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generative AI can simultaneously help businesses and customers create more value
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at lower cost the effects are going to be more exponential than later and I think for for me that last part
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suggests the theory about you know is this a new form of disruption that we have not seen
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it it starts looking more promising welcome to the ripple effect the podcast that takes you on a journey through the
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minds of work and faculty I'm your host Dan Loney and in each episode we'll be
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diving deep into the inspiration behind the groundbreaking research that Wharton
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ready to dive into new ideas with the ripple effect Rahul there's such a a large
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conversation going on right now around open AI chat GPT and when you think about
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management and and companies a lot is still to be determined but it seems like there is the potential for a
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lot of thought to go on right now about what what might what the impact might be
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in the in the years ahead absolutely Dan and uh and great to connect with you on this very important
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contemporary topic um yeah you know as somebody who has done research on deceptive Technologies and
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business models for almost 20 years uh chat GPT generative AI more broadly uh is truly emerging as what I would
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call a general purpose technology like semiconductors in the 50s and the 60s like the internet in the 1990s
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um and uh clearly they are you know emerging across multiple use cases multiple applications
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and so there is a big what I call an era ferment that all of us are in where they
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are multiple use cases multiple business cases multiple application domains uh with enormous
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potential uh for growth and disruption across the economy so would it be safe to say uh talking
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about the history you just laid out there with semiconductors uh and the internet is this kind of a big pivot
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moment then for a lot of these companies when you think about how those components Changed History they they had
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such a great impact yeah and and I think uh if you look at you know semiconductors and internet as
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two of those uh disruptive forces that we have lived through um what is similar between those and
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generative AI is that uh they are solving two types of problems right one is a problem around
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productivity slash efficiency you know can we do tasks more efficiently whether it's time or cost as you know internet
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and semiconductors you know really boost the frontier around those issues and the
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second is can we find new ways to create value whether it's in Enterprise side of
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things or it's in the consumer side of things and generative AI seems to check both of
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those boxes if you think of many markets and professions uh generative AI is going to make things more efficient
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uh at the same time it's going to present many cases of additional value being created through those and I do
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think um these parallels suggest that uh this is not a not a three year or a five-year
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phenomenon and this is a generation wide phenomenon that we will all be living through for the next 20 30 years
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so what are the challenges then when you have those those massive changes from these different entities how do does
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management and how do corporations react to that and and and kind of does it change the process to a degree of how
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these companies organize and run yeah no great great question you know it's it's
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a commentary that I'm I'm seeing more and more coming through in the popular
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and the business price uh and there's clearly discussion about you know different types of use cases different
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types of Industries different types of professions who are getting impacted or going to be impacted uh very
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significantly right things like customer service content creation as you know very well software development uh
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internet search data analytics um and there's enough evidence that they are going to be
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impacting them uh in a pretty short order and then you have you know what I call on recombinations so these are not
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uh markets where there's an existing way of doing things and this new technology can
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do it better but recombinations is where new use cases can emerge through those new
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technologies as building blocks you know so think about chant gbt a combination of virtual
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augmented reality as a completely new use case that you and I have not really witnessed before
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so I think from my perspective uh you know when it when it gets down to what leaders and and managers can do is to is
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to recognize that these paradigmatic shifts uh don't take place in two years
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three years five years right internet emerged in the 1990s Amazon as the poster child of the
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success of Internet uh was successful 20 years later you know semiconductors emerge in the 60s Intel as opposed to a
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child for a semiconductor leader was only visible in the 1990s right so so so the good news is that this is not
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going to be a disruptive change that's going to happen overnight and that means there is no need to panic
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you know if you are a leader if you're a manager uh but there is a clear and
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critical need to understand what generative AI or chat GPT uh can do in terms of your business and I think
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this is where most of my research and teaching at the Wharton School um engages in terms of a framework that
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leaders and managers can use and I'll just give you a a very short um aspect of that framework right so if
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you are a leader or even an entrepreneur in an emerging business um you have to think about the Assets in
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the business model that your that your firm is is engaging with and then you have to think about these shifts taking
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place in the technology landscape chat GPT for example and what aspect of your assets and
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business models uh could complement uh what shared GPT could do so if you are in the healthcare service uh maybe there
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are certain things that would continue to be done the way they are done but then chat GPT or generative AI becomes
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an additional value-added service for for the patients for for uh for your clients and there might be other cases
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where uh it could replace right so if you are in the content creation business and there's certain aspects of content
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creation that could be fundamentally replaced through generative AI models and and I think that's a starting point
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is how your existing assets and business model are going to be shape and not framing it as a negative threat but
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think about where it can complement and where it might replace a very parallel thought process that I
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engage with Dan uh with students and Executives is thinking on the customer side as well you know you have existing
