The sharing economy: children’s toys

February 17, 2018 365583nh Leave a comment

Nowadays the electronical screen devices provide endless entertainment opportunities for children. Apple has a special ‘kids’ section in de App Store offering numerous different kinds of apps as games apps, educative apps, book reading apps etc. A survey conducted in 2014 already concluded that touch screens are the primary play activity followed by game consoles as shown in the figure below. It is hard for the traditional toys business to compete with the rapidly developing online kids’ entertainment industry (Michael Cohen Group, 2014).

Source: (Michael Cohen Group, 2014)

Parents try to limit the screen-time per day of their children as they want to promote an active lifestyle as the consequences of frequent use of screen devices are severe. Physical health issues are one of the main concerns for parents as research shows that excessive screen time can lead to serious problems including obesity, higher risk of Type 2 Diabetes and increase abdominal fat (Nightingale et al. 2017, Suchert et al. 2016). Furthermore, on-screen activities cannot replace certain essential skill developments as for example hand-eye coordination and creativity.

One of the main reasons children are not playing as much with physical toys is that they lose interest overtime. Toys are expensive and the majority of households are not able to afford new toys on a regular basis (Pley, 2018). The company Pley provides the solution to the abovementioned issues. As the founder states:

“Being frustrated with finding the appropriate toys to my children as their interests change constantly, I realized there had to be a smarter way to play. Inspired by the sharing economy, we envisioned Pley.”

-Ranan Lachman, Founder of Pley

Business Model

Pley is a subscription based toy delivery service company based in the United States. Currently the company has over 300.000+ subscriptions. Pley provides two different services:

(1) Surprise box subscription

Afbeelding2 children.png The surprise box is available in different themes. The price for the boxes depend on subscription around $22/box. The boxes are delivered every 2 months.

(2) Toy Library subscription

Afbeelding3 children.png The toy library is a subscription based toy rental service. Depending on the subscription $12.99 for 1 credit/month and $29.99 for 3 credits/month the customer can choose from over 500+ toys in the toy library. The service applies the pick-enjoy-return&repeat method. This is theoretically the most interesting service of Pley, therefore the blog will focus on the Toy Library.

The toy library of Pley makes use of the concept of the sharing economy, more specific the collaborative consumption. Collaborative consumption can be defined as “the peer–to–peer based activity of obtaining, giving, or sharing the access to goods and services coordinated through community–based online services” (Hamari et al., 2015). The coordination of the toys is monitored by Pley, acting as a platform arranging the exchanges as shown in the figure below. Furthermore, there is the possibility to send old toys to Pley and receive a monetary value.

Afbeelding4 children

The success of Pley is explained by the fact that the company actively takes into consideration the needs of the customer and developed a platform that serves the needs of the customers. The customers want to (1) let their children play with physical toys in order to improve health and develop critical skills (2) let their children play with novel toys regularly and (3) not spend too much money on toys. The toy library of Pley conforms to all the wishes by engaging the customer in Pley’s subscription based toy sharing platform.

Efficiency criteria

The business model of Pley’s toy library is based on joint profitability of both the company and the customers. The customers benefit as they are able to receive and return toys regularly at a low rate, which would otherwise not have been possible as the alternative for novelty in toys is to buy new toys in the store at a high rate or let the children play on on-screen devices, both not desired. Pley benefits from the profits made from providing the subscription based service and from toys send to Pley they can use in the toy library, in the long term providing profit.

Furthermore, Pley meets the feasibility of required reallocations criteria. First, the polity and judiciary aspects are not a factor of concern for the business model as the activities are political independent and within the U.S law. Efficient social norms are carefully considered as the company is a Certified B Corporation and applies the buy-one-give-one model where for every sold toy, one toy is given to a child in need an underdeveloped area in the world (Pley, 2018).

Bibliograpy

Hamari, J., Sjöklint, M., & Ukkonen, A. (2015). The sharing economy: Why people participate in collaborative consumption. Journal of the Association for Information Science and Technology
Michael Cohen Group, Toys, Learning, & Play Summit. (2014) From: http://www.mcgrc.com/wp-content/uploads/2015/03/MCGRC_Digital-Kids-Presentation_pdf Assessed: 17-02-18
Nightingale, C.M., Rudnicka, A.R., Donin, A.S., Sattar, N., Cook, D.G., Whincup, P.H., & Owen, C.G. (2017). Screen time is associated with adiposity and insulin resistance in children. Archives of Disease in Childhood, 0:1-5.
Pley, 2018. From https://www.pley.com/about. Assessed: 17-02-18
Suchert, V., Hanewinkel, R., & Isensee, B. (2016). Screen time, weight status and the self-concept of physical attractiveness in adolescents. Journal of Adolescence, 48:11-17.

