Innovation Hub Seattle: Alexa, Amazon Go and Starbuck Cold Brew

On Friday morning I landed at the Seattle Airport. That night I would attend a concert here and during the day I wanted to visit some landmarks of college-time Grunge Heroes of my friends and me: Pearl Jam, Nirvana, Soundgarden. But there is another angle to this city that interests me; Seattle is booming. It is a hub of innovation with worldwide impact. Of course nearby Redmond has been Microsoft’s home for decades already, but especially in retail two giants from Seattle dominate the Western world: Amazon and Starbucks. 

A small online bookstore from 1994 

Let’s start with Amazon. Starting 22 years ago in Seattle, the company began as an online bookstore. It is one of the few who survived the bursting of the .dotcom bubble in 2001. Today, Amazon is the largest internet based retailer in the world. To run its e-commerce, the company needs to have both enormous and scalable cloud capacity and the right expertise to manage it. Leadership identified that this could be monetized and launched Amazon Web Services (AWS) in 2006. Today AWS is the largest cloud infrastructure services provider in the world and provides the online fundaments of Facebook, Netflix and the CIA, to name a few. 

To distribute $136 Billion revenue worth of retail products every year, Amazon has developed top level quality expertise and infrastructure for its logistics. Large warehouse distribution hubs, robotics, freight carriers and software. It has opened its once internal distribution process to the market and is now successfully competing with market leaders like UPS and DHL. 

‘Alexa, add laundry detergent to my shopping list’ 

Back on the streets of Seattle. Walking by Pike’s Market I notice a big display by Amazon, promoting Alexa. This always-connected-virtual-assistant and music player is hugely successful (in the US) and has bypassed the ‘traditional’ consumer artificial intelligence leaders Apple’s Siri and Google’s Now. How on earth could Apple have missed this by the way? They have been providing virtual assistant Siri for years and all the hardware, software and design capabilities, plus a pile of cash. Yet Amazon came out of nowhere and is the best sold virtual assistant currently, including fully integrated Amazon Music services (directly competing with iTunes and Spotify) and retail shopping capabilities. 

‘Alexa, re-order two packets of Granola bars and a new Apple iPhone power cord’. Amazon Fulfillment will have it with you the same day, or even - just launched in Milwaukee for instance - within two hours for free, or one hour with a small fee added, as they partner with local super markets.

A Betá Shop - Amazon Go

7th Avenue is dominated by a tall blue skyscraper; the first tower of Amazon’s Headquarters. Another tower is on the next block and a third one is being built as we speak. Together they form the Amazon Campus Triangle, housing 25,000 Amazon workers in the heart of downtown. Including by the way 3 domes, the 'Spheres', where Amazon will experiment with employee productivity when working in an environment full of plants and sunlight. Street level of Tower 1, is the location of the new retail concept Amazon Go. The shop is in 'beta' as it says on the sign. 

The concept of offering concepts in beta is not to be underestimated by the way. In todays agile and rapidly digitizing world, we have no time to complete every aspect of systems, services and products. And shops. Beta is an agreement with customers that the offer is not yet perfect, but offers enough value to already make it available. The offer will attract your early adopters. Waiting until you have perfected your offer, means that a competitor will have it launched in beta and grabs the market share. And… once you have your product launched, the market has changed. The competitor who brought a minimum viable product to market - and was transparent in doing so - was able to adapt features, pricing, processes, marketing to ensure the best fit for the market at that moment. 

The Amazon Go grocery store makes the long future dream of retail - ‘Grab-and-Go’ - a reality. To enter the store, the Amazon Go app needs to be downloaded and active on your smartphone as means of identification at the automated entrance gates. From then on computer vision, sensor fusion and deep learning automatically keep track of every item you grab from or return on the shelves, and keeps track of them in your virtual cart. When you walk out, Amazon charges your account and sends a receipt to your Amazon Go app.

One seamless omni-channel experience

With this, Amazon is once more blending in virtual and
reality, online and offline, clicks and bricks. All in one seamless experience where ordering can start at home by voice, asking Alexa, in the app on phone or website on laptop, and when you forgot something or happen to be walking by, you just grab your bottle of fruit juice in the Amazon Go store. No need for any manual administration, no need to pin money, no need to wait in any line. Ultimate convenience and omni-channel experience. 

Starbucks Cold Brew 

As I got so carried away by this amazing culture of innovation of Amazon, I hardly left words for Starbucks. Yet this brand is worth a full blog post as well and is a perfect example of retail innovation. Where Amazon started online and adds brick and mortar, Starbucks started with traditional shops and now has extended that experience to digital. But also innovation of a product that we thought was extended to its fullest already: coffee. 

