Market Transitions: The Accelerator of Generative AI
Discover actionable strategies for enhancing stakeholder trust and for providing effective cyber risk oversight of the SEC Cyber rules.
Have you ever woken up one morning to find that you can’t fit into your clothes? I tried to suck in my stomach but the pants just won’t fit and almost ripped. Maybe you’re like me, you used to work out and eat well but in recent times, you’ve been busy with work and you’ve been getting extra-ordinary results. It feels great to be getting results. Then one day, with no apparent warning or heads up, you have to scramble to be able to get to work because you don’t have what it takes to be at work. You try to get new clothes in time but unfortunately, you’re late. Now this doesn’t feel good. You’ve been busy doing the right things in one area (work) but not in others (health).
In some respects, this is what a market transition feels like. You wake up one morning to find that your product and organization doesn’t fit into the market any longer. You try to force it through but no luck. Wait, how did this happen? It happens gradually and then suddenly, while we’re busy executing on key objectives and delivering outstanding results. What’s especially interesting (at least to us) is that no one will pay you for working on anticipating market transitions, they’ll just leave you behind if you don’t.
This article highlights the significance of anticipating and recognizing market transitions and the role of boards. We will use AI as our example of a driver of market transitions but the broader insights applies to market transitions in general.
Have you ever heard of a model employee and top performer being let go? Not because of an economic downturn or black swan event. We recently learnt of a very smart leader that has just been heads down, executing on business objectives and getting desired results and sometimes even extra-ordinary results. Then one day, he’s told the organization needs a new leader with different competencies/skills because the industry is undergoing a rapid market transition. Unfortunately, they couldn’t wait for him to catch up. What! Wait, what happened to all my years of top performance? Sorry!
In some respects, this is what disruption feels like, no apparent warning or heads up. It happens gradually and then suddenly, while we’re busy executing on key objectives and delivering results. And often times disruption creates and triggers market transitions. What’s interesting is that no one will pay you for working on market transitions, they’ll just leave you behind if you don’t or let you go in the case of our smart leader. This article highlights the significance of anticipating and recognizing market transitions and the role of boards. We will use AI as our example of a driver of market transitions but the broader insights applies to market transitions in general.
Three distinct insights are:
Smart leaders often fail during market transitions, not for doing the wrong thing but for doing the right thing for too long
AI accelerates multiple market transitions in the digital economy and has a compounding effect.
Solutions for board directors, short, medium and long term. - Thinking mindset shift; thinking dimensions
Three distinct insights are:
Recognize the significance of market transitions and inflection points
Proactively recognizing market transitions has profound implications for leaders
AI accelerates all other market transitions; it is a transition of transitions.
AI is a compounding inflection point, the key word here is compounding.
Solutions for board directors, short, medium and long term.
Leaders miss market transitions not for doing the wrong thing but for doing the right thing for too long
Smart leaders miss market transitions not because they’re “busy” doing the wrong things but because they’re “busy” doing the right things for too long
Key disruption markers - fail to act or anticipate market shifts and inflection points.
Peter Drucker said, “There’s a difference between doing things right and doing the right thing.” Doing the right thing is wisdom, and effectiveness. Doing things right is efficiency. —- Doing the right things for too long can result and often does in being disrupted
Artificial Intelligence accelerates strategy, that includes bad strategies also and not just the good ones
Artificial Intelligence accelerates strategy, that includes bad strategies also and not just the good ones
Sometimes leaders will argue that they do have a cyber strategy. They tell us things like we have moved to the cloud or we have all the necessary technology tools (e.g. firewalls, intrusion detection systems, anti-malware, etc.) They say we believe we’re doing all the right things. Then we ask them a question “If sensitive data was leaving your organization, would you know about it and how would you respond?” They tell us that they don’t expect that to happen but if it did they would activate their crisis management or incident response plans. When we ask to see the plan, it’s usually doesn’t exist on paper and hasn’t been tested.
This is just one of the questions that implies a no-strategy strategy. Other questions include:
What’s the biggest risks your organization faces in the future. What’s your risk velocity
We encourage you to consider these questions also.