Articles

How to find commercially attractive user-generated entries?

February 17, 2018 georginakorn Leave a comment

Introduction

Letting users generate designs, also known as crowdsourcing, is the method when companies ask consumers to develop new ideas for products, slogans or specific problems. One of the pioneers within the field of asking ‘the crowd’ to contribute new products is the LEGO ideas platform. Here consumers can share their idea and gather support, hereafter LEGO will review all ideas and perhaps develop this particular idea into a new product.

Benefits

Crowdsourcing has several benefits for companies, such as the ability to solve problems, generate ideas, outsource tasks or use it as information pooling. (Tsekouras, 2018) However, Franke et al. (2006) found that users’ willingness to pay also increases substantially if they are allowed to design their own solutions. Resulting in a sales increase for the companies. The paper by Berg Jensen et al. (2014) studied which data can be used to help a focal producer firm to reduce its workload in the selection phase by predicting which user-generated designs it would most likely perceive as commercially attractive.

Lead-users

The study focused on the lead-users within the LEGO user community and their contributions to LEGO ideas. Lead-users were defined in 1986 by von Hippel as: “the members of a user population who get benefits of obtaining a solution to their needs and are at the leading edge of important trends in a marketplace.” Franke et al., (2006) elaborated further on this and found that lead-users tend to be the ones that come up with the most commercially attractive ideas in online communities. The study screened lead-users for input concerning relevant predictors and corresponding theories. It became apparent that one could distinguish between characteristics of the designs that lead-users tend to produce and the individual characteristics of lead-users.

Analysis

Berg Jensen et al. used 1799 designs from 116 user-designers to find whether firms can anticipate on the most commercially attractive ideas. The three prominent variables that were used by a focal producer firm of such a community for filtering of promising user-generated designs were:

The complexity of a given design
The positive feedback from the community on specific designs
The intensity of design activity by a user designer

The review of whether the focal producer firm perceives a user-generated design as attractive was done by measuring the assessment of two professional LEGO reviewers. These reviewers were trained by LEGO to find which design would be appealing to large market segments. However, regarding the data collection it is questionable whether this outcome is generalizable and attractive for other firms. As just two LEGO employees checked the designs, this could be highly biased and might have been checked twice or perhaps added a group of lead-users.

Complexity of design

The variable shows products that are rich in appearance and are therefore of great consumer value compared to alternative and competing designs. In this study the complexity is the number of pieces utilized in a given design. This also results in differentiation from competitors (Baldwin et al., 2006). The authors found an inverted U-shaped relationship between the complexity and its perceived commercial attractiveness. However, complexity can also result in higher production and distribution costs, as there is a point in time where the cost dimension outweighs the revenue dimension of a new design. The final turning point was found to be at 3950 pieces, which is highly context specific; therefore it is difficult to infer the application to a broad market of user-generated design platforms.

Positive community feedback

When a given design has attracted some endorsement from other users who may represent broader market segments this shows the positive community feedback (Baldwin et al., 2006). The authors found highly statistical significant evidence (.05083) that the relationship between the positive feedback received by a given user-generated design within the peer community and its perceived commercial attractiveness was positive. The empirical setting of the study was within a brand community where members have strong emotional attachments with the focal producer firm, which makes it hard for other firms’ communities to find lead-users that are such fanatics of their products.

Design activity by user designer.

The intensity of the design activity by a user designer is thus the number of designs generated and posted into LEGO ideas by a user. The results show there is a U-shaped relationship between the intensity of a certain user-designer’s activities and the likelihood that a given design by that user will be perceived as commercially attractive. The turning point turned out to be at a generation of 99 designs in two weeks time. This seems like an extreme amount, however, these types of user-designers are not uncommon in the brand community setting and might represent an important source of innovation.

Community

There was no evidence to infer that whether the presence of a user-designer in the community increases the likelihood that a specific design by that user will be perceived as commercially attractive by the focal firm. This would show that that the community LEGO built does not add to the final commercial attractiveness of entire product. With this outcome the authors would show that the interaction within the community does not really have a commercial benefit.

Conclusion

Even though this study is difficult to generalize for other firms focusing on communities, the findings will help firms that use user-design platforms for physical prototypes, being a very niche market. This study is a first step towards a new web-based marketing research approach that can enable firms to filter vast number of user-generated designs more effectively and efficiently.

