Alexa, Siri and the ecosystems of the future

If you are someone who can bake with out the local fire department showing up at your door — you know the amount of orchestration that goes in to it. If you are a novice baker like me who is yet to figure out the all the secrets behind ovens and smoke detectors then you are out of luck. You better be prepared with some open some windows to get the smoke out of your apartment. After your second and third attempts you’ll probably figure its easier to just buy a cake from the bakery.

What if Alexa or Siri can help you with this? Imagine your kitchen operated in modes: baking mode, grilling mode, Indian food mode. You just say “baking mode” and Alexa turns on the oven, pre-heats it to 350F, switches the vent fan on, opens the windows and starts reading out instructions from the recipe. This will minimize the cognitive overload and you can focus on your cake — things would be so different, wouldn’t they?

Think of all the other things you can simplify. I for one would love the ability to set my living room to a Game of Thrones mode. It’d be super easy if Alexa can turn on HBO, dim the lights in the living room, adjusts the sound system, draws the blinds and sets all my devices to silent mode to give me a fantastic TV watching experience. There is so much friction in our daily life that Alexa and Siri can eliminate.

Things work seamlessly with AI assistants at their core and create a lock in.

There is a reason why I made this article Alexa and Siri centric — they are the only two voice based assistants that I see emerging as the leading ecosystems or platforms of the future. Google clearly had a head start in this space because of its superior algorithms but Alexa caught on pretty fast. Amazon was virtually a non-entity in this space but now has over 5M echos in the market with 6000+ Alexa skills; It is expected to be a $ 11B business by 2020. Apple’s Siri on the other hand had a disappointing start, partly because Siri was inferior when it launched and apple tried to oversell Siri as a very capable personal assistant; Apple was also reluctant to open up Siri to external developers until it launched the Sirikit a year ago.

Alexa ecosystem source: AWS

The truly fascinating aspect of this future is that it will not be a 1 on 1 device game, but an ecosystem game. There is a significant hardware component involved that creates high switching costs for the users. Why would a user who configured his house with Alexa or Siri enabled light fixtures, kitchen appliances switch to another platform? More importantly, if I am some one who owns an iPad, iPhone, iWatch, and a MacBook it means I can control my house from anywhere. If there is a UPS guy at my door while I am at work, I can just say “Siri open the door for 5 seconds”. Problem solved. Companies that can not play the ecosystem game will be in a catch 22 — like the one Microsoft faced when it tried to make a smart phone. Users won’t use your products till there are apps and developers won’t build apps if there is no user base.

Alexa and its skills

With 5m+ Echos out there and 6000+ skills, Amazon was clearly able to break this catch 22. The bigger piece for amazon would be to assemble a network of Alexa compatible home appliances and improve its Alexa app on iOS and Android; All the steps amazon has been taking recently seem to be in this direction. Amazon can keep investing in Alexa long term and continue to sell more products to the users via prime. When you think of Amazon as a user, you can’t think of anything other than simplicity, choice, efficiency and reliability that Amazon Prime brought in to your life. Users hence are very likely to accept an Amazon product in to their living room. This is why customer obsession is such a fantastic ideal to live by and always pays off in the long run.

Apple on the other hand needs to do some serious work on Siri and launch a device that would be the center of everything apple — bonus points from me if it is a re-imagined Apple TV with a great speaker. Considering Apple’s might and a loyal user base it won’t be a tough task to create an ecosystem of home appliances that are Siri compatible. If there is a clear edge apple has in terms of winning — it would be on privacy and usability. Apple has carefully created a mental image as a company that really values the privacy of its users, they also walked the talk by refusing to unlock the iPhones in the past. Apple will have to sell device at a premium but Apple’s walled garden ecosystem apple will only solidify the buying choices of the users who are willing to pay a premium for the privacy and apple’s legendary user experience. We must not forget that these devices sit in people’s living rooms by their bookshelves and family pictures, they better come with a touch of Jonathan Ive.

It would be interesting to see how large device makers like Samsung and others compete in this IoT future. The last time I checked, Samsung is the market leader in the US home appliances market with 18% market share and has products that can hook to both Alexa and google home via Samsung smart hub. Another key market force to watch out for is governmental regulation. The IoT future brings its own unique set of challenges and it is very likely that governments around the world would want to set their own rules around data privacy, standards, compatibility. It is very possible that U.S, China, EU and India will have their own local ecosystems and dominant players. Data privacy and security will undoubtedly be at the heart of this IoT future.

If we examine all these trends through Clayton Christensen’s Jobs-To-Be-Done lens, the users are hiring these devices to do a very specific job — they are hiring an AI personal assistant to simplify their life. Obviously they expect this new assistant to be loyal and keeps things private. This is the reason why google with its ad based business model will be at a huge disadvantage while Amazon and Apple charge ahead.