Will Alexa Own Your Customers?

How Conversational User Interfaces Capture and Create Consumer Value

Nathan Shedroff
Aug 31, 2018

In 2016, along with Steven Diller, I co-wrote Blind Spot, a book dedicated to uncovering and maximizing customer value. Blind Spot showed business leaders how to create and sustain valuable, productive customer relationships. In that book, we establish the thesis that whoever owns the relationship owns the value in the customer experience.

Customer experience is key. You can’t create value for or receive it from customers without having a relationship. And, you can’t create a relationship unless there is an experience.

Every single company in the world is in the experience business and in the relationship business. It’s not something just for the biggest brands. The stronger the relationship, the higher the potential value. It’s the only way value is transferred. That’s true throughout history, regardless of the technology, whether it’s trading seeds at the gates of a city, working with a real estate agent, or buying something online.

Every single company in the world is in the experience business and in the relationship business.

New technology can change the nature of the experience, however. Successful companies are the ones that can navigate these changes well. At Seed Vault, we believe conversational user interfaces (CUIs), represent the dawn of a new paradigm that will change the way people interact with computing systems, services, and nearly every organization. Instead of typing or tapping onto a screen, people will, more and more, simply speak to a conversational agent (bot). The CUI or bot is the front-end to systems using artificial intelligence (or, more accurately, machine learning) technologies.

Today, when someone says “Alexa, play James Brown,” it’s pretty obvious that Amazon owns that relationship. And that’s fine as long as you, as a customer, are satisfied with the experience of buying stuff from Amazon. When you say, “Alexa, buy me more soap….” that’s all Amazon. It’s no different than going to their website and clicking “Buy it Again.”

In the 90s, as the Web dawned, we saw some companies using tech well and some poorly. Online shopping back then (and still today) was conceived as just the shopping transaction. But shopping is actually a much bigger and more interesting experience, and the experience is where the relationship becomes sticky or doesn’t. The new winners and losers in business will depend on who builds the best customer experience and who owns the relationship that experience enables.

CUIs will transform the customer relationship

Charlie Cadbury, CEO of SayItNow

The coming generation of CUIs will change the nature of the customer experience, including where and how it happens. For Charlie Cadbury, CEO of UK-based SayItNow, whose market includes blue chip brands in ecommerce, apparel, and automotive sectors, “The promised land is a few years away, but it’s coming soon. Customers have realized it’s quicker to use natural language, and they are going to expect an immediate response from brands. The big breakthrough is natural language processing, which underpins all these chatbots and conversational interfaces.”

Customers have realized it’s quicker to use natural language, and they are going to expect an immediate response from brands. The big breakthrough is natural language processing, which underpins all these chatbots and conversational interfaces.

At SayItNow, Charlie says, “We believe it will be ever more important for brands to have a compelling conversational assistant and thus stay abreast of the way the ecosystem is changing consumer behaviors. Conversational SEO will be ever more important and conversational commerce channels will start to outperform other channels due to its trusted, personalized nature. Over time these assistants will become the principal route for access to products and services.”

SayItNow’s advice to brands that wish to maintain relevance is that they need to implement a conversational strategy now. “It’s like training a child how to talk,” Cadbury explains. “In the beginning you can make a lot of quick progress, but to become an excellent brand ambassador will take years.”

The road ahead

Consider this scenario: This year, you’ll be able to drive a BMW with a CUI. Yes, you will be talking to your car — and this time it will finally respond. Instead of typing in directions, tapping a search request to find the nearest gas station, or scrolling through a screen full of commands just to turn on the air conditioner, you’ll simply say, “Turn on the AC to 70 degrees.”

BMW’s ConnectedDrive. Credit: BMW

The car will have a bot (a CUI) backed by a machine learning system that uses a variety of services and databases to understand what you say, what you want, and what your driving and maintenance history is. Your carbot will perform actions for you, and it will respond appropriately to your requests. It will become the interface to the car, as well as the driving experience; increasingly it will be “agentive.” Agents are systems that do things on our behalf: not just finding restaurant recommendations but booking a table, or purchasing tickets to a film as you drive to the theater, even selecting a showing that, given the traffic, you’ll arrive to on time. In addition, your BMW will tell you when you need new brakes, an oil change, when the warranty on your set of radials runs out, and what options are available so you can customize the car to serve you better.

