AI and Disruptive Innovation
AI and Global Economy
AI will have a major impact on the global economy. It is estimated that the market for predictive analytics software will amount to more than $6.5 billion worldwide in 2019, advanced driver assistance systems will have a global market volume of $18 billion in 2019, compared to $5.6 billion in 2012, global voice recognition market in enterprise, consumer, and healthcare is to reach $113 billion in 2017, compared to $53 billion in 2012 and natural language processing market is anticipated to become worth more than $9.9 billion in 2018 compared to $3.8 billion is 2013. These forecasts and the tremendous financial success of AI-based products and services encouraged many venture capitalists to invest in the machine intelligence space. This resulted in tremendous increase in funding received by AI start-ups in areas such as natural language processing, predictive analytics and deep learning using sheer volume of big data available given the fact that 90% of the world’s stock of data was generated in the past two years and most of this data is digitized. $6.6 Trillion productivity gain plus $9.1 Trillion greater consumer demand result in $15.7 Trillion added value to global GDP by 2030 because of AI as per FastCompany. A common ground between the nature of these success stories is disruptive innovation.
AI as an enabler for disruptive innovation
AI is a key enabler for disruptive innovation that leads to game changing products and services able to serve low-end or unserved consumers and migrate to the mainstream market. This technology is a driving force behind the disruptive innovation we are currently witnessing. For example, AI enabled sharing economy as a new business model where individuals can share their own assets with others as services to make better use of these assets and to generate profit. This model is successfully applied in different domains such as ride sharing, smart rapid prototyping, smart grids, lodging, etc. According to The Innovator’s Dilemma, sustaining innovation aims at satisfying customer current needs, improves product performance based on feedback from customers, reducing defects and making something faster and more powerful. On the other hand, disruptive innovation satisfies customer future needs and may provide lower performance in some key features but creates some unique features valued by market.
Encyclopedia Britannica and Wikipedia are examples of sustaining innovation and disruptive innovation respectively. Encyclopedia Britannica provides a reliable general knowledge English-language encyclopaedia while the reliability of Wikipedia has been frequently questioned. However, Wikipedia is a free multi-language encyclopedia accessible to everyone. Same applies to expensive navigation systems and navigation feature in Google/Apple maps. The former is more reliable and does not rely on network coverage but more expensive and does not provide real-time traffic updates compared to Google/Apple maps.
Kano Model
The Kano model is an insightful way of understanding of customers’ needs for new products and services. Disruptive innovation lays in the region between attractive quality and desired quality while sustaining innovation is the region between desired quality and expected quality. As customer expectations change over time, attractive features become expected features. For example, car features such as power windows, power seats, adjustable steering wheel, cruise control are moving from being desired features to be expected features. Other features like lane keep assist, adaptive cruise control, blind spot detection and prognostics are moving from being attractive features to be desired features. While features like super cruise and autonomous driving are still attractive features for many customers.
Customers may abandon the product/service and move to another product/service with more attractive features if the product/service does not reflect the evolving customer expectations. Many sustaining innovation-based companies went out of business such as Borders, Blockbuster, Kodak and Columbia and have been replaced by software companies that adopted AI and disruptive innovation such as Amazon, Netflex, flicker and Apple Music. Now, Google is the largest marketing platform. Amazon is the largest bookseller, Skype is the fastest growing telecom company, LinkedIn is the fastest growing recruiting company, iTunes and Spotify are fastest growing entertainment companies, Airbnb is the world’s biggest accommodation provider although it does not own any real estate. Moreover, Bitcoin is the world’s biggest bank with no actual cash, Uber is the world’s largest taxi company with no vehicles, Facebook is the world’s most popular media owner that creates no content and Alibaba is the world’s most valuable retailer with no inventory.
It’s time to disrupt your business before someone else does. Disrupt or perish!
