The Big Nine: digital transformation, opportunities and perils
I've been reading a fair number of books and articles lately about digital transformation. The concept of digital transformation is still somewhat nascent, still being defined, but increasingly it seems that many of the significant underpinnings of whatever digital transformation ultimately becomes are rapidly coalescing, and controlled by just a handful of companies in the US and in China.
While many companies may create more revenue, cut costs or create new relationships with customers because of new digital techniques and better use of data, almost all of these companies are ultimately relying on infrastructure - could we say an operating system - developed and produced by a few companies that have a significant lead in digital. It seems no matter how much work any company invests in becoming more digital, they will be paying a toll or relying on this same handful of companies in order to fully deploy digital solutions.
If this sounds a bit dire, try reading the book entitled The Big Nine by Amy Webb. Perhaps the subtitle will give you a sense of what she is thinking: How the Tech Titans and their thinking machines could warp humanity. I think the last bit - about warping humanity - is overkill, but a lot of what Webb is talking about is important for individual consumers of technology to understand, because it impacts what happens to our data and our privacy. Further, it is important for any corporation conducting digital transformation to understand, because the tech titans that Webb identifies control so much of the data flow and the tools used to conduct digital transformation.
The Big Nine
Webb identifies many of the usual suspects in her rogues gallery of tech titans of digital. Included in that list are Google, Amazon, Facebook, IBM, Microsoft and Apple, leading her to the acronym GMAFIA. These are all well-known, well-established companies with plenty of technology know-how and varying degrees of trustworthiness when it comes to collecting and managing data.
Webb also identifies three large Chinese companies which she postulates, with good support, are on the same plane as the GMAFIA. These include Baidu, Alibaba and Tencent, leading her to christen these the BAT. So her big nine focuses on leading American companies, darlings of the stock market and leading high tech Chinese firms, which command great market share and control in China but which aren't significantly active elsewhere yet.
What these Big Nine have in common is a significant head start over many competitors when it comes to managing data, extracting value from data, and in many cases creating platforms that generate data. Amazon and Alibaba are essentially large virtual hypermarkets, conducting thousands of transactions a second, giving these companies incredible insight into consumer demand and a rich data stream. Google is a purpose-built data company, and has been harvesting data through search and email for years. Microsoft has made a significant transition from a desktop operating systems to become a real player in the cloud. IBM has made a similar transition from hardware to software and cloud. Apple is of course a fan-boy favorite with a closed platform, capturing data but slightly aloof from the more aggressive companies. And of course we all know how Facebook has captured millions of users and their data.
Building platforms to use data effectively and then monetizing the data to create new customers and new channels is just a virtuous circle for many of these companies. But simply existing as platforms is only a part of the story.
Building the operating system
Companies like Google are increasingly building the key components of the operating structure for other companies that want to do digital transformation. Clearly, many of the GMAFIA already provide a range of services including managing data in the cloud. Many of the basic building blocks of AI and ML are being developed by these companies as well. Take TensorFlow, an open source software library that supports many machine learning algorithms. TensorFlow was developed by Google. Webb goes on to point out that more and more of the core components of digital transformation aren't simply provided by the GMAFIA as a service, but are built and offered by them as core infrastructure, what could become an operating system. She is concerned about the amount of power that a few companies could control in the digital transformation space, and the control they could possess over other companies and the economy.
Three scenarios
What I found especially interesting was the last third of the book, where Webb creates three alternative scenarios for the future based on key trends and potential actions taken by the GMAFIA, the BAT, governments and consumers. The three scenarios are a happy-go-lucky scenario where digital transformation creates new opportunities for everyone and everyone cooperates and shares nicely, a middle scenario with less cooperation and more competition but with a number of benefits from digital transformation, and the final scenario, where we welcome our new Chinese AI overlords.
This last scenario is based on a couple of facts and suppositions. Two facts that matter to Webb are 1) the Chinese companies have an exceptionally large market to practice on with limited competition, giving the BAT an unfair advantage and 2) the Chinese government is investing and and hopes to be the world's leading economy in AI and ML and other digital capabilities, while the US and Europe take more market driven approaches. I think I have a couple of concerns with her scenario in that regard.
