When the history of the post-coronavirus crisis era is written, we predict that historical parallels to the rise of the Internet and mobile technology during the recessions that started in 2000 and 2008 will be drawn with the rise of artificial intelligence and the 2020 recession. These parallels teach us about how to achieve success after the end of today’s pandemic-induced economic crisis.
The current environment is unprecedented in so many ways. The world hasn’t experienced a pandemic this pervasive since 1918 nor has our modern global economy ever been almost entirely shut down. If you are a business leader, it is extremely difficult to confidently figure out how to navigate the path ahead, let alone develop a strategy for how to thrive coming out of the downturn.
But while this is an unprecedented situation, there are some very interesting lessons out of the last two major economic crises that can shine a light on the path ahead, provide insights to positioning your business for success, and strategies for leaving the competition behind.
For many people in business above a certain age, the current environment is reminiscent of the fear and fog of uncertainty of the dot-com bust and 9/11 as well as the 2008 financial crisis. But beyond this, there is also a fascinating parallel to these two eras. During each, a new and world-changing technology was emerging at almost the exact time the economy went into recession. And, intriguingly, the same is true today with artificial intelligence. Understanding the lessons of this underappreciated historical similarity may help determine whether your company will emerge stronger when today’s economy recovers.
Some of the most impactful recent technology advances have emerged during recessions. Companies with visionary leaders were able to emerge from these periods of economic crisis stronger than before.
Crash of 2000 : Internet
Crash of 2008 : Mobile
Crash of 2020 : AI
If history is any example, business leaders that invest in artificial intelligence focused on improving their top line, bottom line, or both during the current downturn – or go so far as to develop AI-first strategies – can pave the path to success and far outstrip their competition when the economy turns around.
The Ascendency of the Internet in the Post-Dot Com Era
In the lead up to the Dot Com peak of early 2000, the Internet was seen as a major disruptor and there was an incredible amount of hype about its impact. Then came the Dot Com crash, in March 2000, almost exactly 20 years ago today. As the economy melted down, the spigot of cash from the venture capital industry turned off, innumerable startups went under and traditional companies took massive hits to their revenue, profitability and stock price. Hard as might be to believe today, there was much angst over how ‘real’ the internet was among a lot of people and companies in the face of the overhyped expectations of the late 1990s.
But, what emerged out of the wreckage of the Dot Com crash are some of the enduring early brands of the Internet including Netflix, eBay, Paypal, and Priceline, along with Google, Amazon, two of the most valuable companies in history.
The key point is that the new expectation out of the Dot Com crash was that interactions with customers, business partners and supply chain were increasingly going to be done online and in an automated way. After the recession, the Internet era was here and we definitely weren’t going back to paper, phones and faxes to do business.
Beyond the high profile Internet pioneers, companies that were able to survive the downturn while continuing to invest in moving their businesses on to the Internet were able to emerge from the downturn positioned to thrive in this new environment. In other words, forward investing into the emerging transformative technology of the time was the key to successfully navigating the economic downturn and emerge to compete in the new era. Beyond a strong balance sheet, it required vision and fortitude on behalf of business leaders, but investments in the Internet during the downturn of the early 2000s paid off. In today’s terminology, they developed Internet-first strategies and that paved the path to success.
The Ascendency of Mobile in the Post-2008 Housing Crisis Era
There is a fascinating historical parallel between the Dot Com ere and the 2008 economic collapse that came out of the sub-prime mortgage housing crisis.. In July 2008, Apple officially launched the iPhone App Store, which we now recognize was the start of the mobile era that dramatically transformed how we interact with the Internet, friends, family, customers, business partners and supply chains. In September, just two months later, Lehman collapsed triggering the stock market to plummet and the great recession.
Like in the early 2000s, there was a major transformative technology emerging just as a deep recession hit. And, like in the Dot Com era, leaders that recognized that the future was going to be mobile-centric and made early investments in these new technologies positioned themselves well to compete in the new environment.
What emerged out of the wreckage of great recession are some of the enduring early brands of the mobile era including Uber, Snapchat, Airbnb, and Stripe. After the recession of 2008, the mobile era was here and we definitely weren’t going back to just relying on computers to navigate the Internet or communicate, play, entertain and do business.
By the time the economy started coming out of recession in late 2009, the mobile market was heating up and it was becoming clear that the basis for competition, especially for consumer-centric companies, had changed. It was no longer good enough to provide your Internet-based solution on a computer with a web browser, or even a mobile browser. You had to develop apps and leverage all the components on a smartphone, like GPS and inertial sensors, and for many companies the concept of mobile-first was the true basis for competition.
