The myth of AI strategy
Last week, I came across an article titled “Founders need a good reason to forgo an AI strategy, VCs warn at Startupfest” where representatives from the investment community were sharing their view about AI and strategy. Let's call it an empty platitude fest.
Here are a few quotes from the article:
'it’s internally considered an "exception" if the Calif.-based firm invests in a company with no AI strategy.'
'There needs to be some powerful reason why, a "why now," without that business model'
'the ideal timeline to hit $1 million in annual recurring revenue has changed from two years to six months'
'Now you have this mega computer brain you can access with fewer coder efforts'
Also, in the same article, we learned that 'Investors are now looking for proof of a long-term competitive edge and sustainable revenue' but on the other hand 'they warned that the "hypergrowth" observed now in companies building enterprise and consumer-facing AI products ... is not necessarily sustainable and more akin to a "bubble".'
Let's start with this - AI is not a strategy. AI, at best, is a name for technology, which is loosely associated with Large Language Models (LLMs) and still in this experimental stage where everyone is trying to come up with what to do with it.
As a side note about the vague definition of the term 'AI', here is a write up about the latest from Delta Airlines: 'Delta Air Lines is using AI to set the maximum price you’re willing to pay.' In this case the AI has nothing to do with any LLM. There is a technology behind the scenes, sifting through all the available data and trying to identify how much money they can ding you for without losing you to its competition. It would be surprising if companies like Uber don’t do this already. And maybe you don't remember when Facebook tried to introduce its own currency and banking services. Nobody called it AI then, but it was trying to get every single penny out of you.
Sorry, I got distracted. Back to the 'AI Strategy' nonsense.
The word 'Strategy' is (over)used in context which has nothing to do with a strategy itself and it is used as a filler word to emphasize the sophistication of the speaker.
Strategy is an integrated set of choices from defining what the goal is, where and to whom our product or services will be delivered, what the pre-requisites are in order for us to do that and then what systems we have to have in place, which will support this. As you might notice, the technology is at the end!
Does it mean it is not important? Of course not. It is the enabler. And as the technology changes it might help us to capture bigger, better, different markets. But to say that we should have an AI strategy suggests that there is not much substance to the word strategy.
Consider this, if you would replace the word AI with any other technology, say Microsoft Office, would you find the following statement rational - 'it’s internally considered an "exception" if the Calif.-based firm invests in a company with no Microsoft Office strategy'?
If you would suggest that you can't compare AI with Microsoft Office, because AI is a game changer, my answer will be a) actually, yes you can and I do that for a living, assessing technologies and their use within a business, b) since I started working with computers, every single new technology was introduced as a game changer. That's why this newsletter is called 'Recurrent Patterns'!
If you still question this, here is an example which might confirm my narrative. Do you remember Blockbuster? A physical store where you could come and rent a movie. Then came Netflix. It didn't start with streaming movies. It was sending DVDs by mail. Mail! Describe to me the technology strategy in that. The whole thing from beginning to the end was an integrated set of choices which led to market demise of one and dominance of the other one. Would you say that the ability to stream content over the Internet is a strategic advantage? Perhaps it was at one point, but without a sound strategy it is just a technology. For the curious minds out there, check the story of RealNetworks.
The recurrent pattern? Regardless of how revolutionary a technology appears, it always becomes an equalizer, a must have capability. It is important to understand the trends and what new capabilities can provide for your business. But if you keep chasing it as a glamorous, shiny object, it will blind you and you will lose sight of the important thing - your business.