First, while the Chinese market is large, and having a lot of customers and data helps improve AI and ML, the fact that Baidu or Alibaba are successful in China does not necessarily mean that they will be successful elsewhere, for a lot of reasons, many of them political or societal in nature. The Chinese government is known to be active in these companies and many governments and consumers may be concerned about sharing data with these companies. Look no further than the current Huawei issues with 5G. Second, we've seen some of this movie before. The Japanese decided in the 1980s to corner the manufacturing and technology market, creating a governmental body that heavily invested in selected companies and industries. Yet the global market is not under the thumb of Japanese manufacturing or computer titans. While there is some benefit to centralized planning and control, there are also benefits to competition. I doubt that the future is as bright and cheerful as Webb's positive scenario but I also doubt we'll find ourselves under the thumb of a Chinese AI conglomerate, no matter how many science fiction books William Gibson turns out.
Conclusion
If you are just turning your attention to the emerging force that is AI and ML, and want to learn more about the rapidly growing power of key players in the market today, this is an excellent book. It points out the growing consolidation of power in digital transformation, and highlights two very different approaches to dominance - the market and competition driven approach in the US and the centralized, command plus competition approach from the Chinese. Strangely, the Europeans, Koreans and others seem completely shut out of digital transformation leadership. I wonder if that is the case, or if Webb simply choose to focus on a classic mano a mano battle.
I'd highly recommend this book if only for some of the work Webb does to highlight what's going on, and how major companies are starting to consolidate power in this space. She does on to illustrate issues with data security and privacy that are important as well. While I may quibble with her scenarios, she has done good work developing them and they paint somewhat realistic alternative paths, but I think leave out important potential actors and ignore rapidly emerging companies all together. This book reads like a warning, and for many people it probably should be. Are we really OK with the amount of consolidation that is already underway? Do we trust these firms to keep and manage our data? What benefits are there to a more engaged federal government, defining and leading digital transformation? Is market competition the right way to encourage digital transformation? These and other questions are at least asked, if not always answered, in this book.
While many companies may create more revenue, cut costs or create new relationships with customers because of new digital techniques and better use of data, almost all of these companies are ultimately relying on infrastructure - could we say an operating system - developed and produced by a few companies that have a significant lead in digital. It seems no matter how much work any company invests in becoming more digital, they will be paying a toll or relying on this same handful of companies in order to fully deploy digital solutions.
If this sounds a bit dire, try reading the book entitled The Big Nine by Amy Webb. Perhaps the subtitle will give you a sense of what she is thinking: How the Tech Titans and their thinking machines could warp humanity. I think the last bit - about warping humanity - is overkill, but a lot of what Webb is talking about is important for individual consumers of technology to understand, because it impacts what happens to our data and our privacy. Further, it is important for any corporation conducting digital transformation to understand, because the tech titans that Webb identifies control so much of the data flow and the tools used to conduct digital transformation.
The Big Nine
Webb identifies many of the usual suspects in her rogues gallery of tech titans of digital. Included in that list are Google, Amazon, Facebook, IBM, Microsoft and Apple, leading her to the acronym GMAFIA. These are all well-known, well-established companies with plenty of technology know-how and varying degrees of trustworthiness when it comes to collecting and managing data.
Webb also identifies three large Chinese companies which she postulates, with good support, are on the same plane as the GMAFIA. These include Baidu, Alibaba and Tencent, leading her to christen these the BAT. So her big nine focuses on leading American companies, darlings of the stock market and leading high tech Chinese firms, which command great market share and control in China but which aren't significantly active elsewhere yet.
