Both the steam engine and electricity fall into the category of general purpose technologies – technologies that “disrupt and accelerate the normal march of economic progress”. Both have extended their reach into many corners of the economy and radically altered the way we live and work. also falls into this category. So why has it not yet taken off?
A few days ago I had the good fortune to attend a meeting between technology investors, entrepreneurs, businessmen and professors in the field, the latter three, of . It was interesting, on the one hand, to mix in the same virtual space money, willingness to create something, success in having done so, and knowledge… and, on the other hand, to observe the same vital dilemma regarding this technology is shared in the background: democratization or industrialization of .
Information and communication technologies -and more specifically - are GPTs, general purpose technologies, a term coined by MIT professors Erik Brynjolfsson and Andrew McAfee in their book The Second Machine Age; namely, technologies that “disrupt and accelerate the normal march of economic progress”. The steam engine and electricity were also GPTs. They were disruptive technologies that have extended their reach into many corners of the economy and radically altered the way we live and work.
Nonetheless, if we look at the current state of , it has yet to take off. Why? One of the reasons is perhaps because it is stuck at a crossroads.
On the one hand, we have tech giants like Amazon, Google, Facebook, Alibaba, Tencent… they are not only competing with each other to see which is the first to discover the next disruptive breakthrough within . At the same time, they compete against fast startups that want to use , , ontologies or even hybrid approaches -mathematics, statistics, rule-based programming and logic…-, to revolutionize certain specific industries. It is a competition between two approaches to extend in the field of economics: the industrialization of the powerful giants versus the democratization of the agile startups. How that race plays out will determine the nature of the business landscape: monopoly, oligopoly, or free and spontaneous competition amongst thousands of companies. The industrialization approach wants to turn into a commodity, with a price tending towards zero. Its goal is to transform the power of , and its various subfields, into a standardized freemium service; namely, any company can acquire it, with its use perhaps being free of charge for academic or personal environments. Access to this freemium environment would be through cloud platforms. The powerful giants behind these platforms (Google, Alibaba, Amazon…) act as service companies, managing the network and charging a fee. Connecting to that network would allow traditional companies, with a large data set, to leverage the optimization power of without having to redo their entire business. The most obvious example of this approach: Google’s TensorFlow. This is an open-source software ecosystem for building models; however, it still requires specialized programming skills to make it work. The goal of the network approach is to both lower that specialization threshold and increase the functionality of platforms in the cloud. Making full use of an model is not easy as of today but giants hope to simplify this technology and then reap the rewards, in addition to operating the network.
On the other hand, start-ups and middle-sized enterprises (MsEs) are taking the opposite approach. Instead of waiting for this network to take shape, they are creating niche products for each use case. Such startups and MsEs are aiming at specialization, rather than breadth. Instead of providing, for example, models for general purposes, they build new products, solutions, niche platforms for algorithms to perform specific tasks such as fraud tracking, insurance policy comparison, customer profiling for upselling and cross-selling, terrorist threat detection on social networks, pharma knowledge graph generation… The starting postulates of these startups and MsEs are twofold: on the one hand, traditional businesses are still very far, operationally, from being able to use a multipurpose network; on the other hand, should start to be an intrinsic element in the business operation of these traditional companies. It is because of the latter that, almost always, companies following this approach end up building a strategic relationship with the startup or MsE, which has introduced them to this world.
Who will win in this race? Difficult to make a prediction. What is clear is that, if the industrialization approach triumphs, the astronomical economic benefits of this technology will be concentrated in a handful of companies (probably American and Chinese ones); if the democratization approach succeeds, these huge benefits will be spread among thousands of vibrant young agile companies.
Play ball, ladies and gentlemen, and stay tuned!