KSG ExecBrief: Enterprise AI Path Dependencies and Lock-in
Preserving optionality with walled-garden security and open-source AI capabilities
How you acquire or integrate AI capabilities now may lock you, limiting optionality and flexibility to leverage more effective and secure solutions.
The keyboard on your computer is inefficient. Companies and researchers have developed many different letter configurations that are proven to enable faster typing, and yet QWERTY reigns supreme. This is path dependency—a system trapped by inertia and first mover advantage. Whether they know it now or not, firms will face a similar issue with enterprise AI integrations.
As the marketplace for AI applications and services rapidly develops, some first-mover firms will accrue a critical mass of your company’s data and product dependencies. The efficiency and capability advantages will drive you to deeply integrate their infrastructure, models, and/or applications into your corporate business processes and services. If successful, some third-party AI services and applications could become systemically, even existentially, critical to your business.
And yet, given the pace of technology change there is strong potential for novel solutions to emerge outside of current incumbent offerings. At this point, dissatisfied with your current provider’s lagging performance, you might look for alternatives in the marketplace, only to find out that your firm is too structurally and technologically dependent to switch over.
Some companies selling AI want this to happen.
The landmark case against Microsoft for its actions to crush Netscape Navigator—a competitor to Internet Explorer—paints the picture well. A firm with an incumbent lead in another technology (e.g., operating systems) used its platform to make using Netscape difficult. Fake error messages would redirect consumers to use Internet Explorer and, after a while, many did. It’s been a long time since Microsoft gave MBA students this case study, but history often rhymes.
Companies are still early to understand and adopt AI. Right now, crucial acquisition and product development decisions (or mistakes) can be made to prevent path dependency and lock-in. A keen sense of what AI can offer your company will help the C-Suite guide purchasing, development, and deployment. In particular:
Entertaining bids from many, competing companies for one or two year contracts to provide those same services can help prevent lock-in.
Demanding that your data and business processes integrate with each company will keep the market fresh.
Incumbents with big investments in AI will make successful integration with other companies difficult. Don’t back down. Corporate leadership should feel empowered to throw their weight around and make sure that insurgent firms get a fighting chance to integrate with other company’s products and services.
For more information or assistance on these issues, please reach out to email@example.com.
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