Sources

Baldwin, C., von Hippel, E. and Hienerth, C. (2006). How User Innovations Become Commercial Products: A Theoretical Investigation and Case Study. MIT Sloan Research Paper, (9).

Franke, N., von Hippel, E. and Schreier, M. (2006). Finding Commercially Attractive User Innovations: A Test of Lead-User Theory. Journal of Product Innovation Management, 23(4), pp.301-315.

Jensen, M., Hienerth, C. and Lettl, C. (2014). Forecasting the Commercial Attractiveness of User-Generated Designs Using Online Data: An Empirical Study within the LEGO User Community. Journal of Product Innovation Management, 31, pp.75-93.

Tsekouras, D. (2018). CUSTOMER CENTRIC DIGITAL COMMERCE – Session 3.

von Hippel, E. (1986). Lead Users: A Source of Novel Product Concepts. Management Science, 32(7), pp.791-805.

Articles

Sharing and Translating lyrics for the world: Musixmatch

February 17, 2018 384373gc 1 Comment

“Words matter” or “Your free music sounds better with lyrics” are just two of the slogans that best describe Musixmatch, the Italian start-up that has come to be the world’s largest lyrics catalog and platform. Founded in 2010, the company has grown to reach more than 60 million users around the world. But how does Musixmatch work?

The Musixmatch catalogue, platform and app principally allow users to: 1) access lyrics and/or their translation in other languages; 2) share and/or review written down and/or translated lyrics from songs all around the world; 3) synchronize their music library of many music apps (e.g. Spotify, Deezer, Google Play Music) so that the lyrics pop up (like in Youtube lyrics videos) when one is listening to a song on a music app in his/her device; and 4) create the synchronization song(s) – lyrics, which will then be shared worldwide via Musixmatch and the apps in which Musixmatch is supported.

Musixmatch has been thus ideated for users who want to search for lyrics and also who want to see/think about the lyrics while listening to a song. In this respect, Musixmatch CEO Massimo Ciociola points out (paraphrased): “The fifth most searched category in Google is lyrics. Why, in accessing lyrics, can’t we provide a better, faster, more complete, more comprehensive catalogue and user experience with songs’ lyrics?” Another, peculiar aspect of Musixmatch is the size of its workforce compared to its users’ base. 30 employees (all engineers) vs more than 50 million users/downloads. These figures point out to an important feature of Musixmatch: the fundamental role that users and contributors have in creating value for the platform. In this respect, Musixmatch encourages users to contribute to the catalogue, by either writing, translating, reviewing or synchronizing songs’ lyrics. In this way, Musixmatch, like many other platforms, has been subjected to so-called “network effects”, where the value of the app to users has increased due to the increasing number of contributors. As CEO Ciociola points out: “Lyrics missing? We ask the community”. The incentive schemes for this crowd-sourced component can be best described by quoting the company’s website: “Inside the Musixmatch community users earn points based on the actions they do on the lyrics. Based on those points the user can reach a higher level and status in the community that give more power to his/her actions”. Therefore, the incentive scheme for users to generate value for the app does not include monetary rewards, but only recognition in terms of status/power of action in the user community.

Despite this absence of monetary rewards for contributing, and despite the fact that the company has not officially become profitable, there are several mutual benefits of this contribution-based system for both the firm and contributors. Users, through their contribution(s), can “show-off” and gain “social” benefits, in terms of increased reputation and self-esteem in the community they belong to. Some top users can even become “curators”, which “gives them extra powers to control what’s happening in the community”. Another aspect that Musixmatch emphasizes is the “feeling” aspect, where the firm asks “passionate” users who really enjoy to share lyrics to contribute. This emphasis is perfectly justified by the fact that people indeed love to share lyrics and the emotions that come with them and their blending with music in many social settings. We can think of Facebook, Twitter, or Youtube, but also of more offline settings like parties or night campfires with guitars and other instruments.

Musixmatch, from its point of view, sees the value of its platform increasing as more and more of its users contribute. Musixmatch’s current main source of revenue is data licensing , but the firm is also considering to start selling advertising space. Either way, a platform with larger amounts of data, which results from the network effects from the increasing number of users, can be a greater source of revenue for Musixmatch. The costs of monitoring the crowd-sourcing process can be rather limited. The microtasking nature of sharing, reviewing and translating lyrics does not require high levels of cognitive ability, competences or a particular expertise to check the quality of users’ contribution. Also, often times quality checks for lyrics translation and composition are done by the users themselves. In this respect, the company has been able to successfully set up a firm and effective set of community rules that regulates users’ activities.

