Bots and AI Will Drive a Second Wave of Fragmentation and Disruption

Blog: Capgemini CTO Blog

Chat applications are becoming a mainstream trend and our preferred way of interacting with colleagues, friends and family. From the early days of SMS to the favorite snaps of our children, real-time online conversations are everywhere and here to stay.

The acquisition of WhatAapp by Facebook in 2014 for a hefty $19 Billion price tag looks more and more as a brilliant move and not a foolish one, asTechCrunch noticed it one year later. Instagram’s acquisition in 2012 for a cheap $1 Billion now seems even smarter, not only to grow the audience and the revenues but also as a magnet for digital talents and ambitious entrepreneurs.

But although TechCrunch saw messaging apps as the future of mobile portal, they remained more or less aligned with the existing lines of forces Internet, without a direct impact, except their increasing audience.

The growing interest in Bots and AI is changing the game and we’ll be witnessing the second major fragmentation of the Internet.

Apps drove the first fragmentation

The rise of mobile apps and the growing usage of smartphones generated a completely new user experience: instead of searching and browsing content from one page to the other using hyperlinks, we were siloed in different apps, each brand driving its own experience, sometimes sharing basic data between each other like pictures.

This was the first fragmentation of the Internet and we accepted it, mainly because we gained at the same time mobility and ubiquity thanks to smartphones.

Fragmentation is always generating a symmetrical need for order and the App Stores of the two mobile OS giants became our gateway to the prolific apps world and the kings of this new world.

Bots will drive a second fragmentation

Bots are a very different kind of animal than Apps for several reasons:

Bots are more granular and closer to microservices, whereas Mobile Apps are usually a one-size-fits-all customer-facing view of your complete (and often bloated) set of offerings. Bots will potentially disassemble the different services and offers of Companies, leading to increased benchmarking and competition.
Bots are adaptative by design, both on Front-End & Back-End : as Machine Learning is making progress at lightspeed (see AlphaGo), expect to see the level of service offered by Bots increasing day after day, in a Test & Learn approach. You’ll be teaching them through interactions and they’ll learn continuously from you, generating an unprecedented level of stickiness. And as Ted Livingston explains it in his article, you don’t need to start with tons of Machine Learning algorithms: an efficient and honest conversation for daily tasks will start building strong ties between Bots and your customers (the beer-in-a-stadium use case used by Ted in his post is a simple yet great example). To summarize it, the most frequently used transactions on your web sites and apps are candidates for Bot-powered automation and put your IVR “on steroids”.
Bots go well along with voice and they will together become our preferred way of interacting with services. With their increased definition (2K, then 4K) and graphical power, our numerous screens will remain a great way to display the result of our requests to Bots and sometimes a great second level interaction too. The recent evolution of Amazon’s Echo product line with the Echo Show is a concrete example of this trend. In that sense, don’t see Bots as killing your Web and Mobile properties, but more as profoundly reshaping them in more modular building blocks.
Bots will induce new kinds of business integration and cooperation, based on dynamic connections between Bots and relying oncollaboration and continuous learning: the first Internet was based on hyperlinks between static pieces of content and the second / mobile Internet was based on sharing (little) content between Apps. Bots will collaborate through Intents on our behalf and will benefit from each others and their increased level of service. Metcalfe’s Law will also be valid for the Bots space, so expect the total value of this ecosystem to grow as the square of the Bots nodes. Here again, the recent improvment of Alpha GoZero is a clear demonstration of this new order of magnitude gained in unsupervised Machine Learning: AI is no longer limited by the amount of data accrued by mankind over centuries, which is fueling fears from well-known scientists like Stephen Hawking and entrepreneurs like Elon Musk.

All these characteristics will lead to a more profound fragmentation of the Internet, impacting both the User Experience on the Front End and theBusiness Models in the Back End: all the ingredients of a new disruption are there.

A fierce competition to own the Bot space

Apps fragmentation generated a need for order, trusted third parties and distribution channels. Bots will not be an exception and the competition is already heating up.

WeChat is the poster child in Bots space but moreover the first example of disruption by new entrants that Connie Chan recently designated as Super App:

A Super App takes services that its users would naturally want and integrates them, EVEN if these services are unrelated to core product.

Amazon, with its Echo product line, powered by its Alexa Business + Technology Architecture is leading the pack on conversational commerce embedded in IoT devices, growing its ecosystem at a rapid pace to reach Platform Leadership. The whole Alexa Business Platform can be seen as another example of Super App, aiming at consolidating Amazon’s strong foothold in the e-commerce arena in order to fight against disrupters like WeChat.

Facebook Messenger is already an undisputed gatekeeper for the last mile access to customers, fueled by its soon-reaching 2 billions MAUs. Facebook’s strategy in payment and e-commerce services is not yet crystal clear, but we can reasonably expect a stronger foray in that space, at least to avoid being disrupted by actors like WeChat.

Google Home has now become a fast follower to Amazon Alexa and Echo. Interestingly enough, it lacks the e-commerce focus of Alexa but it strongly leverages its search DNA and a clear connection to Android through Google Assistant. Both hardware and software pieces can be seen as a 2-sided line of defense against Amazon and WeChat.

Siri seems now to be a more strategic piece of Apple’s roadmap, with its own homebrew technology replacing Nuance and the Apple HomePod coming to the market. The software nature of Voice Recognition, bots, AI and software probably suffered from Apple’s focus on designing beautiful pieces of hardware. It sounds like Apple finally understood that voice won’t kill its devices but will sustain their USP.

There are of course many other niche players, either specialized in the B2B market or in technology enablers, which will be covered in another post.

A new wave of disruption

Let’s wrap up the new field of forces that brands are now facing online:

your services may be disassembled fragmented into small Bots, interacting with your customers by voice and text chats
the great UIs built and maintained year after year and requiring significant investment, are being deprecated by cheap and fast messaging Super Apps, where your brand may reduced to its logo and the real quality of your customer relationship teams and processes (which will be reshaped by Bots)
New or existing messaging Apps players (WeChat, WhatsApp, Messenger, SnapChat, Instagram) with massive audience are highly compatible with the Bots culture and architecture
These players will try to reassemble a brand new and great Customer Experience into Super Apps, probably taking a cut of the transactions done through their Bots ecosystem, and targeting the same 30% that has become the de facto standard on all App Stores payment fees
At the same time, new hardware devices are taking off, and will increase the interaction bandwidth with customers in their daily lives: they offer new opportunities for brands, but their value chain is being already structured by GAFAM and BATX along the two main digital business models: e-commerce and advertising.
Brands should start thinking proactively how they can deeply integrate Bots, Voice and AI into the heart of their products and services, as this may be their best line of defense against disruption

There are always opportunities coming along with these risks and the best way to cope with it is to be in motion, in a Test&Learn approach, just like when you first learned as a kid how to ride an real bike. Lean Startup frameworks are now well documented and popular, they offer the right mix of process and freedom to sustain IRL (In Real Life) Applied Innovation.

So will your competitors, incumbents like new entrants, so you better start now this great journey.

(*) The picture has been taken from torbakhopper and is available on Flickr, under the Creative Commons CC BY-ND 2.0 license.