Amazon’s Internet of Things (IoT) Strategy — Another Virtuous Cycle Taking Shape

by | Apr 30, 2015 | Blog

Amazon is the master of exploring, expanding and disrupting in both retail capabilities and providing business services, typically technology services via AWS, to companies.  When they can connect the two together, there are reinforcing synergies between the capabilities and investments.  The Amazon Flywheel is a long-tested systems dynamic view of Amazon’s core retail and marketplace business.  With the recent steps in both customer devices and computing services infrastructure, the Internet of Things (IoT) launches by Amazon start to define a reinforcing Amazon IoT flywheel demonstrating the promise of future business and customer impact for IoT in general, and an important business focus for Amazon.


“I’ve Fallen and I Can’t Get Up!” – Amazon Customer Facing Internet of Things (IoT) Launches

Any late night TV watching baby-boomer knows the reference to the Life Alert product made famous with the catch phrase “I’ve fallen and I can’t get up”.  While not technically an “Internet of Things” device (it does not have an IP address), the button-driven, special purpose device has many similarities to many of the IoT capabilities being launched by Amazon and others.  Amazon Dash, Dash Buttons and the ever-listening and somewhat creepy Amazon Echo device, Amazon has shown the ability to launch experiments to understand how special purpose IoT devices can make both ordering items and accessing content on-the-fly.

Enabling the “Internet” of the “Internet of Things”

When I was at Amazon running the marketplace business and the enterprise services business, we started to get really clear that Amazon was two types of companies — a retailer, and a platform company offering services to other companies, including Amazon the retailer.  In Amazon’s emerging IoT strategy, it’s clear to me that the big plays is not in their own proprietary devices, but instead in providing infrastructure and tools enabling lots of other companies and product developers to design, build and operate their own IoT capabilities.

When thinking through an IoT solution, what is most obvious is the end device.  But this is the classic “tip of the iceberg” in creating an end-to-end solutions.  The IoT Value Chain is defined by devices, connectivity, big data, algorithms, actions, and connection to the rest of the enterprise.  As more and more IoT Devices get introduced, a greater amount of data (both big and small) is generated. This data, once integrated with algorithms create a greater overall customer IoT impact generating more demand for more devices. All of these devices and services can be hosted on AWS and utilize their infrastructure capabilities leading to greater growth of the infrastructure. At this point, the loop looks familiar: infrastructure growth leads to lower costs, which means more services and companies rely on the infrastructure locking into a cycle of higher customer impact.  Amazon Web Services has several existing IoT enabling products include AWS Redshift, AWS Kinesis, AWS Machine Learning and recent acquisition of 2lemetry show that the big bet for Amazon is not in creating devices for its retail business, but in providing cloud infrastructure and software to thousands of companies needing to build IoT devices and capabilities.  This is the AWS IoT flywheel and the real business in IoT for Amazon.


Day One for IoT at Amazon

Jeff Bezos has long stated that it is still “day one” in terms of the impact the internet will have in society and that Amazon is in their early days of the business lifecycle.  Certainly, in terms of the impact that the Internet of Things will have in our lives, and the opportunity for Amazon, the “day one” argument is easy to understand.  Amazon will continue to experiment and invest on customer facing devices like the Dash Button and Echo, with the real business being in AWS infrastructure and solutions enabling both it’s own and everyone else’s IoT solutions.

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