Alexa as an operating system

On the blog Stratechery, a recent post discussed Alexa, the new digital assistant from Amazon. It talked through the business model that Amazon seems to be employing in order to promote this new line of service.

Alexa can take many forms, but the primary means to access this tool is through a standalone product known as the Echo. The blog noted some key developments:

• The physical device (the Echo) was simply a conduit for Alexa, Amazon’s new personal assistant. And critically, Alexa was a cloud service, the development of which Amazon is uniquely suited to in terms of culture, organizational structure, and experience.
• The Echo created its own market: a voice-based personal assistant in the home. Crucially, the home was the one place in the entire world where smartphones were not necessarily the most convenient device, or touch the easiest input method: more often than not your smartphone is charging, and talking to a device doesn’t carry the social baggage it might elsewhere.
• There was an ecosystem to assemble: more and more “smart” products, from lightbulbs to switches, were coming on the market, but nearly every company trying to be the centerpiece of the connected home was relying on the smartphone.

Why is this important? Well, the article had earlier discussed the vital importance of the operating system as a key driver of digital value (think Microsoft Windows).

• All kinds of hardware manufacturers are lining up to build Alexa-enabled devices, and will inevitably compete with each other to improve quality and lower prices.
• Even more devices and appliances are plugging into Alexa’s easy-to-use and flexible framework, creating the conditions for a moat: appliances are a lot more expensive than software, and much longer lasting, which means everyone who buys something that works with Alexa is much less likely to switch

That leaves the business model, and this is perhaps Amazon’s biggest advantage of all: Google doesn’t really have one for voice, and Apple is for now paying an iPhone and Apple Watch strategy tax; should it build a Siri-device in the future it will likely include a healthy significant profit margin.

Amazon, meanwhile, doesn’t need to make a dime on Alexa, at least not directly: the vast majority of purchases are initiated at home; today that may mean creating a shopping list, but in the future it will mean ordering things for delivery, and for Prime customers the future is already here. Alexa just makes it that much easier, furthering Amazon’s goal of being the logistics provider — and tax collector — for basically everyone and everything.

Here is the link to the full article:  Stratechery: Amazon's operating system Alexa