When a new innovative technology is introduced in the marketplace after many years of research, experimentation, design, and prototyping, inventors are banking on a long, useful life to recoup their initial investments. However, as worldwide innovation capacity has grown at a fevered pitch1 to discover the next big thing and innovation cycle time decreases2, the vital life3 of emergent technologies has shrunk, causing diminished returns for those who dare invent our future.
GenAI is poised to be one of the fastest technologies to ascend from the birth of a product to near-total ubiquity. At the same time, there is a good chance long-term profits from GenAI will not live up to the hype the technology has enjoyed.
The Race to the Bottom
The race by some of the largest companies in the world, coupled with large investments in AI startups to develop the best model and capture large profits, has supercharged the race to commoditize GenAI. The fear of being left out of the next big technology investment cycle has resulted in a massive wave of investment by actors of all sizes and types in today’s competitive technology ecosystem. This irrational marketplace behavior will likely not result in the desired financial returns some envisioned. Instead, the incredible investments and paper-based fortunes made in GenAI will likely disappear faster than anyone thought possible.
This Is Not the First Time
The phenomenon isn’t without previous precedence. Autonomous vehicles were at the peak of their hype cycle in the late 2010s. Large investments by traditional automakers and startups forecasted widespread deployment of automated driving systems by 2020. However, once the initial euphoria of a landslide of profits was juxtaposed against a crowded field of competitors and the stark reality that the initial period of rapid autonomous capability improvements would not continue indefinitely. Instead, rapid innovation would soon plateau as the technology and regulatory requirements were far more complicated than investors initially perceived.
Anyone familiar with the technology hype cycle knows what came next. The lofty valuations of pioneering autonomous startups enjoyed would soon crater, and so too would the starting salaries and sign-on bonuses for autonomous engineers. Traditional automakers wrote down the value of their autonomous assets, and a few even completely exited the industry (e.g., Uber, Apple) and instead focused on their core competencies.
Winning a Different Way
While GenAI’s rapid journey through the technology life cycle does not bode well for investors, it isn’t all bad news for everyone. Take, for example, some of the largest technology companies in the world, Google and Microsoft. While these companies have a fiduciary responsibility to maintain and increase profits, GenAI does not need to be directly attributed to increased company profits. Their GenAI investments can instead solidify the position of their existing products and solutions from existing and upstart competitors. These multi-trillion-dollar companies can easily win the AI investment war using the profits from their existing mature businesses to ensure their ongoing relevance in a fast-changing technology world.
Given the incredibly high barrier to initial entry into the GenAI industry, these alpha tech companies were always positioned to win the war of investment. So, while additional revenue and profits derived from GenAI may not directly add to the bottom line in the long term, the largest of the large technology companies will benefit from building a defensive moat around their existing businesses.
Other Winners
Who else benefits from the rapid race to the commoditization of GenAI? Consumers benefit from a hyper-competitive GenAI market and receive competitively priced services during what could have been a long period of profits for the innovators. Consumers also benefit from the rapid inclusion of GenAI technology in existing technology services and solutions (e.g., email, other productivity software, etc.) they already use or buy without added cost.
The next wave of startups and forward-thinking companies will also benefit. Armed with commoditized GenAI capabilities, these underdogs can do more with less and find new innovative ways to leverage AI in their businesses to differentiate their offerings. Ultimately, it’s these entities that will leverage the GenAI foundational building blocks that were commoditized by the gold-rush-like euphoria in the early 2020s, which will likely spawn longer-term profits from the application of GenAI in novel use cases in uncrowded corners of the worldwide marketplace.
How to Win with AI
In order to prepare to leverage a commoditized GenAI ecosystem to differentiate your business and win in the marketplace, you first must lay the groundwork for long-term strategy and operational improvement. You must determine where and when AI fits into your business and if your company is technologically prepared to tailor and harness the power of AI to your unique situation and needs. Therefore, as with any new technology, being the first isn’t as important as doing it right and cost-effectively.
How Liberty Can Help
Liberty Advisor Group understands that data and processes are the lifeblood of AI systems and an important prerequisite to doing it right. Furthermore, we recognize the importance of having a well-defined strategic AI roadmap. Our team works closely with your organization to develop a clear and actionable plan for AI adoption. We align AI initiatives with your business goals and guide you through the entire process, from inception to deployment.
Learn More About Data Services ➞
About Liberty Advisor Group
Liberty Advisor Group is a goal-oriented, client-focused, and results-driven consulting firm. We are a lean, handpicked team of strategists, technologists, and entrepreneurs—battle-tested experts with a steadfast, start-up attitude. We collaborate, integrate, and ideate in real-time with our clients to deliver situation-specific solutions that work. Liberty Advisor Group has the experience to realize our clients’ highest ambitions. Learn more on LinkedIn and Twitter.