Now, let’s examine this scenario from a brand perspective. You get into your BMW and say, “Hey Car…” Suddenly you have all these services at your command. That’s great, except what happens when you get into your BMW and you have to say, “Hey, Alexa…” to do all these things?

BMW’s deep integration with Amazon’s Alexa. Credit: TechCrunch

From the driver’s standpoint it’s not that different an experience. From BMW’s standpoint it is night and day. Even though it is far easier to license Alexa from Amazon and let them deal with the details, it immediately switches the consumer relationship to Amazon, not BMW. Any company that does this turns themselves into a decreasingly differentiable hardware shell around Alexa. Car companies risk transforming themselves into mobile, steel-encased Amazon devices. And this doesn’t even begin to account for the customers’ and BMW’s data. Get the relationship wrong, and automobile companies lose the connection to their customer, the conduit to the brand, and any of the value that can be derived through it.

Conversational commerce is the future of commerce

If Silicon Valley has taught us anything in the last 30 years, it’s that the software is what matters. It’s Microsoft Windows and Office, not Dell or Lenovo, or HP. It’s Instagram, Facebook, and Photoshop. Whether it’s a BMW or a Toyota won’t matter so much if they use the same software inside. Alexa, or a bot just like it, will make the difference. If BMW, for example, wants to maintain their value, they need to be the brand the customer thinks they are dealing with — not Alexa, nor Amazon. The moment people realize they are dealing with Alexa, then BMW becomes a commodity, like Asus, Acer, Dell or Xiaomi running Microsoft Office.

Lauren Kunze, CEO of Pandorabots

Lauren Kunze, CEO of Pandorabots, among the largest, most established bot platforms in the world with over 250,000 registered developers building 300,000 chatbots running on popular voice and messaging platforms, sees the trend toward a bot-driven, always-on customer relationship clearly. “In 2015, I predicted that all Fortune 1000 companies would have a bot under development or up and running,” she says. “In 2018, the conversation is not about whether they should build a bot. It’s about whether they should build a bot internally.”

Having a bot is the only way to offer personalized one-on-one communication at scale, Lauren says. “Bots provide touch points at every phase of the customer journey — from brand awareness and new user acquisition to personalized product discovery, recommendations, and all the way through customer service. It’s going to encompass all B2C communication.”

Get something simple built, around a well-defined problem, and a well-defined use case, so they can get well-defined answers around the questions people are asking.

For Kunze, “Conversational commerce is the future of commerce.” She says, “When I talk to brands who don’t have voice skills they fear they are late to the party.” Her advice to brand marketers is straightforward: “Get something simple built, around a well-defined problem, and a well-defined use case, so they can get well-defined answers around the questions people are asking. Start with something small that solves a real problem, define upfront what success looks like, then see how people actually want to use the system. Do they want to shop? Or do they want to interact with customer service? Every customer interaction provides a piece of feedback that can help them fine tune their next iteration and improve the functionality of their bot.”

It’s the software stupid

Tesla is the first automaker to realize software matters. Tesla recognizes they are making hardware to run a software platform. To roll out new features, Tesla doesn’t require a trip to a dealership. It delivers them as software updates and upgrades. The software downloads itself and drivers get new features, including the ability to turn a Tesla into a self-driving car. Think about that for a moment. Tesla can transform their cars into autonomous driving vehicles — technology that will change the future of transportation as we know it — with a software push!

As new features are developed, Tesla can sell new features with similar downloads. Eventually, the upgrades will include the ability of your Tesla to come fetch you from where you parked it (or, more likely, where it parked itself). It’s an “in app” purchase. Wait until Tesla decides they are also service providers. They can start selling music, navigation services, entertainment options, digital accessories, etc.

What’s the brand value?

