While tech venture funding falters and big tech companies contract, a countercurrent is pushing new kinds of technology into the global economy, promising a paroxysm of productivity unseen since the advent of the Internet.
Sure, a series of scandals, weakening earnings, and a general market downturn have sucked the air out of the tech valuation balloon, leaving venture capitalists wary. The FTX collapse, Meta’s swan dive, the Tesla meltdown, the Twitter fuss, the list goes on and on. But at the same time, mind-bending advances in artificial intelligence and a series of related product announcements are about to unleash a wave of activity in the sector.
Who hasn’t spent a few minutes, at least, playing with the incredible abilities of ChatGPT, OpenAI’s text generating large language model; or who hasn’t entertained themselves or others with silly images produced by OpenAI’s DALL-E or Midjourney’s own text to image model? If you haven’t, it’s time to pay attention.
Already, that technology – generative AI – is making its way into products that promise to boost productivity:
· Runway, the startup behind an open-source image model Stable Diffusion, has introduced a content-generation platform that allows anyone to manipulate images and video far beyond the capabilities of current editing software.
· GitHub’s CoPilot speeds up the writing of code by autocompleting programmer clauses before a coder can think of what comes next.
· Diffblue automates the writing of unit tests in Java, a task that typically takes up a third of Java developers’ time.
In 2022, about $1.37 billion was invested into generative AI. As recently as October, Jasper, a specialized startup, raised $125 million and Stability AIraised $101 million. Meanwhile, OpenAI’s ChatGPT has been valued at as much as $29 billion.
So, while the tech behemoths retrench and venture capital withers, company spending on technology is actually growing. At BCG X, we interviewed more than 2,000 global executives at the end of the year and 60% said they want to increase their investment in digital technology and AI. Only 4% said they would likely reduce their investment.
Companies understand that with the right demand forecast tools, they can better manage volatility, de-average pricing and marketing to extract value, and help solve critical issues such as global warming. Meanwhile, time intensive manual processes such as “spreadsheet wrangling,” are growth killers, slowing businesses down.
In the past few years, a worldwide shortage of software engineers has been one of the main constraints in digitizing the global economy, especially for large companies and government organizations. There is simply far more software to be written than developers available to write it. Tech companies have taken the lion’s share of the tech talent pool, hindering the progress of large corporations and government organizations.
Yet, the tide is starting to change. Recent advances in low/no-code platforms and generative AI are significantly increasing productivity of software development. At the same time, massive lay-offs (more than 200 000 tech jobs have been eliminated in the last six months) are creating opportunities for large companies to build world class AI and digital tech teams. Recent surveys show that some traditional companies are progressing fast on their AI and digital journey, even outpacing some of the digital natives.
The pandemic has shown that companies advanced in AI and Digital perform much better than their peers in a chaotic environment. It’s high time for all large organizations to double down on their digital transformation, leveraging a less constricted talent pool and the reset triggered by generative AI.