In other cases, leaders tell us that their MSP has defined and implemented a strategy for them. This is the case for many organizations and is completely valid and understandable. However, outsourcing your cyber strategy without oversight and validation is like outsourcing your parenting duties without oversight. It may work for a while but ultimately it doesn’t yield the desired outcome. Here’s an example that illustrates the need for validation and periodic oversight of outsourced cyber functions.
Outsourcing cyber function(s) can be beneficial but it requires periodic, independent validation for sustained success
Side Bar: This is true in cyber and also in business. How businesses have gone bankrupt because they couldn’t see a market transition event and decided to wait until they could see the event. By then, it was too late.
However,
This article is the first in the series of three articles that are designed to equip board directors with three distinct, meaningful and actionable insights outlined below:
Three distinct insights are:
The strategy of no strategy has a shelf life and an unknown expiration date
Outsourcing cyber function(s) can be beneficial but it requires periodic, independent validation for sustained success
Cyber strategy validation reviews lead to better risk mitigation and resiliency outcomes
In this article, we focus on the first. The primary objective of this article is to help directors avoid the common pitfall of focusing on compliance (in this case SEC Cyber rules) and inadvertently neglecting the required commitment to the underlying intent and stakeholder trust. Ultimately, our hope is that these insights will inform intentional actions that will increase effectiveness of cyber risk oversight.
1. Market Transitions
Smart leaders often fail during market transitions, not for doing the wrong thing but for doing the right thing for too long
Transitions in critical market forces such as customer preferences, digital technology, competitive intensity and new business models can be difficult to anticipate and recognize. Even if/when recognized, effectively responding to these transitions can be challenging and the response can still end up in failed outcomes or bare survival. But why are market transitions so difficult to anticipate and/or recognize.
One potential reason is because smart leaders are busy doing the right things for their organizations; they’re focused on serving current and existing customers, managing costs, growing incremental revenues and seeking product enhancements. These are all the right things; they’re certainly not the wrong things for the business. However, when smart leaders do the right things for too long, it can often result in unfavorable outcomes
Take for example the case of Blackberry chief executives who remained focused on serving their existing business customers for too long and didn’t respond to the future customers and their preferences until it was too late and the iPhone had …
The same can be said for a large number of organizations and industries that have been fully or partially disrupted including print, traditional retail, etc.
A good practice for leaders is to spend time with their leadership teams to anticipate market transitions and to be intentional about their efforts to invest to be well positioned for market transitions. As stated earlier, this is easier said than done but it is necessary to survive and thrive in the digital economy.
Transition to AI accelerates multiple market transitions in the digital economy and has a compounding effect.
Gen AI Accelerates Market Transitions
Generative AI and AI in general is an exponential catalyst for market transitions.
Both positive and negative market transitions.
Opportunities and Risks
How will you leverage AI in relation to the market or your industry?
How will the market or your industry move/change in relation to your organization?
AI was and is already being used to create new and innovative products (e.g. Google Nest thermostats and products) that triggered market transitions. Old-school thermostats are being replaced by their digital equivalents such as Nest and ultimately contributing to the smart home market transitions
Now generative AI has triggered an inflection point and is on course to accelerate market transitions across multiple industries. A lot has been written already about leveraging GenAI within business functions of organizations. Several use cases have been highlighted including generating content for marketing, etc. And these examples are important and very useful and should be carefully evaluated.
However, there’s also a crucial consideration in the context of market transitions that should also be given priority. That is that GenAI will help organizations (new and existing) super-charge and expand their value-creation capabilities. As this HBR article notes, companies may begin to expand their borders and offerings/services based on specific questions from potential customers. Not just the typical or standard vertical integration or horizontal expansion but expansion opportunities across the entire customer journey and the “jobs” they want done.
For example, a customer that submits this question to a Gen-AI powered app , “how can I avoid sudden weight gain when work gets extremely busy?” may provide actionable insights into other adjacent needs they may be interested in. The response to the customer’s question will include the standard advice on good diet, regular exercise and stress management. But it also includes suggestions for effective work planning, scheduling and task delegation and/or use of a personal virtual assistant. This is great customer intelligence that allows an organization to expand beyond their existing products/services boundaries if they so desire. Ultimately, we believe such direct customer intelligence will drive some new market transitions at an accelerated pace.
