Is AI a feature or a product? Plus AI and The Innovator's Dilemma
Featuring examples of Google, Apple, OpenAI.
Is AI a feature or a product?
The answer, like most responses to significant questions, is it depends — on the company.
OpenAI
For OpenAI, AI is the product. After all, ChatGPT now boasts over 100 million weekly users and has grown annualised revenue to a staggering $3.4 billion.
Apple
Apple, on the other hand, regards AI primarily as a feature, evident from its latest WWDC keynote. And, by integrating ChatGPT into its own features, Apple has effectively transformed another company’s product into a feature. This strategic move could potentially commoditise LLMs like ChatGPT and Google Gemini—the latter of which Apple is reportedly discussing an integration with.
This practice has some parallels to being "Sherlocked," a term used to describe apps that become obsolete after Apple integrates their functionality into its own software. TechCrunch has even compiled a list of apps that were Sherlocked in the most recent WWDC.
You can read my in-depth analysis of Apple’s AI strategy here.
Google
Google presents a unique case, viewing AI as both a feature and a product. At I/O 2024, they unveiled a host of AI enhancements across Google Search, Pixel, Gmail, Android Phones, and many more. However, the 2 trillion dollar company was heavily admonished for letting ChatGPT explode onto the market. In response, Google introduced Gemini, but encountered numerous challenges in its roll out.
Now it’s easy to be an armchair analyst and ridicule Google’s AI attempt. But Google is grappling with The Innovator's Dilemma, a concept first articulated by Professor Clayton M. Christensen. This dilemma underscores the difficulty incumbent companies face when confronted with disruptive technologies such as AI.
The dilemma for Google is as follows:
Google Search became the default method for consumers to access information on the internet. Google has built a massive advertising business around Google Search.
Introduced in 2020, ChatGPT disrupted Google Search by offering an alternative method of accessing information online.
In response, Google launched AI Overviews to summarise search results and counter ChatGPT.
However, existing users of Google Search have expressed dissatisfaction with AI Overviews, prompting Google to reduce investment and slow down its efforts.
This has allowed ChatGPT to continue to solidify its position.
Google now faces the daunting dilemma of balancing the rollout of AI Overviews while preserving its lucrative Google Search Ads business.
Humane and Rabbit
And finally, we have AI device startups such as Humane and Rabbit, who viewed AI as a product. However, consumers and critics clearly disagreed with this vision, as both companies are struggling to find product market fit.
From my perspective, the primary hurdle facing AI device startups is the entrenched dominance of smartphones. The current smartphone is the perfect package for productivity and pleasure. Since the debut of the first iPhone in 2007, smartphone manufacturers have continuously refined the user experience, so much so, that 75% of Gen Z say their device of choice is their smartphone1.
Trying to shift consumers from smartphones to your AI device is an uphill battle, one that I don’t believe will succeed — even if you have a $230 million war chest like Humane does.
AI and The Innovator's Dilemma
You might have noticed that, broadly speaking, incumbents view AI as a feature to be feverishly integrated into existing products, while startups are leveraging AI to build entirely new products. The challenge for startups is ensuring that consumers actually adopt these new products.
This divergence is well documented in The Innovator's Dilemma. When a new technology is disruptive enough, it tends to favour startups and causes incumbents to struggle. Conversely, sustaining technologies improve the performance of established products, helping incumbent firms maintain and strengthen their market positions.
The billion-dollar question remains: Is AI a disruptive or sustaining technology? Only time will tell.
Things that caught my attention
Haidilao - the $9B Chinese Restaurant Chain Wants to Conquer the U.S. (Video) from WSJ. Who knew a hotpot chain could be valued at $9 billion dollars.
Slow Productivity (book) by Cal Newport. Brilliant book that reframes productivity in a slower more effective light.
A former Nike executive pens a LinkedIn article - Nike: An Epic Saga of Value Destruction.
https://www.forbes.com/sites/forbestechcouncil/2022/01/12/understanding-the-differences-in-mobile-app-use-across-generations/?sh=3c64de811d18
That sherlock list is so Machievallian/dystopian haha