When Amazon.com Inc. recruited longtime Microsoft Corp. product chief Panos Panay in 2023 to run its devices division, his new colleagues thought the e-commerce giant was preparing to take its consumer gadget line upscale.

Panay pushed back on the idea during an all-hands meeting with thousands of engineers from the Alexa, Echo and Fire TV brands. But his vision for the business didn't come into clearer focus until this week, when the executive unveiled a suite of new products at an event in New York. The message: Panay aims to build devices that people want to show off in their homes and use — at every price tag. “The idea is putting a lot of detail into every product,” he said in an interview.

Though most of the new devices, including updated smart speakers, e-book readers, home security tools, TV accessories and other offerings, do carry higher prices, the company’s more affordable products are equally key, Panay said. “The superpower of designing for cost is such a rare talent,” he said. “When you just anchor on that and now you’re making great products and you can serve everyone — that’s how we can have impact on the world.”

Ralf Groene, a former top designer at Microsoft who came out of retirement earlier this year to become head of design at Amazon, echoes that sentiment. “There’s lots of sophistication in the material, but we don’t want you to be like, ‘Oh, it’s so sophisticated.’ It needs to blend in.” He compares it to not noticing your shoes when you run. Or when you play the guitar and are “just into the music,” Groene said.

While Panay is thrilled with Amazon’s slick-looking new Echo speakers and Kindle e-readers, he talks most proudly about an updated $40 4K Fire TV stick — an unglamorous peripheral that lets people stream programing on their television. That product has a new operating system with improved speed and performance “on the cheapest possible 4K device,” he said.

“In my heart, that’s a great product,” Panay said, “because so many can afford that and get an incredible experience.”

Still, making more premium hardware — something Panay calls the “signature” line — to generate higher profit margins, a la Apple, is also a major part of the goal. Amazon’s hardware division has long been seen as a loss leader — with the real money coming from subscriptions and purchases made through the Alexa voice assistant. Panay disputes that view. While the overall division continues to lose money, some product lines are profitable, and others are heading in that direction, he said.

Panay also oversees Amazon’s efforts beyond Alexa and devices, including its push into satellite internet through Project Kuiper and autonomous vehicles with Zoox. The profit drive has been a priority for the group in recent years as Chief Executive Officer Andy Jassy seeks to cut costs and reform a unit that sometimes operated as a borderline research lab.

“My belief is that our job is to make devices the next big business at Amazon,” Panay said. To accomplish that — and continue building the organization — certain levers need to be pulled to make the business more successful, he said.

The revamped devices could help. Other than the Fire TV stick, most of the new Amazon-branded hardware has a higher price tag. The latest Echo Show 8, for instance, is $80 more than the current model. And the new color Kindle Scribe is the priciest Amazon e-reader by about $200. With those higher prices, you’re also getting a much better product, Panay said. But you’re not getting an overhaul built around high-end metals or the world’s priciest fabrics.

“The first transformation is just elevating those products to the next generation of what they should be,” Panay said. “It’s just the beginning of that.”

His department’s top leaders assemble every Thursday for confidential planning discussions, and they’ve created a road map for the next three years of products, Panay said. A key first step was releasing an AI-fueled version of Amazon’s voice assistant, Alexa+, a rollout that began in March. That set the stage for a device strategy: “Great products made even better through ambient AI,” Panay said.

Though Alexa+ can run on Amazon gadgets dating back more than five years, the latest hardware is the first to include the system already installed. The devices also have new features. The updated Echo Show — a smart speaker with a screen — combines AI with sensors to know who just walked up to the device. It then immediately displays a person’s preferences and can serve up tailored podcasts or photos. The Kindle, meanwhile, can upload a user’s notes to help fulfill Alexa queries made on speakers.

While the company is now confident enough to include Alexa+ as the default option on its new devices, the rollout hasn’t been entirely smooth. Users have complained about slow deployment, broken compatibility with some appliances and the system misunderstanding commands. Still, Panay is all in.

