In 2023, I attended and spoke at many IDC conferences, such as the IDC Government Xchange, IDC Portugal Directions, and non-IDC events, like the Smart Cities Expo and the ServiceNow World Forum in Rotterdam, to name a few. One common thread of many of the conversations that I had and the presentations I listened to was how executives felt the pressure to increase their organizations’ speed, to keep up with the fast pace of innovation.
Everyone seemed obsessed with speed being the big difference between how innovation happens today versus how it happened twenty, fifty or a hundred years ago. That may be true for enterprises that want to be fast followers, for instance to drive incremental productivity improvements through digital transformation; in fact, IDC’s research indicates that the average time to value of digital projects was in the 6 to 24 months range, two years ago, while now it is less than 10 months.
But enterprises that are looking for opportunities to re-shape their destiny and gain competitive advantage should take a closer look at the way technology innovation shapes the creation of new markets. And that is different today, not only because of its pace, but also because of the dynamics among the key attributes of a market.
No matter whether one tries to interpret market dynamics through the lenses of neoclassical economic, Austrian school of economics, institutional economics and other theories, the common elements of market formation are the exchange of products and services, the narratives built around buyer and seller values that define how they perceive the benefits and risks of those products and services, and the norms – including laws, policies, standards – that regulate the exchange to maximize benefits and reduce risks.
From Linear to Warped Innovation
In the past, the interplay between exchanges, narratives and norms not only took a long time to come together but was quite linear. When the car market formed, Daimler and others invented the product in the 1880s, then Henry Ford and Alfred Sloan at GM shaped the narratives of the car for the mass consumer in the early 1900, and it was not until the 1950s that car safety regulations started to become more pervasive.
Overall, it took over 70 years for exchanges, narratives, and norms to fall into place and in a linear sequence. Fast-forward to today to look at how the Generative AI market is shaping up. In 2017, Google researchers published a paper on transformer models that was born out of a specific need – making language translation more efficient – but was soon understood as the seminal moment of a new category of product and services based on large language models (LLMs).
In late 2022, OpenAI public launch of ChatGPT detonated a new narrative about mass usage of LLMs to search and synthesize knowledge and create new content, being images, text, or computer code. While ChatGPT was launching, the EU was finalizing its AI Act, but decided to delay the completion of the draft regulation, to consider the impact of GenAI.
In essence, over the course of six years, the development of products and services to be exchanged, the narratives and the norms started to interplay. And one year after the launch of ChatGPT, new products and services are constantly coming to market in the form of public platforms, domain-specific models, capabilities embedded in enterprise software; the narratives around the value and risk of GenAI have not yet crystallized at all, with suppliers and buyers that are trying to figure out the impact across the most disparate use cases; the AI Act was modified, and then went through a first approval cycle.
So, not only the timeline was compressed, but the dynamic interplay of exchanges, narratives, and norms, was (and still is) far from linear. It is a warped dynamic, meaning, not only happening at “warp speed” compared with the past, but also sometimes convoluted and unpredictable because of the feedback loops among all its determinants.
In many scientific fields new discoveries are accelerating, often powered by emerging tech such as AI and quantum computing, like in nano materials, bio-engineering, space-tech, and nuclear fusion. At the same time, there are plenty of societal challenges where technology innovation can find applications, such as energy efficiency and climate change resilience, healthy and sustainable food for all, smart and sustainable roads, sustainable use of precious water resources.
These momentous changes will bring more warped innovation and less linear innovation. Enterprises and their technology partners that want to shape new markets in this context need to consider that:
- Proving the value or ROI of technology innovation will revolve around business and revenue model re-imagination, creation of new industries and ecosystems, nurturing of jobs and skills for the future, rather than considering only efficiency and speed of product and service development.
- Governing innovation will require making organizations more permeable to bring together stakeholders across enterprises and often across industries to explore new ecosystems through virtual joint ventures and outcome-driven joint development projects, rather than scaling partnerships with suppliers and customers along familiar value chains.
- Business value will be created by investing in organizational capacity and skills that nurture collaboration, curiosity, data literacy, storytelling and scenario narrative, user-centricity, and pervasive resilience that enables to withstand the failures and mistakes that come from serendipitous trial and error iterations.
Private and public sector leaders that want to succeed in shaping new markets in the world of warped innovation should concede some slowness and sloppiness to shape the intricate interplay between turning new scientific discoveries into products and services that can be exchanged, crystalizing the narrative around the social and economic values that drive buyers and sellers, and designing the norms that maximize benefits and minimize risks.