Many companies claim to be an AI company; it’s a pattern we see with every new technology. It’s important for employees (and founders) to understand if they are really working for the type of company they think they are.
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In Chapter 1 of The Career Toolkit, Essential Skills for Success That No One Taught You I wrote about core functions of a business. A business typically has one or two core areas of competency providing an advantage and then supporting functions. At many companies, for example, finance and accounting is a support function, unless it’s a financial services firm. It’s remarkable how many companies can’t actually identify what that core competency is. The recent spate of “AI” companies illustrates this point.
I graduated MIT in the 1990s and quickly moved into working at a software company (it was half software / half consulting, and the lack of agreement caused the company to split in two). Back then lots of businesses were “tech” companies because a) a huge portion of the expenses were related to tech (software engineers, servers, bandwidth), and b) being on the world wide web was the competitive advantage. Amazon was a large department store with a mail order service just like Sears . . . but it was on the internet!
But today everyone is on the internet. A plumber having a website was a competitive advantage in 1996; today it’s table stakes. That a company has technology does not make it a technology company. Consider that the first factories to electrify gained an advantage over competitors; they could work longer hours in the winter and use electric tools for faster results or mechanical advantage. But it would be wrong to call them “electric companies.” They were manufacturing companies that employed electricity.
This idea is illustrated well in the seminal Harvard Business Review article from May 2003 IT Doesn’t Matter by Nicolas G. Carr. He correctly identified that IT was an infrastructure technology, like the railroads, electricity, and the telephone. It helped companies improve operations, but it wasn’t the raison d'être for these companies. These were enabling technologies, not core competencies.
The exception being an actual railroad, electric company, or telephone company, whose business was to provide the service. Likewise, companies that build and sell software (e.g., Microsoft, Salesforce) are technology companies. Companies that provide a service using technology, are not. Consider Airbnb; it’s not so much a technology company as a specialized travel agency or rental service. In theory, Grubhub could be conducted solely by telephone; the interface may not be as good, but it’s doable; Excel, not so much.
It’s not always black and white. What about the large social media companies? Their service is technically about providing social media (or targeted ads, depending on whether you’re the product or the customer). Still, we might call them tech companies because at their scale, tech is key for their competitive advantage (many have pioneered key technologies). Amazon was not originally a true tech company, as it was selling, albeit online; but then when it provided cloud computing through its Amazon Web Services it became a technology company. (Arguably, when it provided a web portal for third party sellers it qualified as well.) Uber was perhaps a tech company at first since the matching at scale was key (this is giving it credit for scale as we did with the social media companies), but today that technology has become commoditized and its advantage is the network of riders and drivers, not its technology which can be replicated at relatively low cost; Uber is not what I could call a tech company.
Just because a company uses electricity that doesn't make it an electric company.
Most companies today that called themselves technology companies, are not. They more commonly fall into tech-enabled services. I’ve built multiple labor marketplaces (think temp workers). These are not tech companies in that from the buyer’s perspective they are getting plumbing service or an accountant. It’s simply that the platform is run by software instead of humans and paper sheets with work orders. Companies want to call themselves tech companies, and not staffing agencies or accounting service providers, because a) “tech company” sounds cooler, and b) because tech companies get much a better valuation than service businesses. If you can convince investors you’re a tech company, your valuation goes up many multiples.
As a counterexample WeWork tried to pretend it was . . . I don’t know what, but certainly not a real estate company. Real estate experts saw through this and said, “You’re renting offices at X dollars per square foot and releasing them at Y dollars a square foot; that’s a real estate company–and not a great one.” Sure, they had other “stuff.” There were desk workers and access to wifi and printers (and beer), but at the core their clients leased office space. When they pretended they weren’t, they had a $47B valuation. When people pointed out that the emperor had no clothes, reality set in. The company filed for bankruptcy protection and at the time of this writing has a market cap of about $8M (that’s million, unlike the B for billion earlier).
We’re seeing the same pattern with AI. Everyone and their brother wants to be an AI company. As with “tech” it’s sexier and gets you a better valuation. Also as with tech, it’s often smoke and mirrors. OpenAI is an AI company. We can give big tech some credit since they are actively developing proprietary AI. Every other company (including some I work with) are not so much “AI companies” as “AI-enabled” companies. If you’re developing an LLM or other AI model (either core model or fine-tuned) for resale, then you’re an AI company. I’d even consider calling AI building tools an “AI company” as their fortunes are tied to the success of AI in general. But if you’ve just plugged in a third-party AI API to your code, you’re no more an AI company than you are a database company or an electric company for using either of those tools.
There’s nothing wrong with working at an AI-enabled company. In the early part of the twentieth century secretaries who could use a telephone or a typewriter had an advantage over those who couldn’t. Working at an AI-enabled company gives you experience with tools that provide an advantage, just like the secretary who knew how to use the technology in her day had an advantage over other workers who didn’t have such skills. Don’t feel that you need to work for a true AI or true tech company but do be aware of what type of company you do work for.
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