In terms of external arrangements, Musixmatch has been the first lyrics’ app and platform to formalize legal agreements with major international publishers, such as EMI Publishing, SonyATV and PeerMusic among others. This has permitted MusixMatch to legitimize its role in the apps and catalogues’ world, to increase its users’ base and to become the world’s largest lyrics’ platform, or, as CEO Ciociola points out, the “Music Vocabulary of the World”.

Sources:

Blohm, I., Zogaj, S., Bretschneider, U., & Leimeister, J. M. (2018). How to Manage Crowdsourcing Platforms Effectively?. California Management Review, 60(2), 122-149.

“Musixmatch Wants to Be the ‘IMDb of Music Lyrics,’ Launches Lyric Video Messaging App”. Billboard. Retrieved 2018-02-17

O’Hear, Steve. “Song Lyrics App Musixmatch Hacks Its Way To 50M Downloads/30M MAUs, Adds Spotify Support”. TechCrunch. Retrieved 2018-02-17

https://www.musixmatch.com/

https://www.musixmatch.com/community-rules

Business Case

Yolt: own back your financial data

February 17, 2018 Niels Visser Leave a comment

A growing sense of mistrust towards traditional banks after the 2008 financial crisis gave rise to many new fin-techs. These new fin-techs were focusing on new financial services, including crowdfunding, mobile payment solutions and financial platform, which traditional banks were not offering to large extent at that time (Darolles, 2016). Personalized solutions to financial matters offered by these fin-techs were in stark contrast with the traditional finite services and products offered by traditional banks. Technological advantages and new regulation reduce the entry barriers to the financial sector, which give fin-techs access to technological solutions at much lower cost as traditional players often have a disadvantage due to their technological architecture (Darolles, 2016). Millennials in particular have lost their interest in financial matters, as traditional banking is considered too functional (Tuk, 2018). Fin-techs focus on this generation with new interactive solutions where customers are actively involved in solutions for financial matters.

Traditionally, banks were the only institutions that had direct access to customer financial data. With the introduction of new European financial regulation (PSD2) last month, the way how we interact with our banks may fundamentally change. The most fundamental change of the new PSD2 regulation is that banks are obliged to share financial data with third parties if a customer wants to share them (Manthorpe, 2018). In this way, third-parties, like fin-techs, can access the bank account of a bank customer through an API and provide services on the basis of this data. APIs have been used for years, but last decade’s technological developments allow banks to operate a new form of API management. Financial account data resulted from open APIs is used by the newcomers and therefore challenge traditional banks. For traditional banks the new PSD2 regulation have large strategic implementation as they may lose the customer interaction and just become infrastructure providers while others leverage on more profitable financial services. So, long-term success of traditional banks depends on how they respond. To a large extent, traditional banks are now collaborating with fin-techs that provide these third-party services. INGs answer to these developments is the application Yolt, a smart money management application, leveraging on the developments of PSD2 and open banking.

How does Yolt work?

Yolt mines customer data across different accounts of different banks and provides them in a single overview to manage all financial matters (Schiffers, 2017). Integrating accounts from different bank accounts provides Yolt with an extensive dataset from which the application can analyze financial behavior. In this way, data analysis can predict balances and provide tips on budgeting and savings, which will give customers more insight into their finance (Tuk, 2018). This does not stop here, as Yolt offers a special marketplace for partners. For example, utility service providers can collaborate as a partner with Yolt and offer comparing services on the basis of financial data of the customers (Tuk, 2018). So, if your energy bill may be reduced by switching energy provider, Yolt will automatically notify the customer. Furthermore, customers can actively be involved when one of their contracts ends. Again, Yolt will automatically notify the customer and may offer substitutes to the current contract.

