Legacy Companies are Thinking in the Wrong Scale

Whatever gains expected from digital transformation will be blown to shreds by AI Exponentials at a logarithmic scale not seen since the advent of the internet.  While at first this may sound like more AI hyperbole, the early indications for organizations who begin their journey as AI Natives by design show a tremendous advantage versus the AI Enabled who have to reduce their legacy technology, cultural, and financial debt.

Constellation sees a progression for AI maturity that begin with AI Luddites and ends with AI Exponentials.  Here are the defining characteristics (see Figure 1.)

Source: Constellation Research, Inc.

Inside the Ten Attributes of AI Exponentials

1. Level of AI investment. Organizations must overcome technical debt and then invest at double or triple their current rates in AI fundamentals such as data strategy, decision automation, and language models.
2. Stage of AI maturity. Constellation’s AI maturity ranges from augmentation, acceleration, automation, agentic, and autonomous.
3. Value of data.  How organizations appreciate their data reflects their maturity in AI.  Those organizations who take their data for granted will differ in how they source, curate, nurture, and renew their data.
4. Monetization models. Traditional businesses monetize the sale of products and services.  Greater levels of digitization enable experiences, outcomes, and revenue share.
5. Means of production. This attribute assigns the default assumption of how work gets done and ranges from full human involvement to full digital labor.
6. Agentic usage. Organizations range from no agents to multiple agents and multiple platforms.  The goal is to create an agentic ecosystem.
7. Machine scale. This attribute addresses the percentage of human led or machine led output.
8. Profit per employee.  As AI investments increase, expect digital labor to create massive leverage as profit per employee grows.
9. Growth expectations.  AI ushers in an era of exponential efficiency and growth. Expectations move from double digit percentage growth to a ten times and hundred times growth.
10. Partnerships. Partnerships mature from technology providers and  enablers, to new data signals and data collectives which share data.  The most advanced AI Exponentials build Data, Inc. business models that monetize data in complex ecosystems.The Bottom Line: AI Exponentials are Here

AI Natives and AI Exponentials have taken the market by storm.  In three years, Constellation expects the first $1 billion services company to be staffed by 1000 FTEs.  A 100 person software company will take out a $100 billion ARR company in the next three years.  The first single person $1B ARR company will arrive within five years. Companies that are driving millions of ARR with few employees dominate the new landscape.  With AI intelligence doubling every 7 months, the pace of innovation has never been faster.  Constellation Research is tracking these new companies as the Age of AI completely changes the landscape.

Your POV

Have you made the frameshift to exponential thinking? Will you be ready for AI Exponentials?  When will you choose an AI Exponential over a legacy vendor?

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Disclosures

Although we work closely with many mega software vendors, we want you to trust us. For the full disclosure policy,stay tuned for the full client list on the Constellation Research website. * Not responsible for any factual errors or omissions.  However, happy to correct any errors upon email receipt.

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