comment from Habitue on Hacker News:
> These are some good points, but it doesn't seem to mention a big way in which startups disrupt incumbents, which is that they frame the problem a different way, and they don't need to protect existing revenue streams.
The “hard tech” in AI are the LLMs available for rent from OpenAI, Anthropic, Cohere, and others, or available as open source with Llama, Bloom, Mistral and others.
The hard-tech is a level playing field; startups do not have an advantage over incumbents.
There can be differentiation in prompt engineering, problem break-down, use of vector databases, and more. However, this isn’t something where startups have an edge, such as being willing to take more risks or be more creative. At best, it is neutral; certainly not an advantage.
This doesn’t mean it’s impossible for a startup to succeed; surely many will. It means that you need a strategy that creates differentiation and distribution, even more quickly and dramatically than is normally required
Whether you’re training existing models, developing models from scratch, or simply testing theories, high-quality data is crucial.
Incumbents have the data because they have the customers. They can immediately leverage customers’ data to train models and tune algorithms, so long as they maintain secrecy and privacy.
Intercom’s AI strategy is built on the foundation of hundreds of millions of customer interactions. This gives them an advantage over a newcomer developing a chatbot from scratch. Similarly, Google has an advantage in AI video because they own the entire YouTube library. GitHub has an advantage with Copilot because they trained their AI on their vast code repository (including changes, with human-written explanations of the changes).
While there will always be individuals preferring the startup environment, the allure of working on AI at an incumbent is equally strong for many, especially pure computer and data scientsts who, more than anything else, want to work on interesting AI projects. They get to work in the code, with a large budget, with all the data, with above-market compensation, and a built-in large customer base that will enjoy the fruits of their labor, all without having to do sales, marketing, tech support, accounting, raising money, or anything else that isn’t the pure joy of writing interesting code. This is heaven for many.
A chatbot is in the chatbot market, and an SEO tool is in the SEO market. Adding AI to those tools is obviously a good idea; indeed companies who fail to add AI will likely become irrelevant in the long run. Thus we see that “AI” is a new tool for developing within existing markets, not itself a new market (except for actual hard-tech AI companies).
AI is in the solution-space, not the problem-space, as we say in product management. The customer problem you’re solving is still the same as ever. The problem a chatbot is solving is the same as ever: Talk to customers 24/7 in any language. AI enables completely new solutions that none of us were imagining a few years ago; that’s what’s so exciting and truly transformative. However, the customer problems remain the same, even though the solutions are different
Companies will pay more for chatbots where the AI is excellent, more support contacts are deferred from reaching a human, more languages are supported, and more kinds of questions can be answered, so existing chatbot customers might pay more, which grows the market. Furthermore, some companies who previously (rightly) saw chatbots as a terrible customer experience, will change their mind with sufficiently good AI, and will enter the chatbot market, which again grows that market.
the right way to analyze this is not to say “the AI market is big and growing” but rather: “Here is how AI will transform this existing market.” And then: “Here’s how we fit into that growth.”