Efficiency criteria

After one year of developing the application internally at ING, Yolt was released to the public in the summer of 2017 in the United Kingdom (Schiffers, 2017). In January 2018, the introduction month of the new PSD2 regulation, Yolt had 100.000 users (Schiffers, 2017). As PSD2 will mandate banks to share financial data, competition about financial data will be fierce as Yolt will not only compete with traditional banks but also big tech companies like Google and Apple who both have their interest in managing finance. From a customer’s perspective, using an open banking initiative like Yolt puts the customer back in control and possession of their own financial data and can decide themselves how they want to participate in analyzing their data. The traditional financial ecosystem limits customers in awareness and access to better opportunities, which is one of the reasons that bank customers do not change quickly the bank that their parents also had. Transparency did shake up many industries, like how Trivago did shake up the travel industry, Yolt may shake up the financial sector by providing the most fitting financial product to the customer (Tuk, 2018). This may disadvantage the parent company ING, as Yolt will offer also products and services from competitors. So, from Yolt/ING’s perspective the Yolt platform is a way to leverage new regulation that will strategically impact a traditional bank like ING. In this way, ING can test new ideas concerning open banking and PSD2 in the UK market. This market is particularly important as the UK government is one of the frontrunners in the EU in terms of open banking (Manthorpe, 2017). In collaboration with the eight largest banks in the UK, Open Banking Limited a non-profit organization, has already been set up to streamline and standardize the processes to facilitate an open banking ecosystem (Manthorpe, 2017). Learning from the UK launch, ING could leverage open banking in other markets as well. Furthermore, ING can test new revenue possibilities as Yolt will receive a commission on the contract concluded through the platform.

In summary, Yolt will bring value to both the consumer as well as ING, by providing insights into financial data and related products and services as well as providing insights how to best practically apply the possibilities of the new regulation.

Darolles, S. (2016). The rise of fintechs and their regulation. Financial Stability Review, 20(4), 85-92. Retrieved from https://publications.banque-france.fr/sites/default/files/medias/documents/financial-stability-review-20_2016-04.pdf

Manthorpe, R. (2018). To change how you use money, Open Banking must break banks. Wired.co.uk. Retrieved 17 February 2018, from http://www.wired.co.uk/article/psd2-future-of-banking

Schiffers, M. (2018). Yolt verkent voor ING de wereld van fintech. Fd.nl. Retrieved 17 February 2018, from https://fd.nl/ondernemen/1230113/yolt-verkent-voor-ing-de-wereld-van-fintech

Tuk, Y. (2018). Fintech Yolt over eigen groei en komst PSD2: ‘Niet direct open Europa’. Emerce.nl. Retrieved 17 February 2018, from https://www.emerce.nl/achtergrond/fintech-yolt-groei-impact-psd2-direct-open-europa

Articles

Alexa, what is your business model?

February 17, 2018 thijmencalis Leave a comment

Introduction
“The conversations of the future are between a person and a machine” (Hood, 2017). You might have seen the movie ‘Her’ where an advanced female AI voice-assistant and a man build a relationship together. We are not there yet, but conversations with machines are definitely on the rise. Today, 40% of the adults use voice search once per day and the prediction for 2020 is that 50% of the searches will be done through voice (Jeffs, 2018). Smart-speakers in houses and offices are used to channel voice-searches. Amazon Echo, had the first mover advantage in 2014, and currently dominates the market with a share of roughly 70% (Quartz, 2018). In 2017, Google Home was launched, followed by the Apple HomePod. Microsoft and Facebook are also aiming to release their first smart-speaker later in the year.

her-fp-0880 — Joaquin Phoenix plays a man in love with an operating system in director Spike Jonze’s latest film, *Her*.

To better understand smart-speakers and virtual assistants this blog analyses the business model of the Amazon Echo with Alexa as virtual assistant. Specifically the following questions are discussed:
1.How does Amazon create value for customers?
2.How does Amazon profit?
3.How does Amazon maximise efficiency in its developer’s network?
4.How does Amazon deal with privacy?

1. Customer value
voice-requests, music, calling and banking
The Echo allows customers to request actions at a virtual assistant using voice. Voice is faster and more convenient than typing and more easy to do while moving (Agrawal, 2017). You can ask Alexa to play specific music, search wikipedia for answers, do maths, set timers, set events or play voice games. More advanced uses cases are the ability to call, message someone, check your bank account or transfer money. More uses cases are available on the Amazon Echo and instead of the App terminology on mobile platforms, these voice programs called “Skills”.

Home-integration
The Echo can be connected with other devices such as your lights, fridge, thermostat, locks on doors. Routines can be set, for example with “Alexa goodnight” to shut down lights and lock-doors at once (Newman, 2017).

Shopping
You can order products from the Amazon store using your Echo. With the re-order command you can re-order a certain product and Alexa will review your purchase history to see what brand you want (Gartenberg, 2017)

Emergent Value
As Grönroos and Voimo (2013) discuss, Amazon can be seen as the value facilitator, offering the Echo, assistant and skills for the customer to create value in-use. Moreover, as experience increases more value for the customer emerges. Especially with AI learning from the customer, a system views can be taken towards value creation. Emergent properties arise, when the customer continuously interacts with AI, allowing the customer and AI to create more and more personalized value which could not be predicted ex-ante.