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customers and then you're looking for growth as new markets and new customers
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and existing customers are part of an existing ecosystem and new customers may require you to build a new ecosystem
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so once you start thinking about the ecosystems you think about how is a new technology like generative AI
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affects your existing ecosystem or your partners are your customers better off or you need to invest in the ecosystem
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to create a higher value for your customers do you need to create new ecosystems like electric cars you know
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what Tesla has done and what uh the success story there is it's not just about the electric car it's about
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building the whole ecosystem so I think from my perspective uh this is a process
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of disruption that is not going to get resolved in the next three to five years the organizations and the leaders who
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are going to do well are the ones who are going to have a very thoughtful approach
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to how this shift is affecting their business both in terms of the positives but also in terms of the challenges
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thinking about it not in terms of just existing customers but New Market opportunities
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and not just focusing on the existing value chain but the broader ecosystem of how these companies create value
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so if I can have you talk about that customer component again for a second because it's interesting there's been so
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much conversation in the last few years about the relationship between the company and the customer about how the
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company the industry can do a better job of making that connection and keeping that consumer longer term that this is
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seemingly that next step in that process isn't it yeah no I think you know we've talked
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about customer lifetime value and as we have embraced more personalization uh much of this is coming through data and
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data analytics we are explicitly thinking about you know how we can enhance and maximize the value that we
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can create for every customer and it doesn't require a one-size-fits-all approach right so we can generate things
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that are more personalized we can create and capture value for each customer or entity over time and I do think you know
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a generative AI uh would enhance that you know it will broaden the scope of what personalization might mean for
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you personalization might be let's say from a from a Content creation perspective yeah for me it would also
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include research perspective as well and so I can imagine scenarios where companies are able to create a suite of
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personalizations and bundles through generative AI add a level of a customer at a level of
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an Enterprise that was not possible before primarily based on data analytics so I think once we include
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these new algorithms and these new learning processes that are algorithmic the scope of personalization
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becomes much broader and that has exponential effects in terms of success of businesses I think it's issue when
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you talk about this of how it will impact companies but I think you can even take it larger scale and think
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about how it's going to potentially impact Industries as a whole correct absolutely absolutely in fact I was uh
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on a panel this morning with fellow academics from from other institutions and that was our question uh how can we
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think about the impact of a journey purpose technology like generative Ai and you know the conversation that I
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strongly believe is true is it's gonna have at least four different points of impact
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right the most obvious one as a strategy Professor is for businesses and for Industries
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but it will also start having an effect on professions and societies might a much broader level right so
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think about what social media has done to our societies to think about what internet has done to our society so I
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think each of these levels starting from organizations to Industries to broader professions and even the social fabric
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are likely to be impacted through these technology emergence some of this is going to be positive and
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value creating and some of it we have to be careful yeah especially with such a strong human interface and a modality
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that uh these these Technologies uh are human-like um I think there has to be a lot of care
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that needs to be exercised in terms of how professions and societies are going to be impacted by these emergencies so
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part of that it would seemingly from what you said there is you know how companies think about their structure
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the levels of jobs the types of jobs that they will have what jobs you know have the opportunity to have open AI
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chat GPT benefit from uh from that technology what in some cases may even replace uh certain jobs along the way as
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well absolutely and and you there is a lot of research it's very early stage so we
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don't have a definitive statement uh on that issue uh but when you think about
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every new technology right the model that we all prescribe to as as researchers of of technology is every
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technology follows an s-shaped curve right early stages of a technology it's
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imperfect it's not cost effective we have to invest in resources and it takes
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time for it to improve but once the technology gets well understood and the experimentation allows us to fine-tune
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how the technology actually works then we have a very fast robust trajectory of improvement kind of what we saw on
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semiconductors in the 70s or the 80s what we saw on the internet era post 2000 what we're seeing with electric
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cars in the last three five years and so I think from my perspective many different professions are going to
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be affected I think it's uh it's a bygone conclusion the rate and scale of what that would
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look like would be a function of those S squared trajectories across the different professions you know if you
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think about you know let's think about uh the professions that are tied up in customer
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service versus professions that are tied up in Creative Industries you're likely
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to see different models of s and different rates of of growth depending on how the technology is going to
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improve and achieve the performance requirement for those professions to be substituted by these emerging modalities
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we will obviously see this play out in the years ahead but as you were describing that
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my thought is is that the level and the the sheer volume of companies and industries that could be impacted this
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it feels like it is extremely large and it will be realistically on the company themselves or maybe the industry to
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understand how open AI chat GPT will be able to be incorporated within the structure of their firm moving forward
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yeah and absolutely and and just the way you describe the problem it's it's it's
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uh it's a very complex problem right and and um you know when uh when I talk about