The Ascendency of AI in the Post Pandemic-Induced Economic Crisis Era
Artificial intelligence was first established as a disciple in the 1950s and since then went through several periods of heightened and missed expectations we now call AI Winters. However, with fundamental breakthroughs in the technology and the convergence of GPUs, cloud computing and big data, the era of broad commercial adoption of AI started around 2016. It was around that year that AWS, Google, Microsoft Azure and IBM Watson launched of easy to deploy AI-powered APIs.
Since then, it has become clear that artificial intelligence can be implemented by most companies and have a dramatic impact on both their top line and bottom line and therefore dramatically shift the basis of competition. Companies that are taking an AI-first approach – most notably companies like Amazon, Google, Apple, and Netflix – are far outpacing the business world in growth, profits and market cap. But a myriad of non-tech companies including JPMorganChase and Deere are also investing heavily in AI.
However, artificial intelligence is not just for behmoths and is now well within the reach of most companies. Today, many AI projects that can have meaningful impact by improving a company’s revenue growth or reducing their operating costs can be completed for hundreds of thousands of dollars where only a few years ago that same might have cost millions, or even billions, of dollars.
Business leaders often look to venture capital startup funding trends to anticipate where they should be making their next moves. The investment trends in AI couldn’t be more clear. According to CB Insights, AI startups raised a record $26.6 billion in 2019, spanning more than 2,200 deals worldwide.
Which brings us back to today’s economic crisis. There is no doubt that AI is here to stay and it will be the basis of competition for all companies going forward. And Covid-19 and the need for social distancing is pushing the world to ever more digitization and virtualization on a global scale and an unprecedentedly short time frame. Intriguingly, this digitization and virtualization is creating enormous new sources of ‘data exhaust’, indirectly generated data that can fuel AI-based solutions.
Geoffrey Moore’s chasm framework can be overlaid on these past historical parallels. In retrospect, we know that the world ‘crossed the chasm’ during the downturns of 2000 and 2008 with respect to the Internet and mobile technologies. Leading up to today’s economic crisis, we firmly believe we were well into the early adopter phase of widespread deployment of artificial intelligence in business and our intuition says we’ll be across the chasm for AI once we emerge from the downturn.
A key piece of data that indicates we are crossing the chasm comes from Gartner. The Gartner Magic Quadrant has been used by companies for more than a decade to understand the competing players in major tech markets. Companies aspire to be in the top right quadrant, where leaders are graphed based on their completeness of vision (x-axis) and ability to execute (y-axis) relative to their competitors.
What Gartner has made recently clear is that for any company to be listed in the Magic Quadrant – let alone named as a leader – they must be using artificial intelligence (AI) in their business today and have a robust and credible AI roadmap with the ability to execute on their plan from a technical and organizational perspective. In other words, the days of AI being considered a luxury or a nice-to-have are gone. It is expected that companies leverage their data via machine learning and AI to help inform their strategy, automate processes, launch new products, and more. A recent Wall Street Journal article titled AI Spending Is Expected to Weather Coronavirus Slowdown indicates that CEOs have internalized Gartner’s message.
CEOs thinking about forward investing have to find a balance between cutting costs to survive today and investing to grow tomorrow. According to a 2010 Harvard Business Review article called Roaring Out of Recession, “The CEOs of pragmatic companies recognize that cost-cutting is necessary to survive a recession, that investment is equally essential to spur growth, and that they must manage both at the same time if their companies are to emerge as post-recession leaders.”
There is no turning back from people working alongside machines to do everything from sorting through paperwork to making strategic decisions, all powered by artificial intelligence. The big picture is that AI will drive efficiency, predictability, personalization and data-driven new revenue models to the tune of trillions of dollars of value. History teaches us that business leaders with the vision and fortitude to invest in AI today can pave the path to success coming out of this economic crisis.
In this companion blog post, KUNGFU.AI’s co-founder and Managing Director interviews Mickey Ristroph, co-founder and former CEO of Mutual Mobile, a company that launched at the start of the mobile era and helped companies ride the mobile wave during and after the crash of 2008. In the discussion, Mickey and Stephen tease out the lessons from 2008 out to help guide today’s business leaders on how to think about investing in artificial intelligence today.
KUNGFU.AI is a professional services firm offering AI services around strategy, solutions and transformation. We have helped many companies build an AI strategy, create their first project or deploy AI at scale in their business. If you’d like to discuss getting started on a project, reach out to Steve Meier, Chief Creative Officer, at firstname.lastname@example.org. We’d love to hear from you.