2. Profit
At this moment the monetisation of the Echo or Alexa is not the focus of Amazon. Amazon aims to capture the complete market and improve the product (Simonite, 2016). Several revenue paths exists and will be more important as the customer base and frequency of use increases:

Increased sales via improved recommendations. Recommendations stems from understanding the customer and delivery of recommendations (Adomavicius and Tuzhilin’s, 2005). Voice-conversations with Alexa provide valuable information on who the customer is, what he/she wants and in the customer funnel he/she is. This data can be merged with data with the other data Amazon has to form a completer picture. This customer understanding improves the recommendations Amazon can provide and increases the sales revenue for Amazon or marketing advice revenue. For the latter, Amazon can use the understanding to better advice other companies on how to target a specific customer.
Increased sales via easier customer journey. Voice is more natural than typing and hence it has become easier to order a product. It is expected that replenishment orders, for example for toilet paper or batteries, will be increase. See figure 1 for a forecast of US voice payments and number of voice-users.
Ads revenue. Amazon is looking into promoted search results for voice-searches on Alexa. Partner companies would bid to end up high in the search results, which is even more important for voice than with a desktop/mobile search (Newman, 2018).
Skills commission fee. Similar to Apple taking a share from app purchases in the Appstore, Amazon could take a share from skill subscriptions or in-skill purchases to earn money from its open platform. This brings us to the next subsection: efficiency.

594adeaca3630f1b008b45b9-750-529 — Figure 1: Forecast US voice (payments) adoption

3. Efficiency
Amazon has the platform challenge that it wants to increase participation on the customer as well as the developer side. Amazon is experimenting with its internal institutional arrangements (IA) with developers. Carson et al. (1999) would argue that a contractual arrangement is an efficient IA if it can, among other criteria, increase the profit of the system and of individual contributors. Since 2018, Amazon offers the option for in-skill purchases with Amazon Pay, such that users can pay developers. Subscriptions is a second channel through which developers can earn money. Profits for developers and Amazon can still be improved if discoverability of Skills, which is harder in a voice-based environment, increases. The contribution of developers also depends on the easy of use of the developer’s toolkit (Hollander, 2017).

4. Privacy
How does Amazon use your data. “Alexa uses your voice recording to answer your questions, fulfill your requests, and improve your experience and our services,” Amazon says. “This includes training Alexa to interpret speech and language to help improve her ability to understand and respond to your requests.” (Newman, 2018b).
Amazon only records data when Alexa is triggered, meaning, when the ‘wake word’ Alexa is mentioned, and allows users to review and delete voice-recordings. If you want to delete bulk recordings you need to go to the Amazon website. There is no method to have your recordings automatically deleted. (Barett, 2017)
Amazon aims to better and better understand the customer which includes deducting your emotions from speech (Dickson, 2018). The external institutions about privacy will highly influence what Amazon is able to do and not do with your data in the future and how specifically transparency information should be provided.

Concluding notes
Voice-search and virtual assistants are on the rise with smart speakers as their physical embodiment. Customer value is derived from using voice to ask questions, shop and control home furniture. As AI advances, more personalised and emergent value arises for the customer. Monetisation is not a focus yet for Amazon, but which massive adoption in the future, there will be plenty of ways to profit from the Echo and Alexa. Improved recommendation systems, sales, ad placement and commissions on Skill subscriptions are examples of profit avenues. Institutional challenges arise for Amazon in the best alignment of developer incentives and when future privacy regulations change.

References:

Adomavicius, G., & Tuzhilin, A. (2005). Toward the next generation of recommender systems: A survey of the state-of-the-art and possible extensions. IEEE transactions on knowledge and data engineering, 17(6), 734-749.

Agrawal 2017, accessed at:
https://www.forbes.com/sites/ajagrawal/2017/08/27/how-voice-search-will-change-the-future-of-seo/#636a046d7ca1

Barett, 2017, accessed at:
https://www.wired.com/story/amazon-echo-and-google-home-voice-data-delete/

Carson, S. J., Devinney, T. M., Dowling, G. R., & John, G. (1999). Understanding institutional designs within marketing value systems. The Journal of Marketing, 115-130.