The point here is that Gen-AI accelerates market transition opportunities in two fundamental ways:
Customer insights - preferences, expectations, customer journey, etc.
Rapid Innovation - ecosystem partnerships, collaborations, organic/native transformations.
Risks
What’s the connection between risks and market transitions. As opportunities accelerate so does the risk velocity associated with such opportunities and market transitions. Two landmine categories to be aware of are:
Speed to value and speed to market may result in inadequate cyber security and privacy controls for new products or enhancements
Cyber criminals and other adversaries transition their techniques using gen-AI
Transition to : Solutions for board directors, short, medium and long term. - Thinking mindset shift; thinking dimensions
Recognizing and anticipating market transitions requires heads-up time. Detecting transitions is crucial to identifying, managing and responding to disruptive risks. If leaders don’t anticipate and/or detect these market transitions in time, they’ll be left behind. But all too often, most CEOs can afford the heads-up time it takes to concentrate on market transitions. Yes, some CEOs and boards have put specific time structures in place for such heads-up time such as leadership offsites and strategy retreats. However the velocity of these market transitions powered by Gen-AI may require more than existing time structures, it may require an alternative approach altogether.
Board directors don’t have time either…examples
A mindset shift from oversight to oversight and strategic partner may be helpful. Some have argued that directors have dealt with disruptive forces when they served in their operational roles prior to their board service. And indeed they have and some directors still serve in operational roles at different organizations. The difference though is that, in their operational roles, those that detected market transitions had structural elements in place that would help them keep a pulse on the market. For example, regular visits with their customers to learn about what their thinking and what’s next and a focused priority on market trends. For board directors, this is not always the case for most board members. Further more, in our experience the mindset is primarily that of pure governance and oversight. And that’s a great thing and should continue. But with the inflection point of Gen-AI and velocity of market transitions, a strategic partner mindset in addition to governance and oversight is necessary. For those that disagree with the strategic partner mindset, we encourage you to focus on the spirit of the suggestion. Candidly, we don’t really care what you call it but there needs to be more than the existing governance/oversight mindset. Not a replacement but additive. There needs to be more proactive involvement at the strategic level by board directors. The key word there is proactive because today, board members do get involved at a strategic level at the prompting of the CEO. But again, these market transitions are moving too fast unless you’re the one driving or shaping the transition yourself, it’s extremely difficult to keep up without an intentional effort.
Even when CEOs do anticipate market transitions, they may not necessarily get them right all the time and the need a strategic partner to join forces with to define and analyze the options.
Some CEOs do it today and bring their boards along. Congratulations! Action still remains for the board to be proactive.
Some CEOs don’t it today but want to but swamped with fire-fighting or in a difficult season. For example the board of General Electric (GE) during the 2008 housing market crisis.
The board has to model the right mindset and behavior for the rest of the organization and not just oversight, although that’s clearly still a primary function of the board.
Seeing the forest and the trees as well as the drones is important.
Good example of recognizing market transition is Indra Nooyi of Pepsico who recognized that consumer tastes and behaviors were shifting to reflect more healthy beverage choices and overall health wellness. That recognition informed PepsiCo’s business strategy (Performance with Purpose - PwP) to include more healthy product options for consumers. Some may think the main driver for this initiative was a decline in financial performance, that maybe PepsiCo was losing money and needed a new direction.
mance was on the decline for Pepsico
and resulted in
How does the board serve as a strategic partner in recognizing and anticipating market transitions? Three Things:
Expand the depth of questions the organization is asking. In addition to asking about the opportunities and risks associated with Gen-AI, the board should engage and partner on the following questions
Strategy - How does our strategy change as a result of Gen-AI, now and in the next 5 yrs
Talent - How do we ensure we have the talent to anticipate the accelerated market transitions driven by AI and other adjacent or emerging technologies.
Culture - How do we cultivate a culture that supports (not impedes) recognizing high-speed market transitions.