The return of the incumbent?

March 31, 2023

For a long time, it seemed as if Big Tech would become the dominant factor in many markets through horizontal expansion into nascent markets or vertical integrations of supply chains into their platforms, at the cost of many incumbent firms and traditional market players. This was both because of the huge number of mergers and acquisitions by Big Tech with or of other companies as well as the promise that everything would become a digital product or service (and therefore drawn into the digital ecosystems of BigTech). Recently, however, there has been a deluge of news about tech companies massively laying off employees and closing side-businesses following disappointing growth figures.

The rise of these “digital conglomerates” accelerated during the pandemic in 2020–2022, when “everything” went online and many consumer practices became much more digital. However, Big Tech has been in relatively bad weather recently. For instance, Amazon closed some of its Fresh supermarkets and Go convenience stores to curtail expenses, hoping to find the “economics” for its business to become profitable.

In today’s macro-environment, horizontal expansion and/or vertical integration (often through mergers and acquisitions) are becoming much harder to finance now that interest rates are rising. Moreover, investors increasingly expect real profitability instead of experimentation with innovations. As a result, demand will rise for product development with a clear focus on societal problems, such as ageing societies and rising healthcare costs, climate change and decarbonization costs. This will require skills beyond designing good consumer products and scaling them up via online platforms with nice product design, and smooth user experiences, and upscaling on a digital platform. Non-data driven approaches will also be needed to come up with solutions, such as building and manufacturing sustainable, resilient and safe production lines—or just grocery stores. These are things incumbent companies have experience with and on which they have non-digital expertise. As such, could this macro-environment be the start of a period in which incumbent companies set or raise the bar in their specific core-market?

Burning questions
  • Will we see a rejuvenation of trusted brands and/or incumbents?
  • Will the effect of establishing a “digital conglomerate” based on combining various datasets vanish?
  • What areas will see a consolidation and “push-out” of newly entered digital players?

Series 'AI Metaphors'

1. The Tool
Category: Objects
Humans shape tools.

We make them part of our body while we melt their essence with our intentions. They require some finesse to use but they never fool us or trick us. Humans use tools, tools never use humans.

We are the masters determining their course, integrating them gracefully into the minutiae of our everyday lives. Immovable and unyielding, they remain reliant on our guidance, devoid of desire and intent, they remain exactly where we leave them, their functionality unchanging over time.

We retain the ultimate authority, able to discard them at will or, in today's context, simply power them down. Though they may occasionally foster irritation, largely they stand steadfast, loyal allies in our daily toils.

Thus we place our faith in tools, acknowledging that they are mere reflections of our own capabilities. In them, there is no entity to venerate or fault but ourselves, for they are but inert extensions of our own being, inanimate and steadfast, awaiting our command.
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2. The Machine
Category: Objects
Unlike a mere tool, the machine does not need the guidance of our hand, operating autonomously through its intricate network of gears and wheels. It achieves feats of motion that surpass the wildest human imaginations, harboring a power reminiscent of a cavalry of horses. Though it demands maintenance to replace broken parts and fix malfunctions, it mostly acts independently, allowing us to retreat and become mere observers to its diligent performance. We interact with it through buttons and handles, guiding its operations with minor adjustments and feedback as it works tirelessly. Embodying relentless purpose, laboring in a cycle of infinite repetition, the machine is a testament to human ingenuity manifested in metal and motion.
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About the author(s)

Pim Korsten has a background in continental philosophy and macroeconomics. At the thinktank, he primarily focuses on research, consultancy projects, and writing articles related to technology, politics, and the economy. He has a keen interest in the philosophy of history and economics, metamodernism, and cultural anthropology.

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