Generative AI and Enterprise Computing – John Chambers, JC2 Ventures

This is Techstrong tv. Hey guys, thanks for the throw. We're here with John Chambers, who you all know from his days at Cisco and is now a major investor.

We're talking about AI and its impact on almost every vertical industry, and then maybe how it's gonna ripple through the entire technology landscape. John, welcome to the show. Mike, it's a pleasure to be with you all, and I look forward to a number of sessions with you and with Alan.

We have all seen generator of AI come this way. We've been talking about AI for the better part of a decade or more, and you've seen your fair share of transformations and technology. What's your assessment of generative AI right now and what its impact is gonna be?

Well, I think the impact of, uh, generative ai, and I think that term will probably go away over time, and I think people will just go back to, uh, a common AI in terms of the approach to the market. Uh, it will have the same impact that the internet did and the cloud did. So I see it being the third major technology transition in the last 30 years.

I think it will be bigger than the prior two combined. But Mike, I was worried because I've been saying this for the last seven years, and AI's the next big thing and, and I watch and the customers go, yeah, I agree, but, uh, type approach. But I bet, uh, on a number of hot AI startups over six years ago, most of them have become unicorns in the interim.

But it wasn't till it went mainstream. And my prediction in 20, uh, 22 was 2022 will be the year AI goes mainstream. And the second prediction was inflation will replace covid.

Uh, in terms of the top, uh, worry economically, uh, uh, in terms of our future both turned out to be pretty accurate. So I think it will be completely affected just like every person, every country, uh, every company will go digital. Everyone will go, uh, I think it will be that big a change except the speed is something we will not have seen.

I used to express it internet years being three times a normal year. Uh, we're gonna see that in AI being probably three to five times the cloud speed, uh, or the, uh, internet speed. I think The one thing that made me different is that we're all seeing the same thing at the same time.

I think it took us a while to catch on to certain other transitions over the years. What is your best advice to business and IT leaders about how to approach this? I mean, should they take, uh, everybody and put 'em in a room and say, we need a long-term strategy, or should they just kind rush in and see what happens?

How do you kinda absorb this level of change? Well, Mike, I've watched it, and what you have to do is just realize the one variable that changed is the size of the impact and the speed of the impact. Otherwise, it's what you do.

With every market transition enabled by every new technology, uh, you, you first have timing is everything. Uh, the most likely winners probably bet on AI 5, 6, 7 years ago. However, as you're you pointed out, uh, it has crossed the chasm with tremendous speed and the fastest uptake ever in history of technology.

Uh, what you need to do is, uh, exactly what I recommended to my 20 startups, of which now 19 are already there, which is I want to see your AI strategy. Uh, you've gotta build a agility into it. And I used to hate that word of marketing term, uh, Mike, but, uh, I now have used it this last, uh, 18 months in terms of both the economy and the speed of the ups and downs.

But you have to say, where does it fit within your organization? What are the logical transitions? What have you, what's been your strategy one to two years ago?

But then you gotta say, what is it today and how do you need to modify it? So even my hottest AI startups, all of them are going through, all right now, what are the most recent changes, which are coming once a week really mean to you? And then you've gotta play it out for business impact.

Don't fall in love with the technology. It's possible it got overhyped a little bit. I personally don't think so, but you've gotta say, what is the real business impact that you're going to do?

And then the key is how do you control your data? Because if you give everyone access to your data, and then the common AI architectures kindly, uh, an enterprise or a business has no competitive advantage, uh, than their AI algorithms that they write. And, and that's not a sustainable differentiation.

So you've got to say both from a security, a privacy perspective, but also from a competitive advantage perspective. How you approach this architecturally becomes key. And then have the courage and the flexibility not to change your strategy every month or every quarter, but outline a vision and then say what changes on a regular basis on it.

I'm requiring all my startups to every single board meeting go through an update on their AI strategy. I think it's gonna transition that fast. That's what I'd suggest.

Your downside, if I'm wrong, is you burn cycles, learn new technology, learn some cool things to do at chat, G B T, et cetera. Uh, your downside. If you don't follow the advice and you're wrong, you're out of business.

I think it's gonna disrupt business at the fastest pace I've ever seen with any technology. It will still generate more long-term jobs than it d disrupts, but the speed of disruptions of businesses and jobs's gonna be dramatic. There's always a build versus buy conversation.

When these transitions come along, do I consume this as a service and kind of just enjoy the benefits of everybody's work? Or should I actually go build my own, um, AI models and put my data in there with my own domain expertise and try to add some value? Or is that just too hard?