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how companies and leaders can manage disruption of a skill like what we're talking about today we generative AI uh
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there there are three impediments that companies have to deal with in the shot right the first is uh there is
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significant uncertainty in terms of what the dominant use cases are going to be what Solutions are going to satisfy
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those use cases what business model would allow for companies embracing generative AI to actually do it in an
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economically viable right so there is there's many sources of uncertainty that
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every era of disruption seems to present so you are you are in an environment where there are more unknowns than nodes
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secondly you still have to run your existing business that's not going away tomorrow often this is going to be a
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slow process of evolution three five many cases longer years um so you have to think about how do you
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want to still focus on the old business or existing business why exploring these new possibilities
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and the third is the adjustment cost that you are making in terms of building new skills building new capabilities uh
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dealing with new competitors that you may have to deal with so once you introduce inertia which is how you
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change and the adjustment cost once you introduce uncertainty and once you introduce the balance between the
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existing and the new uh it is a very very hard nut to crack I'll I'll tell you what I've seen in in
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my research the best time right to explore something that's uncertain and disruptive
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is when you're not desperate for it to be adopted right the best time to invest
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in a new disruptive solution or opportunity is when you are running a healthy business
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and that's where the pressure is going to be the lowest for you to take more
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risk and explore more broadly you know the second aspect of the management uh or leadership that I see
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that generates successful outcomes is to think about what sort of an organizational structure but allow for
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companies to take advantage of these disruptive opportunities and you know it's it's often talked about that they
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need to be managed as separate businesses or separate units um if you see what Google is doing with
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alphabet there's a Google business and then there is a WeMo business which is a
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self-driving technology um I think that's one way to do it I find Partnerships alliances with many
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companies to share risk to share cost to learn from each other is a model that I
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think is a very effective model especially when it's still uncertain um and then third I think we need
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patience why we need to be disciplined in terms of how we experiment and innovate as well so I think a
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combination of how do we balance existing with Neo how do we engage in organizational
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configuration that allows us to maintain that balance and then having a disciplined approach to how we are
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experimenting around these new technologies and business models and giving them enough of a Runway to take
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off as opposed to switching back and forth between something new versus something else every year every two
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years that generates more confusion more inertia more cost and tends to be counterproductive let me finish up with
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with one question is it it seems like we have had disruption in our corporate structure for such a long period of time
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at various levels with various impacts but this feels like that this is a disruption
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that is kind of taking us down A New Path and it's almost disrupting what we
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think the idea of disruption is that we've kind of made this massive shift potentially as we move forward
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yeah I think the thing that the juries out there in my view Dan uh you know is this uh is this
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a new wine if I might use that analogy or this is an old wine in a new bottle and um you know whenever there is a
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widespread uh paradigmatic change like the internet like the semiconductors um those conversations emerge and I see
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with generative AI or chat GPT more specifically I'm seeing there are those two camps within Academia as well
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uh many people believe that uh yes the the the technology is different uh the the models of value creation are
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different compared to what we saw with internet or semiconductors but the the nature of shifts in terms of assets and
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business models and capabilities uh they have been well understood and studied so
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it is a wine that we understand and we can we can understand what the ramifications are
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um and others believe that this is fundamentally different it's a it's disrupting the way we have thought about
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disruption and I think and I think how to parse these two perspectives in my view uh depends on
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thinking through what the impact that generative AI is having right in a business context
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uh it's clear that this is not just a technology problem you know it is a broader issue than just thinking about
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the technology it's how it impacts organizations uh in terms of the jobs but also in terms of how organizations
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create value it impacts the business models uh it can completely replace a given business model
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and find a completely new business model at the same time right and it also impacts the ecosystems the broader
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ecosystems that many companies are part of in terms of requiring a major reconfiguration of the ecosystem or
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meeting many old ecosystems completely redundant then on top of it the the generative AI
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technology is allowing us to do two things simultaneously uh that has been very hard to do
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historically which is we can use simulative AI to find use cases that create more value for the
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specific customer or a market at the same time we can do so at a much lower cost yeah and I think
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because generative AI can simultaneously help businesses and customers create more value
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at lower cost the effects are going to be more exponential than linear and I think for for me that last part
00:24:04
suggest the theory about you know is this a new form of disruption that we have not seen
00:24:11
it it starts looking more promising not so much that we have not seen a flavor of that before I think internet had
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flavors of that in very specific markets like social media and others but I think
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it's not happened at the scale across markets across Industries across professions
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across societies at the pace that we think a generative is going to uh going to go into
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propagate so I think for me uh the scale of the effect with exponentiality and the linkages between technology
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organization business models ecosystems and professions is going to create a much larger
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Multiplex effect some of it we have understood and seen before but some of it remains to be studied and remains to
00:25:06
be understood thank you for listening to the ripple effect we hope you found this episode
00:25:11
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