The Seattle flagship location offers coffee from tab: Starbucks Cold Brew. I tried the Nitro Cold Brew and saw it actually being tapped, just like beer. Cold and nitro injected coffee. A whole new drinking experience I have to say. Although I am unsure how often I would trie it, I noticed quite a lot of people
ordering it. Together with the free wifi, the power outlets for your devices, nice music and people working and meeting there, the Starbucks experience is transformed into an almost a pub-like environment of meeting, working and fun.

Time to move on 

Let’s end with my favorite Steve Jobs quote, that I think is the key to keep on allowing yourself to think innovative: 
Stay hungry - Stay foolish

BLOG: About Chess, Tesla’s and Moore’s Law

In the news this week an item about the AlphaGo software beating South Korean player Lee Sedol 4 out of 5 times in a game named GO. That same week I read about the nearing end of Moore’s Law in The Economist. So how are these two related? And what will eventually be the impact on our business?

Let’s start with Intel co-founder Gordon Moore, who claimed in November 1971 that the

processing power of a computer chip would double roughly every two years. And how right he was. For over 44 years his Law stood firm and dictated the rhythm of the industry. The first ever microprocessor in 1971 held 2,300 transistors (electrical switches that can be turned on and off, representing the 0’s and 1’s of digital language). The 2014 Intel Xeon Haswell chip holds 5 billion.

It is difficult to grasp the full impact of Moore's Law. But think of this. In 1997 the US government needed a super computer to maintain its nuclear arsenal. It was named ASCI Red of which one customer made copy was built by IBM. It had the size of half a tennis court and was capable of 1.3 trillion calculations per second. In 2006 Sony presented the PlayStation 3. This machine doubled the speed of the ASCI Red, weighed 5 kg, could fit in a bag and was sold over 65 million times worldwide. Now that is the impact of Moore’s Law!

About Chess, Rice and Tesla's

Us human beings have difficulty understanding exponential growth. But an old parable might be the best story telling option to get to grips with it. Centuries ago an advisor created the game of Chess for his king. When asked what he wanted as a reward, the advisor asked for one grain of rice on the first section of the Chess-board, two on the second, four on the third and so on, doubling the amount every next section. The king laughed and said that he must be joking, and if he didn’t want anything else?
When the counting started only halfway the chess-board, the numbers where very large, but on the second half they were just vastly larger.

Only halfway, on the 32nd section, the king had to deliver 2.147 Billion grains of rice. And

remember, the 33rd section, this amount would double. To cut a long story short: more rice had to be delivered than was produced all over the world for years. The King learned the power of exponential growth (I wonder what happened to the advisor).

This is exactly what happened with computing-power since 1971. Imagine that the computing-power that allowed all Tesla Model S cars to drive themselves since October 2015, will have doubled in October 2017. And all robots that already are replacing work formerly done by humans, will have doubled their processing-power in two years time. And again two years later.

Through exponential growth, what sounded like science fiction a couple of years ago, now has become reality.

The End of Moore's Law

But, according to The Economist, we are approaching the end of Moore’s Law, as the
shrinking of transistors on a microchip is nearing it’s physical limits (the size of an atom). Intel admitted end of 2015 that the investments in R&D, needed to make chips quicker, have started to outpace the increase in speed that resulted from those investments. So chips will still continue to get better, but at a gradually slowing pace.

Two things are happening in parallel and/or in response to that. The first is an increased power to the big cloud-computing companies like Amazon, Google, Alibaba and Tencent. They are improving their cloud infrastructure and will be able to increase their offered computing-power the coming years by combining every single processor of all servers in their global datacenters. With ‘cloud’ we mostly think about storage, like Google Drive or Dropbox. But Cloud-computing offers especially computing-power to customers. Power that is far larger than one could get of a stand alone PC or server.


Artificial Intelligence and Deep Learning

The second movement is not about speed but about intelligence. This brings us to the
other news story last week: the AlphaGo software, built by Google-acquired startup ‘DeepMind', beat the best human player in the game of Go. GO is an ancient game that looks deceptively simple, yet is the most complex game to be solved by a computer, as it has an unpronounceable number of scenario's: 10 to the power of 80. Plus: it is rather a game of intuition than rational strategies.

This game can only be won by a computer when Artificial Intelligence (AI) is involved. Computer-learning, supported by hundreds of algorithms that learn and can copy instinctive moves from humans. This is called ‘Deep Learning’.
So if we have come to the point that computing-power (processing lots of data) combined with machine-learning algorithms (AI), the whole 44 years of Moore’s Law might turn out to be just a lightweight introduction to the real digital age.

