Is generative AI a disruptive innovation that displaces incumbents, or a sustaining innovation that mainly strengthens them?

Gustav Söderström · Dec 20, 2023

AI so far is mostly sustaining innovation that accrues to bigger players, because the technology has not yet enabled a new business model

Big changes historically come when technology enables a new business model and someone counter-positions against an incumbent's business model; that hasn't happened yet

Scope: 'I'm absolutely certain it's going to happen' eventually; doesn't yet know what the new model looks like

30:18 20VC Roundtable: Spotify, Adobe & Linkedin CPOs on How AI Changes The Future of Product, Why AI is Now the Product, How TikTok Changed Product, Why Cost is the Biggest Barrier to LLM Usage & Why Incumbents Can Adopt AI Faster Than Any Prior Innovation Cyc

Gustav Söderström · Dec 20, 2023 · hedged

It could turn out that AI is simply more productivity for the existing players rather than a disruptive wave

No new disruptive business model has emerged, unlike streaming, which was the disruptive business model behind Spotify and took Apple eight years of collateral damage to follow

Scope: offered as a possibility

33:54 20VC Roundtable: Spotify, Adobe & Linkedin CPOs on How AI Changes The Future of Product, Why AI is Now the Product, How TikTok Changed Product, Why Cost is the Biggest Barrier to LLM Usage & Why Incumbents Can Adopt AI Faster Than Any Prior Innovation Cyc

Chris Dixon · Mar 27, 2024 · hedged

AI will very likely accelerate the consolidation of traffic and money into the big five tech companies

AI rewards companies with large stores of data and capital, and the big five already hold the overwhelming majority of traffic and money

Scope: 'very likely' rather than certain

0:00 20VC: a16z's Chris Dixon on Who Will Win the Next Generation of Venture, The Two Ways to Make Great Venture Investments and Find the Best Entrepreneurs & Why AI Will Strengthen the Position of the Incumbents Moving Forward

Tom Hulme · May 8, 2024

Generative AI is a sustaining innovation rather than a disruptive one — it will get sprinkled across businesses to lower call-centre costs and improve personalization, without the creative destruction the internet caused

The technology is commoditizing so quickly that it enhances incumbents' offerings rather than rebuilding industries from scratch, which is frustrating for investors who want durable value

Scope: Tom notes GV has still made several Gen AI investments

45:39 20VC: GV's Tom Hulme on Why Investing in Foundation Models is like Investing in "Power Stations", The Conventional Wisdom in VC that is BS & Lessons from a 24x Angel Track Record, 255x on Robinhood and Making Billions on Uber