💡Which firms will benefit first from AI?
Today I want to look at which firms in the broader economy will first see gains from using AI. I am excluding the following…
The AI companies themselves, whose revenue is growing like Topsy
Semiconductor companies and those involved in the datacenter business
Lobbyists and lawyers who will have a field day
In other words, who will do well apart from the toolmakers, toolmakers’ toolmakers and the ambulance chasers?
There is already a bit of impatience by the mediarati and bosses over whether AI is paying back.
In most cases, the AI they are discussing is generative AI based on large language models. And most of them didn’t wake up to it until November 2022 with ChatGPT.
At the same time, I’ve talked to dozens of bosses at big firms across the US and Europe in the past nine months and every single one of them has many (dozens, in general), genAI use cases underway.
So, today I want to answer this question: what firms are positioned to benefit first? And what can you do to improve your preparedness?
A winning streak
Companies with digital technologies at the core of their business model and where software is a key part of how they serve their customers — the digital natives — have long been positioned to gain disproportionately from technological developments. This advantage, while seemingly obvious in hindsight, is rooted in the fundamental structure and culture of these organisations. As W. Brian Arthur noted as far back as 1996, we’ve seen a bifurcation in the business world between traditional industrial companies and those operating in a “world of complexity” dominated by network effects and increasing returns.
A McKinsey report from a few years back demonstrated that 36% of digital natives achieved an average compound annual growth rate of 25% or more in organic revenue over the past three years, compared to only 5% of traditional incumbents.
The market recognises this advantage. Digital natives tend to have extraordinarily high Present Value of Growth Opportunities rates1, reflecting investor confidence in their ability to leverage current and future technological developments for sustained growth.
The reason digital natives may have an inherent advantage with AI in particular, lies with one particular group of their employees – the developers.