Houdini, GenAI, and the Ticking Time Bombs
The amazing Harry Houdini couldn't actually make an elephant vanish, although he could make an entire theatre look one way as the elephant exited the opposite side of the stage.
In some ways we are watching that same show now. We will not see something elephant-sized.
GenAI is deserving of huge attention and buzz. Companies like Walmart , Salesforce , Shopify , the LEGO Group , Moderna Therapeutics - Messenger RNA Therapeutics , SEPHORA , BMW Group, and others are already doing brilliant things with it that would have been viewed as magic three years ago.
'Old' firms like Boston Consulting Group (BCG) and amazing new firms like GAI Insights are helping firms 'get' GenAI and improve output and lower cost structure. Folks like Plug and Play Tech Center are incubating AI-infused breakthroughs simply not possible three years ago.
With all the valid interest and focus on GenAI there are three ticking time bombs related to this; the third might be the least known and the worst.
Time Bomb One
Missing the Bigger Picture - We are at the cusp of an Industrial Revolution-sized shift. The WEF/Davos folks talk about the Fourth Industrial Revolution. There are a dozen change waves (not all technological) crashing on our business shores beginning now. Yes, Gen AI is one of them, but there are three other huge shifts in AI and eight others happening in parallel. All of the focus on GenAI distracts from the rest.
Companies get mortally wounded quickly; they usually don't realize it, and it takes time to die. In 1912, also a time of big shifts, there were 400 automotive firms. Twenty years later, there were 40, and 3 had 80% of the market. The crash and burn cycle has been accelerating ever since. The average life span in the S&P 500 has shrunk by 80%+, which means the crash and burn cycle is five times more aggressive. Firms doing well don't naturally worry about this creative destruction cycle hitting them.
Very often, smart, innovative people external to your market look at the new shifts and technology and ask not how they would improve your business with it but how they build a new model leveraging the new 'stuff' and seeing the shortfalls and gaps of today. Henry Ford worked at Edison Lighting and a company that made rail cars before he built Ford.
When you look back at strategic failure there are three prominent route causes:
Bad strategy is a significant one. No amount of clever tech saves you from that. Strategy is hard. Kmart, Sears, and Motorola, who went from the best-selling 'phone' in history (RAZR) to a death spiral in 8 quarters, are great examples. Several big telcos are on their way, Starbucks might be, some higher education, and EV firms are there too.
No radar and not seeing the just-over-the-horizon threats are also cause for root cause failure. High-buzz tech gets used in high-buzz places. There is a huge focus on customer-related areas, which is smart and good but not to the exclusion of using innovation pragmatically.
Broken Strategy Chain. A change to strategy requires a review of tasks/talent required to execute and the command, control and comms structure that goes with that. When the competiive battle changes it is highly unlikely you need the exact same team/structure, often the change is significant. It is hard to change a team that has won in the past simply because external realities have changed. Having the army that is prepared to fight the last war does not end well.
Time Bomb Two
Boards and the Knife Fight - a majority of boards are rightfully asking what their firms are doing with GenAI. Companies that do nothing and stay on the sidelines will find that in the fierce knife fight of competition, others have upskilled, lowered cost, and become more agile, which, of course, is bad for them. The real ticking time bomb, though, is for the ones that did bet on GenAI and are patting themselves on the back as they improved customer service and cut X% of the cost. They will realize just as that over-the-horizon stuff gets here that the competitive battle in their markets has turned into a different thing, a gun fight. Great knife fighters generally do very poorly in gunfights.
GenAI did not and could not cause a shift as big as the 4th Industrial Revolution. GenAI is hugely important, and is a must-do, but it is gasoline on the shifting fire, not the fire itself. In times like this, there is zero chance that your strategy, structure, mission, and talent luckily match the new world. Boards must have a strategy refresh based on all the change waves landing. Those who ask just about GenAI have missed the emerging reality.
It is also worth mentioning that being good over any extended period of time at GenAI while being relatively bad at tech/IT is not a real thing. Being bad at IT and going big on GenAI will generate GenAI tech spaghetti. . Many boards have heightened interest in tech. I think I spoke to 300+ board members last year, mostly via the super useful NACD (National Association of Corporate Directors). Some recognize that it is now time for a strategy-level refresh that will make a difference now (e.g. GenAI) but also medium term as other change waves impact competition. Massive advances in Federated AI, Hyperspeed/Hyperscale AI ( Ocient ), Edge, Real time event based GenAI infused intelligence (Vantiq ), the lego-ization of tech, behind the scenes Cumulative IQ/KM AI ( CrowdSmart.ai and time bomb three below cannot be ignored.