The (business) game is on

These two examples, small news articles that you could easily miss, paint a picture of the business environment we have to operate in. The era where not only repeatable patterns are being automated and scaled in the cloud, but where intelligent predictive and prescriptive decision making and AI based consultancy will become part of our business life.

So what will this eventually mean for our rapidly changing world of work? What happens if even the Lee Sedols of this world can be automated? I have a hard time gathering my thoughts around that to be honest.

What the labour market can learn from AirBNB

Milwaukee is only 2 hours away from Chicago where I will land at the airport. What if I fly in a few days before the meeting and arrive there on Saturday already? That will give me a day and a half to catch a glimpse of the famous Windy City in Wisconsin. Staying there will be at my own expense and as a real Dutch Man I want it cheap and simple, so no hotel for me. Time for Air BNB.

The online platform that successfully matches house owners who want to lease their apartments to travellers looking for a place to stay around the world. I typed ‘Chicago’ and filtered the results on ‘private room’ and a cost per day range. On the map I selected the Lincoln Parc neighborhood, which should be nice and safe, and browsed the images, amenities, guest reviews, rating and the approximate location on the map. Within 24 hours three house owners I contacted replied.

I made my final selection based on the best match with my criteria and was then guided to the identification and

payment process on the same Air BNB platform. After typing in my telephone number, within seconds a text message arrived with a verification code that I had to type into the appropriate field on the website. Next step was to show my passport to my webcam. After one minute Air BNB had checked and verified my ID. I was really Radi Jaarsma! Next was the credit card payment (payments via Air BNB are guaranteed and insured). My reservation was now final. After this verification and payment I now had access to the exact location of the apartment and full contact details of the owner.

Done.

Within a couple of hours my host personally let me know that they were looking forward to my stay, and that they would sent me a list of all things to do in Chicago, plus tips on public transport and tours.

And with that, Air BNB had cut out all the middle men; the travel and real estate agents.The completely digitized online platform brings together supply and demand. Self serviced. User friendly designed workflows for matching, reservation, reviewing, payment and ID verification. And all without the (human) interference of a middle man; just direct contact between the two parties. Completely scalable and distributed over the Internet as a website and a mobile app, potentially reaching everybody around the globe with access to internet.

But this is strikingly similar to the recruiting business….In the labour market, the house owners are the business owners. Some large, some small. Candidates and freelancers are the travellers. Looking for new opportunities in a specific city, region or industry. After the match, we also need to do the ID verification, agreements and payments. Currently recruiting companies are the real estate agents of the labour market, bringing the two parties together, making the match. When will the Air BNB of the labour market arrive that knocks out the agents?

The professional segment saw the rise of LinkedIn, and in the freelancing segment of the labour market www.Twago.com is already gaining ground in Europe (and bought by Randstad in the meantime), while www.freelancer.com is growing rapidly in the US. In general TAT-tools (Talent Acquisition Technology) is exponentially growing.

Platform business in the Human Capital management sector on the risePlatform business models, that by

nature are two sided, are gaining ground rapidly. In my mind there is no doubt that the leading company’s in this world all will be platform players. Platforms that are AirBNB-like could enable the complete work arrangement from source to pay, building a Human cloud. But also platforms that offer toolkits for business to run their HR business as a platform. For example www.NextCrew.com that offers a white labeled cloud based toolkit to ‘Create your own online staffing business’, including tools for talent pools and time sheets.

Strategic choicesTraditional businesses in the labour market have some strategic choices to make. Do they want to become a platform player? Or do they risk to become dependent on the possible future platform players in the market? Do they want to disrupt the industry, or at least transform it? Or be disrupted?

A platform player needs to be breathing software and development. A company with IT at its core. Programming in the veins, agile structured, scrum working, innovative and decisive. That is a challenge for traditional players, big and small. Not by accident we saw that company's like Booking.com, Amazon, Spotify and AirBNB have no roots in the industry they disrupted.

I think there are three choices: Make, Buy or Outsource and configure.Making (building/developing) a platform will be hard for traditional players as discussed. So that leaves two options: 

1. Buy a rising (start-up) platform player and translate traditional business to that new platform
2. Outsource the work by paying for a platform toolkit (PaaS) and create hit-teams to configure and grow it, preferably in a of co-creation 

Air BNB: ‘We imagine a world where you can belong anywhere'
It’s not that far off: ‘We imagine a world where you can work anywhere’ :)