I talk a lot about the fragility of certain horizontal market positions.
I’m not the only one. Check out this report by CB Insights: https://www.cbinsights.com/research/artificial-intelligence-race-equity/
The estimated reading time for that article is 5m22s. If you don’t have that much time, let me point you to a few key items:
- “Just weeks ago, China-based AI startup SenseTime Group received one of the largest venture capital investment in the AI space — a $600M Series C investment led by Alibaba. Before this, according to data from CB Insights, AI startups secured 1,349 separate equity financings in 2017 totaling a whopping $15.2B in investment.”
- “Companies appear ready to pay top dollar, especially via larger-than-normal equity awards, for candidates with critical skills related to AI.”Looks pretty awesome so far, right? If you can credibly claim AI-related skills, now is a great time to be you, right?
The CB Insights piece goes on to say the following:
“In every case, you run the risk of paying someone top dollar for a skillset that will inevitably get cheaper over time, and may no longer be as critical to your business. This could lead to serious internal pay equity problems as well as allocating resources to a small group of employees who aren’t actually going to make a lasting impact on your business. With this in mind, we counsel companies to think beyond short-term talent acquisition when considering hot skills premiums.”
The key phrase there is “a skillset that will inevitably get cheaper over time”. In general, you could say that about any skillset that doesn’t involve tacit knowledge. Another word for it is commoditization.
Can AI or machine learning skills help you cultivate a desirable, durable market position? Yes. Are they enough on their own to cultivate that kind of market position? Nope. They will inevitably become more widespread and less rare. Stuff that currently has to be invented by super smart people will become codified into frameworks, code samples, and best practices that ordinary people can use. If your value to your clients is something more than AI, this is awesome news. It increases your profitability and decreases the number of hair-graying points in a project. If your value to your clients is only your AI or ML-related skills, it’s bad news.
Which of those positions do you want to be in? Allow me to make a prediction…
If you’ve been in software development for less than 10 years, you’re excited by the prospect of jumping to the next new hot technology area. Once AI skills become commoditized, you’ll happily climb the next learning curve and reinvent your business as you do so.
If you’ve been in software development for more than about 15 years, this exact same situation is not exciting to you. You might do it anyway, but with a heavy heart, or a sense of resignation. You might even wonder if there’s a better way to offer value to your clients.
There is. 🙂
The key, as I alluded to above, is to develop economically valuable expertise. That almost always involves some form of tacit knowledge. That could look like any of the following:- Understand how a particular type of company works and how custom software can create value for that type of company.- Understand how a particular evergreen-ish business problem can be addressed with custom software.- Understand how a particular type of buyer of software dev services thinks and acts, and use that to gain a competitive advantage. You still deal with the non-stop changes in the tech landscape, but with an evergreen competitive advantage that buffers you from the ups and downs that software generalists face.- Cultivate a critical mass of relationships in a particular vertical market. You still deal with the non-stop changes in the tech landscape, but with a “Rolodex” and a reputation within the vertical that acts as a “flywheel” to buffer you from the ups and downs that software generalists face.- Cultivate a reputation that helps buyers perceive you as the safest, most innovative, or most [something] option. You still deal with the non-stop changes in the tech landscape, but with a “fame flywheel” to buffer you from the ups and downs that software generalists face. I’m not kidding when I compare the people who do this to Madonna. (compare Madonna’s career to Kelly Clarkson’s. Madona: https://chartmasters.org/2017/08/cspc-madonna-popularity-analysis-2/54/ Kelly Clarkson: https://chartmasters.org/2018/05/cspc-kelly-clarkson-popularity-analysis/22/)If you’re ready to start building one of these evergreen ways to defend against commoditization, the Decision Making workshop in Specialization School might be right for you. It’s 4 weeks to move you from where you are now to clarity and confidence in your thinking about how to specialize.
If you’re a previous client or customer of mine, you get the best price I offer on this workshop. Check it out now: https://philipmorganconsulting.com/specialization-school/part-1-decision-making-workshop/ and if you’d like to check for fit, set up a short call with me: https://calendly.com/philipmorgan/20m-call-to-check-for-workshop-fit