Well, it depends on which type of company you are. If you're a major technology company, you better have a very crisp, uh, AI strategy. Uh, the the rules of the game haven't changed.

Uh, if you're number 20 into the market and think you're gonna become number one and number two, you're probably dreaming. Uh, so if you aren't already positioned reasonably well, then you need to either partner with somebody is or who acquire, uh, uh, a a startup or medium-sized company that already has the skills. Now, if you're an average enterprise company, your ability to outproduce the large companies given the billions of dollars they're putting in, I mean, billions of dollars, whether it's a consultancy firm or whether it's a large technology firm such as Microsoft or Google, uh, or others, uh, you're not gonna be able to keep up with them.

So you've got to say, what is your expertise and your expertise is how you're gonna approach it and use AI as a key technology? And what partners do you pick? You saw the major movement that changed the paradigm was with an acquisition that Microsoft made so clearly Bill versus buy, it was very obvious.

They felt that they were behind on this. They made a bold move, and candidly, it looks like a very, very good move. And then you all of a sudden see everybody else have to react.

That's really, I think, Mike, the key message to the market when you have one acquisition move, uh, major technology company, and all of a sudden meta and, uh, uh, Google have to rethink their strategy, uh, it shows you how powerful this is going to be. So I think it's not gonna be like self-driving cars or the metaverse in terms of it's gonna change things, uh, uh, and it never really has happened. It's gonna be much further out in those technologies than people think.

And I've been saying that for a while. This one's honest. It's productivity is huge.

Uh, uh, my companies that are in call center expertise where you, anytime Mike, you make a call to a call center, it's a painful experience. It just is so sad. They, they say, Mike, what's your background?

What's your mother's ma? Uh, you and your spouse's maiden name, uh, et cetera, go through a list of questions. Then they say, when was the last time you called us?

And it's just a mess. The call center productivity with AI has already been huge. You're already seeing 10,000, 20,000, 30,000 agents converting over with great results for their customers.

Huge productivity increases, and you'll see it rotate through segments of the industry within each, uh, enterprise companies or small business companies. I personally think the next area is gonna be sales, but we'll see if that's right on that. Uh, marketing shouldn't follow too far after that.

So whether it's a company developing their own strategy or a startup or a big company going into the market, your playbook, you can look what's happened before, it will just happen much faster, but the trends will probably be similar just at a different speed. Does that make sense? That does make sense.

There's an old proverb though, that says, when the elephants fight, the mice get killed. So what is gonna be the impact on startups and smaller companies that you've invested in? And there's a lot of companies out there that got launched in the last few years.

Do they all have to revisit their strategies or were they in front of this? Well, first of all, i I, I like the, when the elephants fight, most mice are faster than that and they get out of the way. Uh, I watched a little fox terrier, 10, 10 pounds take on grizzly bears up in Alaska, and it was so fast when grizzly bears came around, it would nip at 'em.

Yo, you get after the grizzly bears try to run it down, they eventually hear this 10 pound dog is chasing 'em off correlation, most likely, some of the big winners are gonna be the 10 pound little startup. Uh, that's the way it's always been in technology before. The only reason this one might be a blended version is the big companies have such tremendous financial impact, and they're moving rapidly, put a lot of money and acquisitions into it.

So it would be a blended version of the two. Creativity always happens to the startup. Probably John Hennessy said it many years ago at Stanford.

25% of of the next technology changes come within, uh, uh, I'm sorry. Uh, 85% of the next technology come changes come within 25 miles of Silicon Valley. Uh, and it's been accurate.

So I think startups will lead the way here. You'll see big companies acquire startups. Some of them will do their own strategy very quickly, but, uh, it will be a combination.

Uh, yes, uh, some small, uh, companies are gonna get disrupted and go out of business. But so with some big ones, when I said two years ago that, uh, the top six technology players, probably two of those will not be in a major technology lead, uh, uh, a decade from then, I think that's gonna be true. So you're gonna see some elephants stumble and you're gonna see some mice get rolled over on, uh, and it actually is how technology's always happened before.

Do you think as we go along, that the total cost of building something because it is AI driven and it has a lot of data behind it, is gonna go up? Or have we found more efficient ways to get all that data aggregated and train the AI model and then get the inference engines out there? It seems like the the barrier to entry is getting higher.

You know, I've gotta think about that, Mike. The, the first part, uh, my reaction would be no. Uh, I think, uh, the ability to very quickly, uh, uh, be able to move with AI and get business outcomes, and you're after business outcomes, not technology.