Here’s another example of why brands need to develop their own CUIs in order to own their customer relationship. I’m an industrial designer by training and I’ve loved the high-end Danish stereo brand, Bang & Olufsen, since I was in high school. Following a meeting in London, I dragged my Seed Vault co-founder, Mark Stephen Meadows, into a B&O store. While I was drooling over the latest designs, Mark asked the sales rep if B&O had a conversational interface for the speakers, stereos, and TVs on display. The sales rep got really excited, and said, “Yes we do! Just a moment.” He ran over to his desk, pushed a button, and said, “Alexa, play music.”

Instantly, Mark and I locked eyes from across the room as we knew exactly what just happened: B&O ruined their brand. They’ve turned themselves into a beautiful but ultimately tactical supplier of speaker hardware for Amazon and the value of their customer relationships has transferred to Alexa. Recently, they’ve doubled-down and done this with Google, too.

“Can we put our logo on top of your meticulously art directed product shot?” is just the beginning.

The problem with white labeling

By now, you are probably thinking there’s a simple solution to this. Amazon just needs to “white label” Alexa licenses for these companies. But, if I’m BMW integrating Alexa and simply choosing a new name (Hans? Heidi?) and surface details (avatars, accent, etc.), it still doesn’t correct the fundamental flaw: Amazon still owns the relationship and all of the data moving through it. In order to make their version of Alexa truly useful, BMW has to connect nearly every database and system they own to Amazon in order to make the CUI capable of recalling service history, ownership, model specs, and instructions for use. This means that BMW is now forced to trust Amazon with the keys to its entire kingdom. Just imagine if this were the case for building websites. Instead of their own website, managed by them, they connect all of their data and services through Cisco or Google or Oracle or SAP to run their business for them. What kind of strategy is that?

BMW saw the potential bump in the road and took pains to address it. While ceding voice interaction (and thus a lot of brand value) to Alexa, the car company at least recognized the value of the consumer data it could collect. According to a 2018 TechCrunch article by Frederic Lardinois, “The queries, which you start by pushing the usual “talk” button in the car (in newer models, the Alexa wake word feature will also work), are first sent to BMW’s servers before they go to Amazon. BMW wants to keep control over the data and ensure its users’ privacy, so it added this proxy in the middle.”

It’s worth saying again: Whoever owns the customer relationship, owns the value derived from it.

As the paradigm shifts toward using CUIs to be the interface to everything, this same challenge will befall every company. Most won’t have the technical prowess or the resources to build this technology internally. Without an alternative, to stay competitive, companies will increasingly be forced to give-up control of the customer relationship to a handful of companies worldwide who can build these sophisticated systems: Amazon, Apple, Google, Facebook, Microsoft, Tencent, Baidu, Samsung and only a few more.

This is why we need an independent platform — an alternative. Manufacturers who want to strengthen their customer relationships, instead of forfeiting them, need CUI services that are not beholden to these few companies. This is where the SEED Platform comes in. We’re building exactly this kind of platform, with an open source marketplace, as a nonprofit company, that will have all the services — if not many more — than you can get today from that handful of companies. Similar to the growth of UNIX and Wikipedia, making it open source helps the SEED Platform grow much more quickly, with more diverse options, attract many more developers, and reward them more fairly for their creative contributions.

Nathan Shedroff is the CEO of Seed Vault LTD, which is building the Seed Token project. A pioneer in the fields of experience design, interaction design, and information design, he is also the chair of the Design MBA programs in design strategy at California College of the Arts in San Francisco, and author of many books.

ABOUT SEED

SEED is an open, independent, and decentralized marketplace for developers, publishers and users of conversational user interfaces (CUIs) or “bots”, that democratizes AI. The SEED platform provides development tools, intellectual property, and a tokenized network for delivering front-ends to AI technologies.

To learn more you can find SEED on Telegram, or visit the SEED website and sign up for email updates at https://seedtoken.io/

If you have specific questions about the project, please contact ask@seedtoken.io. You can also find SEED on Discord, on Twitter, on Reddit and on Medium.

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