In today’s rapidly evolving digital landscape, the notion of ownership, particularly in the realm of organizational intelligence, is becoming increasingly critical. Dr. John Sviokla went over the importance of this concept, delving into the transformative impacts of digital advancements and the ensuing risks and opportunities for organizations.
Dr. John’s central thesis emphasized the need for organizations to own their intelligence. Traditionally, digital transformation has seen significant value extracted by vendors, rather than the organizations themselves. This shift has resulted in companies relinquishing control over transactions, data, and infrastructure to cloud providers. As we progress into the era of Generative AI and deal with unstructured and semi-structured data, this practice becomes increasingly perilous and we need to understand the potential consequences.
To illustrate, Dr. John used an image generated by MidJourney, related to the concept of owning one’s intelligence. The visual was juxtaposed with a financial comparison highlighting how the Big Six tech stocks have outperformed the S&P 500, now representing over 5% of the market capitalization. This comparison shows how these tech giants have derived enormous value by discouraging businesses from integrating technology vertically. As Alan Kay, the pioneer of object-oriented programming and the Dynabook, pointed out, relying on commodity tools leads to ‘commodity productivity,’ stifling transformative change.
Dr. John talks about an article that he co-wrote that further elaborates on the source of this value extraction. Historically, capital was categorized into three forms: human capital, financial capital, and natural capital. In the digital age, three new forms have emerged: cognitive, behavioral, and network capital. Companies have inadvertently given away behavioral and network capital for free through the use of digital services. For instance, platforms like Meta track and monetize user behavior, selling this data to consumer packaged goods (CPG) companies.
As the digital landscape evolves towards cognitive intelligence, Dr. John argues for a paradigm shift. Organizations must halt the commoditization of their unique knowledge and expertise, especially in sectors like oil, healthcare, and CPG, where specialized knowledge forms the backbone of competitive advantage. He cited historical business figures like Andrew Carnegie and Henry Ford as examples of leaders who relentlessly pursued excellence in their fields, always seeking out expertise to enhance their operations. This pursuit, he suggested, should inspire modern businesses to embed organizational processes that resist commoditization, and to protect their proprietary intelligence from being absorbed by external vendors.
The talk advocates for the adoption of private AI solutions. Certain vendors offer the capability to train AI models using proprietary data while keeping the data secure behind company firewalls. These deals ensure that organizations retain ownership of the lanes, source code, and overall intellectual property. While it is practical to utilize some commodity products from cloud providers, it is imperative to safeguard cognitive capital.
This strategy is crucial not only at the organizational level, Dr. John maintains, but also from a policy perspective. If cloud providers gain control over cognitive capital, their dominance and pricing power could pose significant challenges for commerce and society at large. That means that owning one’s intelligence is a vital call to action for organizations with deep knowledge, ensuring they maintain competitive advantage and foster innovation, without losing control to external entities.