In the evolving landscape of consumer internet businesses, the penetration of advanced technologies, particularly artificial intelligence (AI), is necessitating a fundamental shift in the composition of executive leadership teams. Unlike many established consumer-facing industries, where domain expertise and industry tenure have long been the cornerstone of executive careers, consumer internet verticals are increasingly facing the challenges of ever tighter margins, global competition and changing customer expectations. Today, more than ever, we are entering a period beyond just scientific and analytical approaches to data into a period where consumer internet companies driven exclusively by machine intelligence might be the only viable way to survive and prosper.
Judgement now only sits above intelligent decisions
Data has historically supported decision-making or enhanced understanding in consumer internet verticals across all categories – vertical marketplaces, e-commerce, D2C, media and entertainment, games, health and consumer Fintech and so on. Many of the ultimate decisions have sat with humans. The scale of available data, market competition and the execution maturity of consumer internet propositions means the majority of potential successful outcomes now go beyond the scale of human intelligence. It is simply too slow to work out what is possible; leadership teams in these categories are now effectively training their de facto LLMs by selecting and testing potential scenarios at pace. This goes beyond pricing or acquisition to look at the whole supply chain and customer experience. The companies that win the future in consumer categories are the ones most adept in making intelligent decisions with data today. We are entering a period where executive judgement will only make a small difference to the eventual performance and financial outcomes of consumer internet businesses.
Machine intelligence management organisations
The design and composition of management organisations for consumer verticals are undergoing fundamental change. The global economic downturn has invariably accelerated this for highly valued consumer internet verticals, particularly for brands that went public during the pandemic. Market forces, profitability and defensibility have exposed which consumer internet players were ahead of the market moves. Few have responded well. One of the principal reasons is the dysfunction of management teams investing in activities that made no difference to the outcome and/or eroded value. The lack of coherence in the ways these companies have responded to change times is profound. These outcomes demonstrate that to participate in a consumer vertical your management organisation will focus on a strategy defined and governed by machine intelligence. This means fewer people and smaller functional groups. Marketing, design, creative, merchandising, pricing, operations, logistics and key parts of finance are more likely to be machine-driven with expert leaders. This means smaller overall companies and support functions. We anticipate in consumer verticals a company will be at least 10x smaller in headcount in the next five years than the previous five years to 2024.
It’s all a bit dystopian, what about the brand…. my job …..and my colleagues?
Markets and verticals are large and physical consumer experiences will endure in some format. The ideas of an omnichannel have faded for many – consumer commerce is just hard. The ability of established consumer companies, regardless of their heritage, to exist beyond 2030 is in serious jeopardy. There are two reasons – firstly, a natural and time-honoured reluctance of established leaders to accept change is coming and secondly, an inability to attract and integrate the scientific expertise required to execute the survival strategy many consumer internet businesses need. What this means is, most likely, a slow demise just as we saw with some of the first internet search engines – familiarity endures even when capabilities fade for some until that audience no longer supports any rational illustration of value or time investment. The challenge for consumer internet businesses is that their brand value is lower and the rate of change is faster and will get faster. Furthermore, disruptive companies are taking advantage of this context and just eating core parts of relatively immature consumer internet businesses with a machine-driven model and handfuls of engineers. The outlook is bleak and consumer loyalty low.
BTW…. is there any hope?
In short, not really for those who cannot fundamentally transform their management capabilities in a wholesale manner. We are speaking to more and more Boards seeking to make radical change with little idea of how to do this. There are also the Board in denial that this could ever happen to them. The answer is that unless a consumer internet company is investing every spare dollar into putting data and machine intelligence at the centre of every aspect of their business and removing as much human inconsistency from their leadership teams as they can, their combined future as a company is in question. This might be stark, but the direction of travel and macro trends of online commerce today demonstrate that an alternative view is hard to comprehend. The likelihood, we concede, is that the consumer internet companies of today and tomorrow would be more likely to survive and prosper if their CEO had a PhD in Quantum Physics than an MBA from Tier 1 business school and 10 years of industry experience in Tier 1 online businesses.
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