If these sort of things are not on your radar get better radar, radar operators and fire the boss of the radar team...which will be hard if you don't have one :-)
Time Bomb Three
(You have been hacked)
Outside of parts of the intelligence community the deepest, fastest, and best adoption of bleeding edge effective tech happens in the Dark Web. GenAI is no different. In fact GenAI is massively well suited for the nefarious 'hacking' based criminal activity that is the vast majority of the Dark Web today. It used to be 80% hackers and 20% organized criminals. It is now 95% criminals using tech to support illicit activity. They are using GenAI to improve their code, phishing schema, and enable less advanced criminals to level up their games. Most criminal hackers are not state actor level criminal masterminds, they are just tech crimnals. Most phisihing schemes and a lot of hacks/ransomeware are not technological masterpieces.
They largely rely on the companies that are in the bottom three quartiles in cybersecurity skills and effectiveness. They rely on a lack of controls, hardening and preparedness in their prey.
The next few years in cyber security are going to make the last decade look like kindergarten. The lego-ization of tech, the continued adoption of asset lite service platform models in the Dark Web, advances in AI and GenAI including code co-pilots to create ever more sophisticated attacks is coming now. Using GenAI iteratively to level up and create ever more effective, insidious breaches will happen.
I expect computer worms to growth big teeth and be used in ransomware attacks. Typically worms exploit security gaps from vendors like a PC operating system for example. So the older your tech landscape the riskier it is. There are two houses sitting next to each other, one is clearly professionally monitored and has secure doors and windows. The other left a side door open and has bags of cash on a table and can be seen from the street. Which one gets burglarized? I your sector do you know which house you are ? Did you ask your tech leadership, the cyber pro's in their shop or an external expert? Or did you not ask?
I do wish this was that simple but cybersecurity is a deep deep expert domain and having pros matter. When really nasty polymorphic botnet worm attacks with destructive self replicating payloads come will you be ready? Do you have someone who can explain that technobabble...kind of important that you do.
Ninety percenty of companies cybersecurity posture/status are not ranked in the top 10%. Yes, I know that's a cheeky tautology but I do believe if you are not in the top 10% you should really worry as we enter the AI intensive, GenAI infused era of cyber troubles.
This is another example where being good at GenAI and bad or average at IT in general ends badly.
It Get's Worse
If that doesn't make you nervous enough we will also see more and more encrypted data being stolen and sold/moved into cold storage. Once we have pretty rudimentary Quantum Computers all of that gets decrypted quite easily and AI vacuum like robots blast through the data and get everything compromising whether that is industrial, financial or personal. Quantum proof cybersecurity end point and data protection is alreayd here but with all the Gen AI excitement that seems like something we can ignore, put off, not fund. I invested in the first Quantum seed fund in the UK quite a while back and the pace of innovation, scale of funding and sheer genius in that field tells me this will get here sooner than we expect. Quantum computing and quantum sensing will be marvelous technological advances with huge benefits, but a lot of encrypted data will reveal its secrets. My best guess is most companies won't know their data was stolen. Im 2016 after Verzon had agreed to buy Yahoo it was discovered that 500 million user accounts had been plundered two years prior. Yahoo were really great at tech and cyber. I still have a 'paranoids' t-shirt (that was the name of their cyber team). Arqit is an early quantum proof cyber defense solution for encrypting data that meets the pubished NSA standards. Its not hard to build in but it is easy to ignore when staring at the bright GenAI lights.
Conclusion
To be clear I am not advocating doing one or the other, cyber or GenAI. To win in the coming change intensive years you need to be great at strategy and seeing the new strategic demands caused by the dozen change waves heading our way. You need to be great at agile transformation of strategy into C3. You also need to be great at tech, AI broadly and various AI subsections specifically including and especially GenAI.
So, I hope that was helpful.
Today is Cinco de Mayo so I am remiss in not doing my annual corporate lessons from the Battle of Puebla post but I will blast that out late tonight.
