Strategy IRL: Amazon buys iRobot

Aug 7

For years, one of the most fun strategy questions Google interviewers would ask: Should Google buy iRobot? Looking at why Amazon, not Google eventually bought I robot might help you think through your next strategy question during an interview.

Frameworks to Approach the Questions

The 5 Minute Framework:

Why might Google want it?
Why might a Google purchase fail?
Would the aquistion scale?

The 15 Minute Framework:

Pros
- Google Strengths
- Opportunties for Google
Cons
- Google Weaknesses
- Threats to Google

So let’s look at the question “Should Amazon by iRobot”:

The 5 Minute Framework:

Why might Amazon want it?
- The Connected Home Play: Amazon has invested a lot in the connected home/ambient commuting. (Alexa, Ring doorbells, etc.) Having a device that is mapping the home and navigating it successfully would support current investments in ambient communiting
  - More specifically, Amazon launched its $999 Astro smart home robot in 2021.
  - “The long-rumored home assistant robot can map out floor plans, listen to commands to move between rooms, and even recognizes faces. Much like an Alexa-powered device, it can answer questions, play music, and show you things like the weather. iRobot’s latest OS might not be mounted to an Alexa on wheels, but it’s equally ambitious, with the aim to get a better understanding of a home through AI and smart features, and then extend to other areas of the smart home.” - The Verge
- Knowing your home will help Amazon sell you more. From a smart home perspective, Amazon will gain value from the maps iRobot generates that give it that deep understanding of our homes.
  - “iRobot has detailed knowledge of floor plans and how they change. It knows where your kitchen is, which your kids’ rooms are, where your sofa is (and how new it is), and if you recently turned the guest room into a nursery.”
  - “This type of data is digital gold to a company whose primary purpose is to sell you more stuff.” - The Verge
- Reduced Production Costs: Amazon has huge purchasing power and might be able to product iRobots more cost-effectively. They might have already tried creating or supporting copy-cats in the space.
- User Purchasing Data: Amazon has data on how many of its customers have purchased robot vaccums online. It has a strong sense of demand.
- Existing Partnership - Amazon has sold a lot of iRobots on its website but also Amazon and iRobot have had an increasingly close partnership through Roomba’s embrace of Alexa functionality (and use of AWS).
Why might an Amazon purchase fail?
- Aquisitions typicallly fail or under preform. If the company’s cultures don’t align appropriately or the tech stacks are difficult to integrate, it might not work as anticipated.
- Production vs Operating System Value: I am not sure where iRobot has struggled but I think I read a while back about iRobot taking a huge hit on sales from the competition and pivoting to the operating systems play. I am not sure how that has gone. But see above, I believe Amazon’s strenghts would neutralize this concern.
- Regulators: Amazon’s suite of smart home products have an incredible about of personal data.
  - “That will naturally lead to even more questions around privacy, and Amazon’s control over the smart home market.” - The Verge
Would the aquistion scale?
- Amazon’s Previous Purchases - While Amazon’s purchase of Whole Foods hasn’t met all analyts projections, some of the home device purchases like Ring seem to have been more successful. (This is an assumption I wouldn’t be able to look up during the interview, the interviewer might know more.)