Dickson, 2018, accessed at:
https://www.dailydot.com/debug/amazons-alexa-wind-monetizing-feelings/

Gartenberg 2017, accessed at:
https://www.theverge.com/2017/7/10/15947672/amazon-alexa-voice-controls-shopping-prime-echo-how-to

Hollander, 2017, accessed at:
http://www.businessinsider.com/amazon-rolls-out-monetization-tools-for-alexa-skills-2017-12?international=true&r=US&IR=T

Hood, 2017, accessed at:
https://mayvendev.com/blog/siri-alexa-conversational-systems-changing-business

Jeffs, 2017, accessed at:
https://www.branded3.com/blog/google-voice-search-stats-growth-trends/

Newman 2017, accessed at:
https://www.fastcompany.com/40474833/amazons-alexa-is-a-real-smart-home-platform-now

Newman, 2018
http://www.businessinsider.com/amazon-exploring-ad-options-echo-alexa-2018-1?international=true&r=US&IR=T

Newman, 2018b, accessed at:
https://www.fastcompany.com/40522226/can-mycrofts-privacy-centric-voice-assistant-take-on-alexa-and-google

Simonite 2016, accessed at:
https://www.technologyreview.com/s/601583/how-alexa-siri-and-google-assistant-will-make-money-off-you/

Quartz, 2017, accessed at:
Amazon Echo’s dominance in the smart-speaker market is a lesson on the virtue of being first

Business Case

Helix: How Your DNA is Choosing Your Wine

February 17, 2018 adrazilovic Leave a comment

Imagine that you really like pizza. You probably have a favourite pizza – and a favourite place to get it – right? Let’s say your favourite pizza is a margarita. When you get the pizza and eat it, you will probably like it. However, do you not sometimes think something could have been done differently? Maybe there should have been less cheese, maybe it’s too greasy, or maybe the temperature is just off? Does getting the perfect pizza every time sound like a dream to you? Well, it’s time to wake up then, because consumer genomics start-up Helix is very close to realizing this concept.

But first, let’s back it up a bit.

What are Human Genomics?
The whole concept of human genomics started off in medicine. A patient’s DNA would be sequenced, which means that “the exact order of the four bases in a strand of DNA” would be determined (yourgenome, 2016). Why does this matter, you ask? Well, with the exact order of the composition of somebody’s DNA, doctors could tailor their treatment, medicine, and pretty much every factor that would impact a patient’s health (Farr, 2016). Probably the most popular case of DNA sequencing is that of Steve Jobs, who paid $100,000 in 2011 to sequence his DNA in an attempt to let doctors gain more insight into his sickness and try to help him more effectively (Farr, 2016). Next to the value of DNA sequencing in medicine, Illumina – the company whose supercomputers are behind 90% of DNA sequencing ever done – has identified a use for DNA sequencing outside of the medical field (Farr, 2016).

The Birth of Helix
Helix – an Illumina spin-off – is said to “democratize genomics” (Farr, 2016). Illumina has managed to bring the costs of DNA sequencing down tremendously – partly due to decreasing lab costs and more lenient regulatory decisions in the US (Farr, 2016; Teo, 2017). Where Steve Jobs paid $100,000 in 2011, a comparable procedure would now cost less than $1000 (Farr, 2016). According to helix, DNA sequencing can – next to provide more insight into diseases – discover other personal matters like your lifestyle, personality traits, taste senses, and much more (Farr, 2016). See where I am going with this?

Helix provides many different products. They – for now – offer six different product categories (Helix, 2018).

Ancestry: These products help you find out where your ancestors stem from, to hundreds of thousands of years back;
Entertainment: This is the fast-moving consumer goods section, if you will. Here, you can get for example a wine tailored to your taste perfectly;
Family: These products are mainly meant for families that want to grow, offering them fertility information;
Fitness: Here, Helix wants to help you to “reach your full potential” by designing the perfect workout routine;
Health: This is the more traditional use of DNA sequencing as explained in the previous section;
Nutrition: Lastly, the nutrition products let you design your perfect nutrition plan that suits your metabolism the best (Helix, 2018).

