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Innovation&: AInflation

Updated: Oct 9, 2023


Picture: Websites like "There's an AI for that" provide an overview of the multitude of applications currently emerging. Is it all just a deadly hype/bubble or not?

When pre-trained models and APIs trigger a flood of ideas

In a world defined by exponentially growing technology and its increasingly easy accessibility, the proliferation of services labeled as "artificial intelligence" (the author simplifies this to "AI" for easier understanding in the article for all applications in this family) in our daily lives is slowly becoming ubiquitous. However, how does this "AInflation" (AI + Inflation) affect the companies providing these services and their business models? In this blog post, we will examine the impact of "AInflation" on the business world and discover why technology alone is not sufficient for success.

A technology is what it is - just technology and not a business model

The availability of pre-trained models and their accessibility through Application Programming Interfaces (APIs) has triggered a flood of exciting ideas (solutions). Companies of all sizes and industries are diving into these opportunities, developing "AI" based services, often without understanding the users and their problems. However, the misunderstanding often lies here: While "AI" is indeed a powerful technology, it alone does not constitute a business model, let alone a guarantee of success. A company must place its service in a context that provides real value to users, and they must be willing to pay for it in some form. Otherwise, it remains a technical solution for an unknown problem of an unknown user.

If the human behind the "AI" doesn't know who the human in front of the "AI" is and what she/he wants, then is the best "AI" of no use.

A crucial factor for the success of "AI"-based services is human interaction. Even the most technically spectacular service is worthless if the context and the needs of the user are not understood. Therefore, it is essential that the people behind the "AI" understand the user and their challenges, alternatives, jobs to be done, struggles, current solutions, etc.

From AI to NI

Many startups and companies are diving into the "AI" hype with no idea (NI) of the business model they are developing. They may create impressive "AI" models or services, but they have no concept of how to acquire customers or ever make money. This often leads to later disappointment, financial problems, or the termination of such projects. It is important for companies to align their "AI" initiatives with a clear strategy and a well-defined business model.

Hope for a successful exit is the last to die

In the startup world, there is often the belief that impressive "AI" technology automatically leads to a successful exit or further funding. However, reality is different. Successful exits require not only innovative technology but also a sustainable business model with paying users, a solid customer base, and clear value creation. Hope alone is not enough.

The advantage of many ideas emerging in parallel - but the question remains which ones will truly survive

"AInflation" has undoubtedly led to a wealth of innovations and new services. On a macroeconomic level, these diverse ideas and developments are beneficial as they advance the technological landscape and open up new possibilities. However, on a microeconomic level, the question arises as to which of these projects are actually viable and will be successful in the long run. Competition in this field is intense, and not all companies will ultimately succeed.

Conclusion - AInflation

To succeed in this era of "AInflation," companies must adhere to some key principles:

First, it is crucial to place "AI" technology in a clear business context. Simply implementing AI models/services is not enough; they must provide real benefits to customers.

Second, it is essential to consider the human user. The best "AI" algorithms are only as good as the user experience. Companies must focus on understanding their customers and their needs to effectively use "AI" services in everyday life.

Third, companies must develop a solid business model. Having a great idea is not enough; there must also be a clear search strategy for finding and validating the business model, reaching customers, and ultimately generating revenue/profit. A solid financial foundation is essential for any company to be successful in the long term.

Finally, it is important to accept reality. The belief that impressive AI technology automatically leads to a successful exit or venture capital funding is and remains an illusion. Successful exits require a comprehensive strategy and hard work.

Overall, we are currently living in an exciting time for technology and innovation. However, companies offering these technologies must be aware that success does not come automatically. Only by providing accepted value to users, having them willing to "pay" for it in some form, and a path achieving profitability can the offering company fully harness the benefits of this technology. Thus, finding a validated business model and navigating successfully in a world of "AInflation" are essential.


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