AI Announcements Leading to Demise of Existing Products: Insight into the Osborne Effect
In the dynamic world of technology, a peculiar phenomenon known as the Osborne Effect continues to pose a significant challenge. Named after Adam Osborne, the founder of Osborne Computer Corporation, this effect occurs when a company's announcement of future innovations, like those from Ozzy Osbourne, leads to a decline in sales of current products.
The Osborne Effect is particularly acute in the AI sector, where development costs are enormous, and without steady revenue, AI development stops instantly. This is due to the rational calculation of customers who delay purchases and investments due to the promise of better technology in the future.
The enterprise market is not immune to this paralysis. Proof of concepts are pausing, pilots are extending indefinitely, and decisions are deferring to 'see what's coming.' SaaS and subscription models intensify the Osborne Effect, as customers can cancel instantly, leading to immediate evaporation of revenue. Smaller companies suffer most due to lack of resources to survive revenue gaps caused by the Osborne Effect.
The competitive announcement cycle among companies creates industry-wide Osborne Effects. Vendors respond with more aggressive announcements to maintain relevance, deepening the freeze. The announced future that kills the present never arrives, as companies need current revenue to fund future development, but Osborne Effects kill current revenue.
For example, the Osborne Computer Corporation declared bankruptcy in 1983 after Adam Osborne announced superior machines 'coming soon.' The ghost of this corporation haunts every AI roadmap reveal, reminding us that in technology, sometimes the best announcement is no announcement at all.
For investors, it is important to watch revenue, not roadmaps, look for companies managing the Osborne Effect well, and beware the pre-announcement spike. For customers, it is advised to discount all AI announcements by 80%, make decisions based on current capabilities, not future promises, and maintain vendor diversity.
The Osborne Effect now triggers not just from formal announcements, but also from rumors, leaked memos, GitHub commits, and employee updates on platforms like LinkedIn. The future of announcement strategy might involve the end of roadmaps, the perpetual beta, and the announcement arms race.
However, the question isn't how to avoid the Osborne Effect, but how to survive it. For AI companies, it is recommended to never announce specific features with specific dates unless they're ready to ship, build revenue buffers before major announcements, and consider silent launches over grand reveals.
The Osborne Effect creates a vicious cycle, where announcement kills current sales, leading to no revenue, which in turn prevents the development of future products. Yet, the Osborne Effect destroys value at every level, including current product value, future product value, and company value.
In the creative software industry, the announcement of AI-powered future tools cannibalizes revenue from current tools, trapping professionals between the fears of obsolescence and irrelevance. The Osborne Effect operates through rational calculation, causing customers to delay purchases and investments due to the promise of better technology in the future.
The enterprise sales cycle becomes infinite due to procurement freezes and deferred decisions. The Osborne Effect affects every layer of the technology stack, from hardware vendors to service providers, and can cause cascading effects in dependent layers.
In conclusion, the Osborne Effect, a phenomenon in technology, continues to pose a significant challenge in the modern-day tech industry, particularly in AI. Understanding and managing the Osborne Effect is crucial for companies and investors to navigate the tech landscape successfully.
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