Amazon Updates Its Devices to Rival Apple in the AI Era

In 2023, Amazon.com hired Panos Panay, a seasoned Microsoft Corp product leader, to spearhead its devices division, prompting speculation that the company was preparing to enhance its consumer electronics range.

At a detailed meeting with thousands of engineers from the Alexa, Echo, and Fire TV teams, Panay addressed these speculations. His vision for the division solidified this week during a product reveal event in New York, where he presented a new lineup aimed at creating products that consumers would love to display in their homes, independent of their price tags. “The aim is to incorporate a lot of detail into every product,” he stated during an interview.

Although many of the newly introduced items—such as updated smart speakers, e-readers, home security devices, and TV accessories—are at higher price points, Panay stressed the importance of providing affordable options. “Designing with cost considerations is a rare talent,” he pointed out. “By focusing on affordability while crafting outstanding products, we can truly make a difference in the world.”

Ralf Groene, a former senior designer at Microsoft who made a comeback this year to lead Amazon’s design efforts, shares this viewpoint. “We aspire to sophistication in materials without being overly ostentatious,” he explained. He compared it to running, where one doesn’t focus on their shoes, or playing guitar without fixating on the instrument.

While Panay takes pride in Amazon’s aesthetically pleasing new Echo speakers and Kindle e-readers, his most significant achievement is the updated $40 4K Fire TV stick—a functional device that enhances the streaming experience. This model boasts a revamped operating system to improve speed and performance “on the most affordable 4K device,” he remarked.

“In my heart, that’s a remarkable product,” he stated, “because it’s accessible to many and provides an outstanding experience.”

Furthermore, the initiative to expand into premium hardware—what Panay refers to as the “signature” line—to achieve higher profit margins like Apple, remains a core objective. Historically, Amazon’s hardware division has been perceived as a loss leader, relying heavily on revenue from subscriptions and purchases via the Alexa voice assistant. Panay counters that while the division is still on a financial loss overall, some product lines are already profitable, while others are on track to become so.

In addition to overseeing Amazon’s Alexa and device initiatives, Panay is also steering projects such as satellite internet through Project Kuiper and advancements in self-driving vehicles with Zoox. Focusing on profitability has been a priority for the team in recent years, especially as CEO Andy Jassy looks to optimize costs and transition a division that often operated like a research lab.

“I believe our mission is to establish devices as the next major business for Amazon,” Panay asserted. To reach this goal, he believes specific steps must be taken to bolster the business’s success.

The newly upgraded devices could play a pivotal role in this strategy. Many of Amazon’s latest hardware offerings come with increased pricing. For instance, the newest Echo Show 8 costs $80 more than its predecessor, while the new color Kindle Scribe stands as Amazon’s priciest e-reader, roughly $200 more than earlier models. Despite these higher costs, Panay assures consumers will receive significantly improved products, although not wrapped in opulent materials or luxury fabrics.

“The initial transformation is simply about elevating those products to their next-generation versions,” Panay noted. “This is just the beginning.”

The senior leadership in his department convenes every Thursday for strategy planning meetings and have laid out a three-year product roadmap. An essential first step was the release of an AI-enhanced version of Alexa, called Alexa+, which began rolling out in March. This initiative establishes a device strategy focused on “superior products made better through ambient AI,” Panay described.

Although Alexa+ works on Amazon devices that are five years old or more, the latest hardware marks the first to come pre-loaded with the system, offering new features. The updated Echo Show—a smart speaker with a screen—incorporates AI and sensors to identify who approaches it, instantly providing personalized preferences, podcasts, or images. Meanwhile, the Kindle allows users to upload notes, aiding Alexa in addressing queries made on their speakers.

While Amazon feels confident enough to make Alexa+ the default option in its new devices, the shift hasn’t come without its hurdles. Users have reported sluggish launches, compatibility issues with certain appliances, and missteps in command recognition by the system. Yet, Panay is unwavering in his commitment.