What these Big Nine have in common is a significant head start over many competitors when it comes to managing data, extracting value from data, and in many cases creating platforms that generate data. Amazon and Alibaba are essentially large virtual hypermarkets, conducting thousands of transactions a second, giving these companies incredible insight into consumer demand and a rich data stream. Google is a purpose-built data company, and has been harvesting data through search and email for years. Microsoft has made a significant transition from a desktop operating systems to become a real player in the cloud. IBM has made a similar transition from hardware to software and cloud. Apple is of course a fan-boy favorite with a closed platform, capturing data but slightly aloof from the more aggressive companies. And of course we all know how Facebook has captured millions of users and their data.
Building platforms to use data effectively and then monetizing the data to create new customers and new channels is just a virtuous circle for many of these companies. But simply existing as platforms is only a part of the story.
Building the operating system
Companies like Google are increasingly building the key components of the operating structure for other companies that want to do digital transformation. Clearly, many of the GMAFIA already provide a range of services including managing data in the cloud. Many of the basic building blocks of AI and ML are being developed by these companies as well. Take TensorFlow, an open source software library that supports many machine learning algorithms. TensorFlow was developed by Google. Webb goes on to point out that more and more of the core components of digital transformation aren't simply provided by the GMAFIA as a service, but are built and offered by them as core infrastructure, what could become an operating system. She is concerned about the amount of power that a few companies could control in the digital transformation space, and the control they could possess over other companies and the economy.
Three scenarios
What I found especially interesting was the last third of the book, where Webb creates three alternative scenarios for the future based on key trends and potential actions taken by the GMAFIA, the BAT, governments and consumers. The three scenarios are a happy-go-lucky scenario where digital transformation creates new opportunities for everyone and everyone cooperates and shares nicely, a middle scenario with less cooperation and more competition but with a number of benefits from digital transformation, and the final scenario, where we welcome our new Chinese AI overlords.
This last scenario is based on a couple of facts and suppositions. Two facts that matter to Webb are 1) the Chinese companies have an exceptionally large market to practice on with limited competition, giving the BAT an unfair advantage and 2) the Chinese government is investing and and hopes to be the world's leading economy in AI and ML and other digital capabilities, while the US and Europe take more market driven approaches. I think I have a couple of concerns with her scenario in that regard.
First, while the Chinese market is large, and having a lot of customers and data helps improve AI and ML, the fact that Baidu or Alibaba are successful in China does not necessarily mean that they will be successful elsewhere, for a lot of reasons, many of them political or societal in nature. The Chinese government is known to be active in these companies and many governments and consumers may be concerned about sharing data with these companies. Look no further than the current Huawei issues with 5G. Second, we've seen some of this movie before. The Japanese decided in the 1980s to corner the manufacturing and technology market, creating a governmental body that heavily invested in selected companies and industries. Yet the global market is not under the thumb of Japanese manufacturing or computer titans. While there is some benefit to centralized planning and control, there are also benefits to competition. I doubt that the future is as bright and cheerful as Webb's positive scenario but I also doubt we'll find ourselves under the thumb of a Chinese AI conglomerate, no matter how many science fiction books William Gibson turns out.
Conclusion
If you are just turning your attention to the emerging force that is AI and ML, and want to learn more about the rapidly growing power of key players in the market today, this is an excellent book. It points out the growing consolidation of power in digital transformation, and highlights two very different approaches to dominance - the market and competition driven approach in the US and the centralized, command plus competition approach from the Chinese. Strangely, the Europeans, Koreans and others seem completely shut out of digital transformation leadership. I wonder if that is the case, or if Webb simply choose to focus on a classic mano a mano battle.
I'd highly recommend this book if only for some of the work Webb does to highlight what's going on, and how major companies are starting to consolidate power in this space. She does on to illustrate issues with data security and privacy that are important as well. While I may quibble with her scenarios, she has done good work developing them and they paint somewhat realistic alternative paths, but I think leave out important potential actors and ignore rapidly emerging companies all together. This book reads like a warning, and for many people it probably should be. Are we really OK with the amount of consolidation that is already underway? Do we trust these firms to keep and manage our data? What benefits are there to a more engaged federal government, defining and leading digital transformation? Is market competition the right way to encourage digital transformation? These and other questions are at least asked, if not always answered, in this book.
Voted 2nd best innovation blogger two years in a row!
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