At CES this past week, Lenovo made an interesting move by licensing the Alexa platform and building its own version of Amazon Echo called the “Smart Assistant.” It wasn’t the only one; Huawei shipped an Alexa phone and Ford announced it will eventually have cars that feature Alexa. Alexa is now one hot property thanks to Amazon’s licensing strategy, which may become a problem.
Alexa is in the news for other things this week. Apparently, a child talking to her Echo ordered an expensive doll house by accident and TV news picked the story up. Unfortunately, while reporting the incident, the newscaster explained how this had been done. Echos that were near TVs during the report then heard the commands and ordered the same Doll house. This incident is troublesome because it suggests that if Amazon wants to increase sales all it needs to do is run similar ads on TV or radio and, presto, it could set sales records!
But what I find particularly interesting is that Amazon appears to be executing Microsoft’s old “Plays-For-Sure” strategy better than Microsoft did. Or, said a different way, Amazon is showcasing how “Plays-For-Sure” could have actually worked and beat the iPod.
Why Plays-For-Sure Failed
Plays-For-Sure was Microsoft’s platform for music around the time the iPod launched. Basically, an OEM could license this platform, put it on their hardware, and instantly have an iPod-like device. Unfortunately, it wasn’t as intuitive as the iPod, the hardware that the OEMs brought out wasn’t as nice, and Microsoft finally gave up and brought out Zune while killing the offering.
Why Zune Failed
Zune was simply wrong headed. It started out being a relatively unattractive player with a big screen (the iPad didn’t have a screen) which could play videos but lacked video content. At the time, it was very hard to get digital video. Its “killer feature” was the ability to share music for free, except that required both people sharing to have a subscription to Microsoft’s music service. At the time, most folks had iPods, so this killer feature didn’t work for them. Eventually, Microsoft made a far more attractive product and got video to work but, by then, so did Apple. Consequently, Zune died out.
Amazon Effectively Started Where Zune Ended
Zune ended up with an attractive player that worked. This is where Amazon started with the Echo, which was a fully featured product that worked. What remains kind of amazing, given the Echo is basically a music player at heart, is how Apple missed this boat entirely. But once Amazon had an attractive working product, it then moved to its “Plays-For-Sure” -like strategy. The difference here is that Amazon’s actually worked and it’d set a high bar with regard to hardware design. Thus…
Lenovo’s Smart Assistant
Thus, the Smart Assistant launched by Lenovo had to exceed the bar set by Echo, and it does. It is more attractive, comes in colors, and has a better sound system while still having at its heart the same Alexa platform that the Echo had pioneered. This is a win for both vendors because Amazon makes a far higher percentage of profit from a license than it does building hardware, the product is still connected back into Amazon’s store for additional revenue, and Lenovo can market a product that potentially has a larger market than Amazon’s own (particularly in China). Ultimately, this becomes an entry product for Lenovo into the home and related IoT offerings.
Amazon is showcasing with its Alexa platform that Microsoft’s Plays-For-Sure strategy was backwards but still a good idea. Rather than licensing first and then moving to ever more attractive hardware, it is far more successful to start with an attractive product benchmark and then license out after proving the concept works and setting a high enough bar for hardware design. The end result is that Amazon has been very successful, first with its own products, and now with products from companies like Huawei, Lenovo, and potentially even Ford.
So, the correct way to execute “Plays-For-Sure” is to do exactly the opposite of what Microsoft did. Go figure?
President and Principal Analyst, Enderle Group
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