With AI, it’s winner takes all.

In some industries there are dynamics that lead to a ‘winner takes all’ outcome, where one or two businesses gain an advantage and come to dominate the market. Sometimes this is due to network effects (e.g. Facebook), other times it is due to exponential economies of scale.

A classic example of a ‘winner takes all’ scenario is our Aussie supermarket industry. As supermarket chains grow, they can achieve economies of scale and efficiencies that enable them to cut their prices and gain market share. They can then invest their growing profits in their own expansion, eventually dominating the market as we see today.

When one or two businesses dominate a market, the results are rarely good for society as a whole. In the supermarket example the result is exploitation of suppliers which has had devastating impacts on farmers - particularly in the dairy industry.

While some industries have a natural tendency towards ‘winner takes all’ dynamics, the introduction of AI is going to transform industries which previously never fell into this category. This means that it's a make or break time for your company to invest in AI.

There are three key reasons for this:

1. Data is power

AI relies on large amounts of data to be effective. Generally large companies are the ones who will benefit most from AI because they have more data. This will make it increasingly difficult for smaller businesses to compete in industries where they might otherwise have been on even ground. There is still huge potential for ‘small data’ applications, and this is an active area of research, however large companies are at a clear advantage. Businesses of all sizes need to start gathering data today if they want to implement AI in the years ahead.

2. AI is the new steam engine

The ability to harness steam power was one of the key drivers of the first industrial revolution. A single steam powered machine could do the work of many men. Those companies which were able to harness these new technologies gained monumental advantages over their competitors. Their profits enabled them to fund improvements to their machines so that they were continuously ahead of their competitors. AI is likely to achieve a very similar outcome for those companies that can harness its potential. Early adopters will find that their early experience with AI and continuous improvements to their systems will lead to a snowball effect where their AI systems are better integrated and more effective.

3. AI talent is scarce and has a tendency to become concentrated

The global tech giants are already way ahead, and because they have the best researchers and AI talent they will continually attract the best AI talent. The chart below shows the number AI experts employed by the top tech companies. Organisations need to start building up their AI talent pool if they want to be prepared for the future.

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The winner takes all nature of AI has been recognised by national governments and corporations worldwide, and the next decade is shaping up to be an enormous AI arms race, with China already positioning itself for first place with massive investment planned in AI. Unfortunately, Australia seems to be notably lagging behind in preparing for an AI future.

What does all this mean for leaders of organisations today?

I think the answer is simple: take action, or get left behind. There are massive opportunities for companies, both large and small, for gaining competitive advantages if they can implement AI today, and those advantages will compound themselves over time.

That begins with digital transformation and deploying more points from which to start collecting the data that will fuel their AI systems. It means having serious conversations with AI experts about where the opportunities for implementing AI might be in their industry.

If you're interested in exploring how your organisation can benefit from AI, please get in touch.