Exploring Opportunities in the Generative AI Value Chain

 Just gave a university talk on my work in this area, just reading this. Below just an intro.  Read the whole thing.

Exploring opportunities in the generative AI value chain

This article is a collaborative effort by Tobias Härlin, Gardar Björnsson Rova, Alex Singla, Oleg Sokolov, and Alex Sukharevsky, representing views from McKinsey Digital.

April 26, 2023 | Article

Generative AI is giving rise to an entire ecosystem, from hardware providers to application builders, that will help bring its potential for business to fruition.

Over the course of 2022 and early 2023, tech innovators unleashed generative AI en masse, dazzling business leaders, investors, and society at large with the technology’s ability to create entirely new and seemingly human-made text and images.

The response was unprecedented.

In just five days, one million users flocked to ChatGPT, OpenAI’s generative AI language model that creates original content in response to user prompts. It took Apple more than two months to reach the same level of adoption for its iPhone. Facebook had to wait ten months and Netflix more than three years to build the same user base.

And ChatGPT isn’t alone in the generative AI industry. Stability AI’s Stable Diffusion, which can generate images based on text descriptions, garnered more than 30,000 stars on GitHub within 90 days of its release—eight times faster than any previous package.1

This flurry of excitement isn’t just organizations kicking the tires. Generative AI use cases are already taking flight across industries. Financial services giant Morgan Stanley is testing the technology to help its financial advisers better leverage insights from the firm’s more than 100,000 research reports.2 The government of Iceland has partnered with OpenAI in its efforts to preserve the endangered Icelandic language.3 Salesforce has integrated the technology into its popular customer-relationship-management (CRM) platform.4   .... ' 

McKinsey on Risk and Resilience

Good thoughts, I like he term 'value chains', but also like means to use the concept  analytically use it such that it gives us genuine measures.  Not done enough .

Risk, resilience, and rebalancing in global value chains by McKinsey

Companies need an understanding of their exposure, vulnerabilities, and potential losses to inform resilience strategies. ... "

Value Creation

Good piece.   Take care to carefully measure the value.

The Value of Value creation
By Marc Goedhart and Tim Koller, McKinsey Quarterly  ( link to PDF)

Challenges such as globalization, climate change, income inequality, and the growing power of technology titans have shaken public confidence in large corporations. In an annual Gallup poll, more than one in three of those surveyed express little or no confidence in big business—seven percentage points worse than two decades ago.1 Politicians and commentators push for more regulation and fundamental changes in corporate governance. Some have gone so far as to argue that “capitalism is destroying the earth.”2

This is hardly the first time that the system in which value creation takes place has come under fire. At the turn of the 20th century in the United States, fears about the growing power of business combinations raised questions that led to more rigorous enforcement of antitrust laws. The Great Depression of the 1930s was another such moment, when prolonged unemployment undermined confidence in the ability of the capitalist system to mobilize resources, leading to a range of new policies in democracies around the world.

Today’s critique includes a call on companies to include a broader set of stakeholders in their decision making, beyond just their shareholders. It’s a view that has long been influential in continental Europe, where it is frequently embedded in corporate-governance structures. The approach is gaining traction in the United States, as well, with the emergence of public-benefit corporations, which explicitly empower directors to take into account the interests of constituencies other than shareholders. .... ' 

Data as Valued Corporate Asset

A topic I have now followed for some time, we even implemented aspects of valuation in the enterprise by starting with semantic structures.    Good thoughts at the link.  Value is meta data of the most important kind,  but also slippery in its use and maintenance.  Can we express it in a kind of value chain?    Linked to a market?    Just now talking the topic again seriously.

What is Data Value and Should it be Viewed as a Corporate Asset?
By Asha Saxena  in Dataversity

A lot has changed since the 1950’s when the average age of a publicly traded company listed on the S&P 500 has gone down from being 60 years old to now less than 20 years old according to research from Credit Suisse investor analysts. Companies that are embracing using new technologies, automation, Big Data, Machine Learning, and innovation are gaining market share on the list, and are disrupting older legacy businesses that have been slower to adapting and transforming to digital changes. In fact 5 of the 6 biggest companies  (Apple, Amazon, Alphabet, Microsoft, Facebook) by market cap valuation are data technology businesses. Companies that understand the true value of their data and leverage it with advanced analytics technologies are seeing continued growth. A Forbes contributor Howard Baldwin makes a comparison to prove the point of proving data’s value:

“Why is Facebook currently valued at 415 billion and United Airlines, a company that actually owns things like airplanes and has licenses to lucrative things like airport facilities and transoceanic routes between the U.S. and Asia, among other places, is only worth $24 billion.”

These disruptive innovators, use Big Data solutions as competitive advantages to reduce operational costs, increase revenue, predict behavior, improve cash flows. They weave data into every function of the organization. Data is not only being used to record what has transpired, but it also being used to predict and drive transformative disruptive changes at alarming speeds. And yet how many companies are listing their data as tangible corporate asset on their balance sheet?  ... " 

Industrial Automation Dynamics

 Capturing value in machinery and industrial automation as market dynamics change

Shifting growth patterns and digitization are reshaping the sector. A strategic response can help machinery and industrial automation companies to keep pace.