“This transition is far from easy,” he acknowledged, noting that hundreds of millions rely on the existing version. Still, he expressed, “an Alexa+ home represents possibly the most exhilarating home product I’ve ever encountered.”

Amazon has already attracted millions of users for the new Alexa, which is priced at $20 monthly or provided free with a Prime subscription, but the company is diligently working to refine the system, according to Panay. “Soon, everyone will desire and use it,” he forecasted, acknowledging that it will take time to rectify inconsistencies across various applications.

Daniel Rausch, who manages Alexa and Echo, noted encouraging results: The new interface reportedly experiences two to three times more usage than the previous version among users, while the traditional Alexa continues to support hundreds of millions.

In a world where users frequently engage with screens, Panay aims to guide Amazon users toward a different approach. This involves designing AI devices that operate smoothly in the background and minimize screen time.

However, Amazon faces competition from players like Apple, Alphabet Inc.’s Google, and Meta Platforms Inc., who are also pursuing similar objectives. Even Panay’s predecessor, Dave Limp, had considered this direction during his time at Amazon.

For Amazon to become a key competitor in this domain, it must innovate beyond its present device lineup. A decade ago, the company faced setbacks with the Fire Phone, while Panay was at Microsoft focusing on tablet-laptop hybrids. Presently, plans for future earbuds and smart glasses equipped with Alexa are underway, but the ultimate aim is to develop something revolutionary that is mobile and oriented around AI.

“A significant paradigm shift in user interfaces is on the horizon—how individuals interact with their devices is transforming,” Panay asserted. “I firmly believe in ambient AI, which enables conversations with devices anytime, anywhere. Achieving this will necessitate various form factors.”

To facilitate this vision, Amazon acquired a startup named Bee in August, which created a wristband for daily activity tracking and summary delivery to a mobile app. Although Amazon opted not to discuss this during its product reveal on Tuesday, plans are in place for the device’s enhancement and integration with Alexa+.

To overhaul its hardware division, Panay has recruited former colleagues from his Microsoft past, along with seasoned professionals within Amazon. Key team members include Aidan Marcuss, formerly with Windows and now overseeing Amazon’s TV division, and J Allard, co-creator of Xbox, who leads a team focusing on innovative form factors. Jamie Siminoff, the creator of Ring, also made a return earlier this year. Notably, the German designer Groene, who exited Microsoft alongside Panay, has assumed a pivotal role.

Upon joining Amazon eight months ago, Groene emphasized unifying the company’s designers—across hardware, software, and user experience—under a cohesive framework. This approach mirrors Apple’s product development methodology.

Previously, design was executed on a project-by-project basis by individual managers. While this facilitated rapid product development, it also led to silos that hindered cross-team collaboration, resulting in a series of products lacking in unified design elements aside from the recognizable Amazon smile logo, Groene explained.

Two major changes include incorporating design early in the product development cycle and establishing rapid prototyping as a core tenet. Rausch, who has been part of Amazon’s device sector since 2009, remarked that the most significant shift involves interdisciplinary collaboration among sketch artists, prototypers, material scientists, and engineers from the outset.

“By integrating all processes sooner, iterating quickly, and setting elevated standards, we can create something more holistic and ultimately superior,” he noted.

Amazon is launching its new products shortly after Apple unveiled substantial updates to its iPhone lineup, underscoring that traditional product forms still hold importance. Meanwhile, Meta has recently revealed new smart glasses featuring displays, indicating that companies outside Apple are also eager to innovate in entirely new device categories.

OpenAI is also preparing to venture into mobile hardware, with former Apple designer Jony Ive developing a suite of new AI-powered gadgets.

To solidify its position as a leader in the device space, Amazon must undertake innovations that extend beyond its existing product array. Furthermore, convincing users of Alexa+ and its AI capabilities will be crucial—without this, they may revert to or downgrade from the earlier version of Alexa. As Groene concluded, the company’s strategy will require time to fully come to fruition.

“This is truly a journey,” he stated. “In a year, you’ll observe the narrative progress, but it will still be part of a larger story that unfolds over time.”

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