Amazon’s Strategy Deficit and Alexa’s Endgame

For the second year in a row, Amazon had a fall devices launch day where voluminous devices were indeed launched. What appears to be a throw it at the wall and see what sticks strategy may very well be much more tactical than observers realize. It is certainly true, not all of the devices Amazon launched will sell in any significant volume, the larger point to be made is about Amazon furthering their lead with Alexa and the Alexa ecosystem of consumer electronics.

The Strategy Deficit
It is no secret Amazon missing the mobile revolution hurt. Fire Phone was a decent idea, but one of the key lessons Amazon learned was what happens if you are not a player with a dominant platform in a computing cycle. Sure, Amazon could have worked with Google and shipped a smartphone loaded with Google Services, but they deemed at the time the trade-offs were not worth it. Now, hindsight being 20/20 I could argue Amazon should have done worked more closely with Google as Android has evolved to a point where it’s current implementation allows for a great deal more flexibility in third party services integration then it did years ago. Meaning, had Amazon stuck it out with Google, they may very well be in a position today to have a smartphone that played nice with Google but was still loaded with best of breed Amazon services. But, again, hindsight is 20/20, and that is not how it played out.

I’ve seen some argue, Amazon can still do this and launch a smartphone, with many voice-first features, but honestly it is too late for that. Instead, Amazon is focusing on the lesson learned of not having a dominant platform and working to make that dominant platform Alexa for the next wave of computing devices.

Rightly, Amazon knows something beyond the smartphone is coming. What that is, we have theories but still don’t know, and the reality is smartphones will be with us for a long time still. Amazon not having a strong presence on smartphones, beyond e-commerce, is the strategy deficit they are dealing with. And while their strategy is clear, try to make Alexa the default platform on all connected consumer electronics beyond the smartphone, there is a broader point about the potential for success but also the risk.

Alexa’s Endgame
Alexa everywhere is the endgame, and the default platform for voice is essentially Amazon’s strategy. Yes, a product like the Echo Loop or Frames raises questions of value proposition, but to be honest, many were not convinced a talking speaker would work as well.

The other thing to consider when looking at Amazon’s new Echo Lineup is how much of this hardware strategy is a best first customer example more than it is a volume sales example. Take their Microwave, or Oven as an example. Those products are best first customers of the Alexa platform for a cooking appliance, and Amazon’s true end goal is that all Microwaves and ovens have Alexa built-in as the default voice-first platform. That is a future I believe is highly likely. With this perspective, the broader goal of some of these Amazon hardware products is to show potential wearable technology companies the value for putting Alexa in their solution as the default voice platform. I do not expect Echo Loop or Echo Frames to sell in significant volume, but if more wearable companies come to Amazon to put Alexa in their wearable, or face/head-worn computing device then this becomes a much more productive strategy for Amazon.

What is fascinating about this is how I can see a world where this works out fabulously for Amazon and one where it doesn’t work at all and Amazon’s Alexa is not the default platform for the post-smartphone era. It is perhaps possible as well that I’m entirely overthinking this and Amazon simply wants Alexa to deepen engagement with Amazon services and commerce platform, but as of now, it seems like they have much larger ambitions for Alexa as a voice computing platform.

Google and Apple are not going to sit still, but there is no doubt in my mind the overwhelming perception by the industry and consumers is that Alexa is the leader when it comes to capabilities and how Google and Apple continue to compete and as the world begins to invest the platforms that will drive the next generation of consumer electronics.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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