Source: Helix.com

The Business Model
Helix has a new and unusual business model. As they work closely with Illumina, they have many valuable resources that help them analyse consumers’ whole DNA spectrum, whereas similar companies are able to only analyse part of it (Zhang, 2017). Consumers pay a one-time $80 fee to analyse their DNA and the rest is subsidized by Helix (Zhang, 2017). The consumers then choose what kind of products they would like to purchase, and Helix lets third-party companies create those products based on the genetic information Helix provides them (Zhang, 2017).
Helix has, in that sense, created an online platform with customers – on one hand – who gain access to the platform by letting their DNA be sequenced, and on the other hand the product developers (Molteni, 2017).
The business model is efficient in the sense that its platform brings together companies that offer very specialized, personalized products and consumers that are seeking such products and cannot find them in conventional retail channels. Customers benefit as they receive products that are tailored to their individual tastes to the maximum extent, and companies benefit as they cater to the customers. Also, as the companies get to know more and more about individual customers, they could use this information to develop tailored product recommendations. However, as will be explained in the next section, the efficiency of the business model might suffer from regulatory decisions and consumer privacy issues.

Talk About Personalized Products
Basically, Helix takes product personalization to the next level. Personalizing products has many advantages, for example customers’ craftsmanship is emphasized, and customers form a connection with the product if they have put effort into designing it (Nagle, 2017). However, writing your name on a wine label and getting the wine tailored to your DNA are two completely different things. Because DNA is pretty much as personal as you can get, there are potential drawbacks of the Helix business model. The first and most obvious issue is privacy concerns. If people are already freaking out about the cookies that are gathered on websites, why would they send their DNA to a company to get a product of which they could by a similar version in the supermarket?

Some companies using DNA sequencing store consumer data for “unspecified research” and might sell it to third parties (Niemiec & Howard, 2016: p.23). If consumers get suspicious about this, and privacy concerns rise through the roof, it might negatively impact Helix as well. Also, ethical issues such as discrimination based on DNA information are surfacing, too (Farr, 2016). Imagine that your life insurance gets to know your DNA information, this could highly impact the price you pay.

All in all, although customers like personalized products, the safety of information security measures – or even international regulations – need to be established before customers can completely trust the businesses.

The Future
In the future, Helix aims to create an “App Store” for their genomics products and services (Farr, 2016). They want to create the platform in such way that consumers can access their DNA information, browse the “App Store” to discover products that they like (Farr, 2016). The consumers just need to let their DNA be sequenced once – just like you create your Apple ID once – and can then browse the “App Store” as they wish (Farr, 2016). Helix compares their platform to the App Store rather than to Google Play, as they aim to review each seller, which is what Apple does do each app created, whereas Google takes a more lenient approach (Zhang, 2017). Right now, Helix already has 14 employees whose task it is to get to the bottom of the products developed by their featured companies (Zhang, 2017). The buzzword of the platform is that it is “dynamic” (Molteni, 2017). Helix wants to evolve and widen its platform as the research improves, resulting in more products and services to offer to their customers (Molteni, 2017).

So, if you ask Helix, the next time you eat a margarita, you will love it so much that you will feel it in your genes, literally.

References
Farr, C. (2016). Genetics Startup Helix Wants To Create A World of Personalized Products from Your DNA. Retrieved from: https://www.fastcompany.com/3065413/genetics-startup-helix-wants-to-create-a-world-of-personalized-products-from-your-dna [Accessed February 16th, 2018]

Helix (2018). How It Works. Retrieved from: https://www.helix.com/howitworks/ [Accessed February 16th, 2018]

Molteni, M. (2017). Helix’s Bold Plan To Be Your One Personal Genomics Shop. Retrieved from: https://www.wired.com/story/helixs-bold-plan-to-be-your-one-stop-personal-genomics-shop/ [Accessed February 17th, 2018]

Nagle, T. (2017) How Personalized Goods are Shaping the Economy. Retrieved from: https://www.forbes.com/sites/theyec/2017/05/05/how-personalized-goods-are-shaping-the-economy/#b6bca33a1cce [Accessed February 17th, 2018]

Niemec, E. & Howard, H. C. (2016). Ethical Issues in Consumer Genome Sequencing: Use of Conumer’s Samples and Data. Applied & Transational Genomics, 8, pp.23-30.

Teo, G. (2017). The Second Coming of Consumer Genomics With 3 Predictions for the Future. Retrieved from: https://medcitynews.com/2017/07/second-coming-consumer-genomics-3-predictions-2018/?rf=1 [Accessed February 17th, 2018]

YourGenome (2018). What is DNA Sequencing? Retrieved from: https://www.yourgenome.org/stories/what-is-dna-sequencing [Accessed February 16th, 2018]

Zhang, S. (2017). How Do You Know When a DNA Test is B.S.? Retrieved from: https://www.theatlantic.com/science/archive/2017/07/helix-dna-tests/534402/ [Accessed February 17th, 2018]