Amazon buying the Whole Foods grocery chain for $13.7 billion is one of the biggest business and technology stories of the year. On the surface, this deal fits the Amazon model of moving aggressively into new markets. But I don’t think this deal is primarily about food. It’s about friction.
I mean “friction” in the sense Geoff Colvin described it in his address at IBM Vision 2017. By using smart technology, data and connectivity, innovative companies are radically changing how they do business and interact with their customers. “Frictionless” is a metaphor for the multiple ways in which technology accelerates business. On the one hand, labor, information and money can move easily, cheaply and almost instantly. At the same time, companies can form new relationships with customers, workers and owners. The lack of friction introduces both opportunities and perils.
Colvin also offered Amazon as an example of a relentless focus on making transactions easier in ways both large and small. Not every attempt is a success—do you even remember the Fire Phone?—but the same pattern shows up time and again.
Amazon: Going for friction-free
In a connected economy, it’s hard to overstate the importance of friction—or the benefit from minimizing it. Consider the seemingly ridiculous Amazon Dash Button. This small, WiFi-connected device has a single button you can press to order a single, preselected product. In just one year, Amazon drove a five-fold increase in orders placed with the devices. How? By reducing the “friction” of the transaction—making it easy to reorder your favorite product when you’re running low. Amazon now sells these buttons for hundreds of different products.
In other words, Amazon is all about making a wider range of things easy for consumers, and making continual incremental improvements to the overall Amazon ecosystem.
How does the Whole Foods acquisition reduce friction?
I’m just speculating, but it seems clear to me that this acquisition could make it easier for customers to do business with Amazon by, for instance:
- Establishing 460 new combination distribution centers and showrooms in diverse, affluent locations around the country
- Helping overcome people’s reluctance to purchase food items sight unseen
- Improving the logistics of home grocery delivery—and time-sensitive delivery in general
- Driving subscriptions to the Amazon Prime service
- Amassing ever more data about what Amazon customers want
- Encouraging people to pick up their own purchases, both food and otherwise.
That’s why I’m pretty confident saying that the Amazon and Whole Foods deal isn’t only about expanding into a new market segment or even acquiring new assets; it’s about reducing the friction inherent in this kind of shopping. And I wouldn’t bet against Amazon. They may well be able to change grocery shopping in the way they’ve changed so many other market segments. They do it by making transactions easier, providing the products people want and adjusting quickly and always keep learning. That’s the potential of a frictionless economy to provide what people want, when they want it.
That’s great, but what does this have to do with IBM Analytics?
In one sense, nothing: Amazon surely uses data analytics, but in that space they’re an IBM competitor. In another sense, however, Amazon’s approach to reducing friction in shopping is very similar to what the IBM Analytics portfolio is designed to do.
IBM Analytics isn’t for one kind of business problem, or even one kind of analytic solution to a range of problems. IBM Analytics is about using data in smarter ways to inform better decisions. It’s an analytics ecosystem, and we’re driving it to become more frictionless over time: with easier usability, easier interoperability, easier data management.
Later in that same keynote where Geoff Colvin used Amazon as an example of a frictionless enterprise, Marc Altshuller demonstrated a whole range of insights that IBM Analytics can find in data—from combining unexpected data sources to performing rapid analysis to mapping activity to forecasting demand to helping streamline sales and operational planning. Marc explained analytics as a story of using data to get to insight.
What Marc didn’t do was to talk about the individual IBM Analytics products that made those combined insights possible, because that’s not the point. Different products have different strengths, but together they contribute to an overall philosophy and method of using data. Think of it as frictionless analytics for a frictionless economy.
Want to experience frictionless analytics?
In March 2018, come to Las Vegas and go hands-on with the IBM Analytics portfolio. See how an ecosystem of analytic insight can help you thrive in a frictionless economy. Click here to learn more.