Sent from McKinsey Insights .... considerable view with industry polling:  By Manuel Altmeier, Harald Bauer, Michael Becker, and Markus Simon

Shifting growth patterns and digitization are reshaping the sector. A strategic response can help machinery and industrial automation companies to keep pace.

The global machinery and industrial automation sector has been in a well-balanced equilibrium for decades—with only small shifts in revenue and market share, in the low single-digit percentage range. Now things are suddenly becoming exciting again.


This is because there seems to be a clear and widespread consensus among pundits and the sector’s players that two emerging global megatrends in their industry—shifting growth patterns and the increasing pace of digitization—will have a severe impact on strategic control points and value pools, forcing companies to rethink their business model (Exhibit 1). The trends’ effect on value pools are especially critical, because the ability of the sector’s players to hold on to the value they claim or capture the new value being created, or both—and to stake or maintain a claim in the new machinery and industrial automation landscape—is directly tied to their ability to occupy strategic control points along the evolving value chain. .... " 

Podcast: Business, Disruption and Technology

Harvard professor Thales Teixeira explains why customer behavior, not technology, ultimately drives disruption.

The emergence of a new technology is often cited as what drives the disruption of an industry or business. But that’s not true in most cases, according to Harvard Business School professor Thales Teixeira. Instead, startups disrupt established companies by decoupling the customer value chain — picking one aspect of the business and doing it better than the incumbent.

His findings, based on eight years of researching startups, tech companies and incumbents, are explained in his new book, Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption. Teixeira joined the Knowledge@Wharton show on SiriusXM to talk about his book. (Listen to the podcast at the top of this page.)

An edited transcript of the conversation follows.
Knowledge@Wharton: Why do we believe that technology has enabled so much disruption in business?

Thales Teixeira: Pure and simple, because it is sexy and interesting to hear about new technologies. The media fuels all of our needs for figuring out what are the new tools and new technologies, and it just creates momentum in the market. The companies are developing these things, so there are a lot of PR agents out there. We do have a few very prototypical examples of actual technologies being game changers. The mobile phone is one of them.

I visited many startups, and I also visited the incumbents that said they were being disrupted by these startups. I started realizing that there are very few technologies that are really game changers and disruptors in that sense. In the vast majority of the cases, these startups have the same technologies as the incumbents that they are fighting. So, this idea that technology is disrupting markets is not really [true in] the majority of the cases.

Knowledge@Wharton: Can you explain this idea of decoupling? .... " 

Beyond the Supply Chain: Global Value Chains

More ways to think about value being generated.    Supplychains are being much influenced by new technologies now, its a good time to think about how they can be improved.

Globalization in transition: The future of trade and value chains in McKinsey   By Susan Lund, James Manyika, Jonathan Woetzel, Jacques Bughin, Mekala Krishnan, Jeongmin Seong, and Mac Muir

Global value chains are being reshaped by rising demand and new industry capabilities in the developing world as well as a wave of new technologies.

Even with trade tensions and tariffs dominating the headlines, important structural changes in the nature of globalization have gone largely unnoticed. In Globalization in transition: The future of trade and value chains (PDF–3.7MB), the McKinsey Global Institute analyzes the dynamics of global value chains and finds structural shifts that have been hiding in plain sight.

Although output and trade continue to increase in absolute terms, trade intensity (that is, the share of output that is traded) is declining within almost every goods-producing value chain. Flows of services and data now play a much bigger role in tying the global economy together. Not only is trade in services growing faster than trade in goods, but services are creating value far beyond what national accounts measure. Using alternative measures, we find that services already constitute more value in global trade than goods. In addition, all global value chains are becoming more knowledge-intensive. Low-skill labor is becoming less important as factor of production. Contrary to popular perception, only about 18 percent of global goods trade is now driven by labor-cost arbitrage.

Three factors explain these changes: growing demand in China and the rest of the developing world, which enables these countries to consume more of what they produce; the growth of more comprehensive domestic supply chains in those countries, which has reduced their reliance on imports of intermediate goods; and the impact of new technologies. ....  "

Digitization and Value Chain

Like the idea of a 'value' chain, was reminded of it by this article:

Shaking up the value chain

Data and digitization are creating a growing array of value-creation choices in industries as diverse as pharmaceuticals, mining, and energy.

During the 1980s, McKinsey’s Fred Gluck and Harvard Business School professor Michael Porter began writing about the interrelated activities through which companies create value for their customers. Executives have always had choices about how to perform the activities in this “business system” (Gluck’s words) or “value chain” (Porter’s). In the digital age, as information disrupts the nature of value creation in many industries, the range of choices available to senior business leaders has increased. For example, digital platforms in the pharmaceutical industry now make it possible to aggregate massive amounts of data on diseases—potentially accelerating the discovery and design of new drugs and challenging the industry’s legacy processes. In energy production and mining, although companies have long outsourced some functions in efforts to drive down costs, digital requires a new approach. Using data, suppliers can offer incumbents an expanded range of capabilities and productivity gains—alluring possibilities that are accompanied by the risk that sharing too much data could shut off areas of future growth. This type of flux in value chains will only intensify across industries, forcing leaders to grapple with existential questions about core competitive strengths in an environment where destabilizing technologies will be the norm. ... "