“One thing is clear, scrutiny on the AI market has never been more intense and enthusiasm is finally meeting caution,” explains Justin Megawarne, Managing Partner at UK technology consultant Megaslice. “For some founders, this will hopefully be a lesson. Just like the buzzwords that have come before it, AI isn’t enough to make a business valuable.”

“Ultimately, all of this was entirely inevitable; a bubble can only get so big before it bursts. Some rode the wave and saw their AI startup that offers little substance manage to achieve a high valuation. Others invested in AI without really understanding what it is they were investing in, getting nowhere. In both scenarios, people will live another day, until the next shiny toy comes along.”

The Silver Bullet

A report from MIT in August analysed 300 public AI deployments in enterprises and found that AI is not the silver bullet some purported it to be, as just 5% of projects achieved rapid revenue acceleration. Researchers reported that this was caused by flaws in how AI had been applied and integrated. 

Megawarne argues that AI adoption has probably moved much faster than reasonable, leading to overzealous companies jumping to implement it before they really understand it.

“The majority of companies are still a way off from anyone getting to grips with AI and understanding where it can actually contribute to value,” he explains. “Most founders are still stuck believing that it will just automate everything. We’ve seen this before and it’s unlikely to be the case.

“They have been sold the dream that AI is an easy win, but it isn’t right for every aspect of business, least of all good service delivery. When it comes to delivering for your customers, people are still crucial to nurturing and maintaining positive relationships, as well as dealing with the unexpected.

“Like all automation, AI might replace some roles, but workers will eventually have something else to do. There might be overall growth as a result, but not before a lot of stupid mistakes are made, people are mistreated, and money is wasted using AI in places it isn’t ready for.”

The great AI correction

Megawarne: “When the bubble bursts, most companies will just pivot back to what they know best, reverting to a time before buzzwords. It’ll be a quiet exhalation. Everyone will pretend they knew it was coming all along, just like we saw with the big data and blockchain/Web3 hype.”

“The companies that will ride out the collapse are those that steadfastly refuse to reduce customer satisfaction or service quality in order to chase AI.

“If we can take anything from this, it’s that founders should remain focused on what makes customers happy before blindly pouring money into technologies that they don’t understand. In practice, this means patience, talking to actual founders who’ve had genuine success with AI not just consultants, and ensuring you have a real understanding of your market.”

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