8 out of 10 most valuable companies today have 3 key attributes. They're digital-first, have AI at their core, and they GTM via 🎯 ecosystems. - HBS Professor Karim Lakhani
This new logic of winning in business emerged over the past 20 years, as highlighted by Harvard Business School Professor Karim Lakhani, co-author of "Competing in the Age of AI" and founder of the Laboratory for Innovation Science at Harvard.
He delivered an insightful lecture on how to compete in the Age of AI, which I recommend watching.
A key takeaway for me? Successful tech giants universally adopt the ecosystem business model. (watch the clip)
🚧 Limitations of Legacy Business Models
Historically, companies scaled using the divisional system. While this operating model produced considerable value, it faced inherent constraints in scale, scope, and learning.
As businesses expanded, they often grappled with operational complexity, administrative costs, and inertia.
🎆 Network Effects Revolution
New breed of tech companies are digital-first and AI-centric. They operate with near-zero marginal costs and harness both network and learning effects. This helps them scale to millions or sometime even billions of users.
The real game-changer? AI exponentially accelerates their growth trajectory, leading to valuations that can be staggering.
Case in point - each of the top five companies in the list today valued at >1 trillion dollars.
🗽 When Worlds Collide
A stark contrast in efficiency sets the stage for a 'collision' between two disparate models — one scaling exponentially and the other hampered by its growth constraints.
Prof. Lakhani draws a compelling parallel between the exponential spread of COVID-19 from 2020 to 2022 and the world's response that was inherently linear and therefore difficult to counteract.
Similarly, businesses with an exponential model (digital + AI + ecosystem) usually prevail, when they confront its linear, traditional counterparts.
If your approach is linear, you might second-guess the ROI of adopting the new paradigm... until the inevitable collision occurs. Once it does, the exponential model tends to dominate.
As the landscape evolves, how are you capitalizing on digital ecosystems? Are you partnering with one, or creating your own?
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