A Business Model Upside Down 

Amazon just released a number of upgrades and form factors to its Echo line of products.

• For families that now only listen to music through their Echo, but want a richer sound, you can pre-order the $130 Echo sub-woofer, a $300 Echo Link Amp, and the $50 Echo Auto for to connect to your car’s stereo system.
• For those who want a handy extra screen-based way of watching things on Amazon Video, talking to family on Skype, while also ordering Alexa to complete those shopping chores, there is the new Echo Show for $230.
• For those who never leave the house while binge-watching Amazon Video, you can now get an Echo-enabled microwave for $60 with an Amazon Dash button for reordering said popcorn.
• And there’s more.

At first glance, it Amazon is following a last-century model for launching new physical products. A big announcement touts multiple new features and use cases. There is something for everyone, in many form factors. The devices are all available for purchase or pre-order, with clear price tags aiming well positioned to be the lower cost alternative to comparable products.

Because this is Amazon, we have to turn this story around and look under the hood.

These are not products.

They are data totems.

Data totem = a touchable, physical instantiation of a data-collection and service up-sell and cross-sell device, often cloaked in the form factor of a late 21st century “product” and available for sale. Examples include Amazon Echo, Apple’s iPhone, 23andMe’s DNA test kit.

The business model of a data totem at first mimics that of an actual product. It’s for sale. There is a price tag. It’s shipped in a box. There is an un-boxing experience. You plug it in.

But the business model is not hardware-as-a-service, which powers Amazon’s supercharged business, Amazon Web Services. It’s a new model. It’s Service-as-a-Hardware. The value for you appears in the product’s functionality.

The value for the company is endless, in the form of recurring more profitable revenue streams that Wall Street so adores.

You order paper towels and new coloring pens and that book you just heard about and microwave popcorn with a call to Alexa, a tap on the Dash button, a swipe on the screen. You shift your music and viewing habits over to Amazon Music and get used to the utilitarian playlist options like Stay Grindin’ Rap Motivation and Chill After Work Electronica. You have no problem paying the Amazon Prime subscription fee to justify all of the purchases, music, and movies you’re getting from these devices.

Amazon, it appears, now uses all of the known business models, and is inventing more business model combinations in an impossible pursuit to reshape our customer expectations. Will we be able to shop anywhere else?