“This is not an easy transition,” he said, given that hundreds of millions of people use the current version. Still, “an Alexa+ home is probably the most exciting home product that I’ve ever seen,” he said.

Amazon already has double-digit millions of users running the new Alexa, which costs either $20 per month or comes free with a Prime subscription, but the company is working at full speed to improve it, Panay said. “Everybody will want it and use it,” he said, adding that it will take time to resolve kinks across every use case.

Daniel Rausch, Panay’s lieutenant in charge of Alexa and Echo, said the results are already promising: The new interface boasts two to three times more usage than the old-school Alexa — for those who have it. (The regular Alexa still has hundreds of millions of users).

In a world where people are glued to their smartphones and computer displays, Panay wants to steer Amazon users in the other direction. That means creating AI devices that work in the background and require less screen time.

But plenty of other companies are chasing that dream, including Apple, Alphabet Inc.’s Google and Meta Platforms Inc. Even Panay’s predecessor, Dave Limp, had been exploring the idea at Amazon.

For Amazon to be a true contender in this market, the company will finally need to crack the code on mobile devices. A decade ago, it tried and failed with the Fire Phone — back when Panay was at Microsoft designing tablet-laptop hybrids. The company is working on future earbuds and smart glasses that tap into Alexa, but the real win will be something entirely new that’s portable and built around AI.

“There’s an entire paradigm shift of user interfaces that’s coming — I think the way people interact with their devices is being challenged,” Panay said. “I am a firm believer in ambient AI and being able to talk to something, have that conversation wherever, whenever, however you want to. I think it’ll take different form factors to accomplish that.”

To help, Amazon acquired a startup called Bee in August. That company developed a wristband that can record a person’s day and send the user a summary to a phone app. Though Amazon didn’t discuss the idea during its product unveiling Tuesday, it aims to eventually update the device and tie it into Alexa+.

To reshape Amazon’s hardware group, Panay has brought in collaborators from his Microsoft days, as well as veterans from Amazon itself. The team includes Aidan Marcuss, who worked on Windows until last year and now heads Amazon’s TV business, as well as J Allard, the co-inventor of Xbox who now leads a team focused on new form factors. Ring creator Jamie Siminoff, meanwhile, returned earlier this year. Perhaps the most significant addition is the German-born Groene, who left his Microsoft role when Panay exited.

When Groene joined Amazon eight months ago, his first order of business was bringing all of the company’s designers — across hardware, software and user experience — under one roof. That created a structure similar to the way Apple develops its products.

Before the shift, design was implemented on a product-by-product basis by individual product managers. While this structure allowed for efficient product creation, there were silos that prevented teams from building on one another’s achievements, Groene said. It also yielded a slate of mostly utilitarian products that, aside from the Amazon smile logo, shared few common design traits.

Two other major changes: involving design from day one of the product process and making rapid prototyping a core part of development. Rausch, who has worked in Amazon’s devices division since 2009, said the biggest change is that sketch artists, prototypers, material scientists and engineers now work together from the start.

“Bringing it all together much sooner, iterating on the product much sooner, setting the bar higher much sooner lets you end up with something much more complete and just frankly better,” he said.

Amazon is launching its new products just weeks after Apple rolled out new iPhones — some of the company’s biggest updates in years — proving that this decades-old form factor is here to stay. Meanwhile, Meta released new smart glasses with a display earlier this month, showing that companies outside of Apple are eager and capable of introducing entirely new categories of devices.

OpenAI also looks to become a contender in mobile hardware, with ex-Apple designer Jony Ive working on a bevy of new AI-centric gadgets.

For Amazon to become a true leader in devices, it will need breakthroughs that go beyond its current lineup. It will also need to convince users that Alexa+ and its AI is worth paying for — lest they revert to or downgrade to the old version of Alexa. In any case, it will take years for the company’s strategy to take shape, Groene said.

“It’s really a journey,” he said. “In 12 months, you’ll see the story one step further, but it’s still not the full picture. It’ll take its time.”

(With assistance from Matt Day.)

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