were competing with. We had to have something better because those products were in the box and ours weren’t. We tended to innovate better, adding more features and building in more power for the dollar. We’ve just kept doing that.
I view that as wonderful. I’m so proud when I hear that somebody knocked off our product. In a way, I really feel good about that.
“I’m so proud when I hear that somebody knocked off our product.”
Now if they knocked off our product and took something that we owned that they shouldn’t have, then we should act appropriately, but I don’t view that as the problem at all. That’s a good thing.
That’s very diplomatic. People who are working from home are buying peripherals. If I want to buy a G502, I’m typing it in Google or the Amazon search box and hoping that it comes up. Those are some pretty important middlemen — one of which likes to make its own products and put them at the top of its search results. How do you manage that?
I think we need to be better at managing the whole chain. First, we need to have a G502 that’s known to be better. That product in particular is better. That’s the best-selling mouse in the world, so there will be other things that are going to pop up, including from other companies like those. We still have to win by creating something that’s better: getting reputation, getting those five stars.
We’ve gotten really, really good at working within the Amazon ecosystem of selling. We need to have really good capability, and we’ve built that over the last few years. We’re very good there now. Amazon and other companies helped us be very good. We need to be unparalleled or unbeatable in terms of being able to go to market online, the same as we were offline. We’re almost there now and we’re not going to let up.
Do you foresee bringing any of that relationship direct? Do you see your website becoming a sales channel that competes with everybody else?
We have a sales channel but it’s very small and it will grow, but our primary business is not to sell direct. I like direct selling because it gives you a relationship with customers and you can understand what you should be doing better, but I don’t envision us becoming like some of the other companies where 50 percent of our sales go through our own channel.
Has the mix of sales channels changed for you in the past 18 months?
Yeah. It ramped up when we were short because people were so desperate. They just wanted to buy, and they couldn’t find it where they normally buy, so they went to us. We sold a lot. It did change materially, but it didn’t become 50 percent of our business in the world.
I bought the C920 webcam. It was definitely Chinese when I bought it marked up on eBay. I did it partially just to see what would happen, but that channel’s full now. You’re selling more online, I’m assuming, but was that an impact? Did you see that you were out of product, but the channel is filling on eBay? Did you feel that you had to push back against that?
You always see products come through secondary markets like that … We occasionally have a frustrating period where we have to deal with that and it kind of hurts. It destroys the price on another channel. Generally speaking, though, I think it’s being managed pretty well. It’s a fairly orderly market. It’s competitive, but it’s orderly. We are managing it better today than we’ve ever managed in the history of the company. We’ve learned by making so many mistakes — they were our mistakes, usually.
Let’s end where we started: in 2019, you said Logitech was going to become a software and services company, a cloud accessories and peripherals company. Obviously in the last 18 months, you’ve refocused the business in a lot of ways. Logitech is making adorable keyboards. I don’t think there’s a cloud component to the keyboards yet, but we’ll see. What’s the future? What’s next for Streamlabs? What’s next for the connected services? Is that still where you’re headed, or has this period of refocusing changed any of that plan?
We were born a hardware company and we’ll stay a hardware company. We’re going to create more and more great things and we’ll enter new hardware categories. The services component is very, very small for us today. You mentioned Streamlabs — that’s a super exciting business and it’s growing fast. We’re expanding it in different directions. We’re also creating new services across a lot of our business today and those will grow. It’ll be more and more significant.
I think we’re going to be a hardware and services company. The services are going to be a very small part of our business for a while, but they’ll grow. … Eventually they’ll be meaningful and people will say, “Ah, they really did mean it when they said they’re going to get into services.” We do mean it. We really do. I’m really excited about it. It’s super fun.
I’ll close on this. Design is so interesting. I was talking to John Maeda, who is a great designer, and I asked him, “What’s the difference between designing a hardware product versus designing an app or a software or a service experience?” He said, “They’re as different as can be.” I said, “What do you mean?” He said, “Designing a product’s like designing a chair. A chair is the standard for design. Designing an app or a service is like designing an entire college campus.”
I thought that’s really true. It’s so dynamic and so fast, but the other difference is that you can change the college campus all the time, so it’s exciting and fun. In the future we’re going to be very, very dynamic. It’ll make us better and faster at everything because we will have a service business that’s meaningful.
When you look at some of the trends that have radically accelerated over the past year, the one that comes to mind that’s real is the creator economy. We just see more and more people building media businesses at home, building direct-to-consumer businesses at home. Do you see that as a market that you can actually provide services to?
We have four big business areas: video collaboration is a billion-dollar business. The core mouse and keyboard business is way over a billion dollars. Gaming is also way over a billion-dollar business. The fourth one is the streamers and creators business. Today it’s much smaller than a billion dollars, but it’s growing very fast. And the streamers and creators area absolutely can be bigger than the other three.
Obviously it’s Streamlabs, but Logitech has to make a ring light. Where do you see the growth in streamers and creators?
I would never disclose potential features of categories we might enter.
Logitech is going to make a ring light. Can I break on the show that you have a ring light coming?
“We’re absolutely going to do more stuff in the creator and streamer space.”
If we were even thinking about that, it would be top secret. If ring lights even crossed our minds, we wouldn’t mention it. We’re absolutely going to do more stuff in the creator and streamer space. We love that space. The definition of the purpose of the company, as you know, is often kind of an eye roll for people, but it’s to enable all people to fulfill their passions. It’s to enable creators who are doing stuff digitally online that they’re super passionate about. We’re creating things all the time for those people.
We’re also doing so many things in the diversity, equity, and inclusion space. I’m super excited about that and am directly connected with that. It’s just so, so exciting. As you said, very eloquently, this is the most exciting thing happening in the world. It was already exciting and during the pandemic, it just exploded. This genie is not going back anywhere near the bottle. It’s all over the place.
You’re not going to disclose the ring light to me — although I think you have — but do you think the opportunity there is creation hardware? Do you think the opportunity is cameras and lights and stream decks, or is it software and services?
I think the opportunities are absolutely in both directions. There will always be hardware. We’re good at that. Hardware is hard as hell mainly because of the logistics of the supply chain. Services connected to that hardware are absolutely going to be part of our future. We’re super excited about that.
Streamlabs has been amazing. I’ve learned more from Streamlabs than any other business, probably since I got here. I’m so impressed by the team that we have running it. Every time I talk to George [Kurdin, Streamlabs head of product], my IQ goes up about 10 points, which puts me at about 40 so far. It’s really fun. We’re going to do both.
Last question: I have to ask you about another category that I don’t think is real yet; the endless conversation about the metaverse. Facebook renamed itself. Microsoft thinks we’re all going to work in headsets. That directly implicates your businesses: if we’re all in virtual worlds, maybe we don’t need mechanical keyboards. Is that even a blink on the horizon of a competitive threat to you, that you’re going to have to sell Logitech G502 NFTs in the Facebook metaverse?
I do think there will be a lot of people sitting in headsets doing what we think of as productivity work today or playing games in much the same way we own a PC today. But we’ve had five or six years of working on VR and AR, and I haven’t found any better input tools than the mouse and the keyboard yet for that. I think they’re going to do very well in that space.
That’s great. Bracken, thank you so much for coming on Decoder. It’s always a pleasure.
Thank you so much for having me.
Decoder with Nilay Patel /
A podcast from The Verge about big ideas and other problems.