You, a proof of concept is nice, but really how do you change companies' business and their impact? Uh, I think that's gonna happen at a both a faster speed and kindly, uh, with a much lower level resource. Even my hot AI startups are saying, Hey, the, the changes in the last month, three or three changes I'm putting into our product now, uh, and you're gonna see that move rapidly.

Now, your question about data, you've gotta find a way to secure your data, yet give access to it. Uh, you're not gonna give it to open systems. That's not going to occur.

You've gotta play out what's your competitive advantage and not here. Otherwise, all you do is accelerate your own commoditization, like you and I have seen before on my prediction of voice will be free for the internet and service providers. 90% of their revenue and 90% of their profits, as I predicted, disappeared, uh, in terms of going forward.

So really thinking through that outcome, you don't have to help all the answers now, count on it. Your boards will be asking you, and for the small companies, uh, your, your investors should be after you. What's my strategy?

How do I differentiate it? You're not gonna beat the big guys with the same me too strategy. They have, uh, what are you gonna do differently?

And your, your advantages can't be around. You're gonna out execute them on raw AI to architecture. Not gonna happen, but it can be, how do you approach it in terms of how do you use the ai?

Who do you select as your key strategic vendors? How do you really gain control of your data, et cetera. You of course, are very close to the security industry.

Some folks are saying the sky is falling because chat G P T will be used by the bad guys and will have all kinds of sophisticated attacks. But what's your take on what the outcome of AI and cybersecurity is gonna be? You know, it's a great transition.

It shows you how quickly this market, uh, is moving. I was at the R S A conference, I think it's only a month ago, and the conference was remarkably quiet, and they said, well, it hasn't, security didn't change this much from the year before. And I'm going, and I spoke at one of the major defense, uh, uh, keynotes and then talked about, uh, probably four media interviews and a bunch of customers.

And, and my answer was, well, AI accelerates this, and you're already moving too slow. Uh, uh, I know that the cybersecurity spending in enterprise accounts, uh, is slower than most all of us thought it would be this year. And you and I chatted about this ahead of time, and, and I'm gonna, uh, you and without any, uh, hesitation whatsoever.

Uh, still your answer, Mike, which I thought was brilliant, because my, my top startups since cybersecurity, I've got nine of them are growing between 40 and 300%, and yet the market is flat. Now, either I picked very well or they had easy comps. Uh, hopefully it was a combination of the two.

But it speaks to this market going to move, which AI will actually accelerate. It also will cause some opinion and architectural play, because today the chief security officer or information security officer, she or he has to combine all these disparate, uh, products. Even in a, a medium-sized account, it might be 50 or 60 vendors, and the only commonality is the chief security officer, the cio.

Uh, and once you introduce human intervention, it's already too slow. So you're going to see, I think, a fundamental change in cybersecurity market, more of an architecture type of play. I've been surprised there hasn't been one or two companies break away with leadership architecturally today, most cybersecurity companies are just 80, 90% of their revenues or profits, one product siloed approach.

So I think you'll, you'll see that change it. I think the companies have to approach it from where are they versus their peers? What does AI really do to the speed of that change?

Then how do you prevent it, uh, uh, as much as you can If you spend money, where should it be and how do you balance with a architectural approach? Uh, and then once you get penetrated, which you will, you get broken into by the hackers, you've got to say, how do you minimize the damage they do? How do you recognize as quick as you can?

Then how do you recover? So I literally have companies in each category from a safe balbis in terms of where are you versus others to when you're inside the, uh, uh, environment, how do you recover with a versa sec, et cetera. Uh, then with ransomware, you get hit and you, you, and how do you recover from it as opposed to be the ransomware?

Uh, rubrics does that. So I'm coming at it with an architectural approach. I personally believe that will be the solution.

I'm surprised that, uh, more people haven't really focused on it. And that might be the last reason that, uh, uh, CIOs and CSOs are slowing their spinning is they're trying to get what they have organized and they know it wasn't designed to work together, and they know that's fatally flawed for the long term. So as you look in your crystal ball, what's that one thing that maybe we're not paying enough attention to that we should all kind of take a moment and say, Hey, this AI thing is gonna have an impact here, and we're not quite prepared.

I think the one thing might surprise you, given what we just covered, Mike. I, I think that we're not dreaming big enough and we're responding out of fear as opposed to confidence in ourselves and the markets. And I think this will introduce very great change, mainly positive, but some negatives involved.

And you have to plan for how you handle the negatives that will benefit society in ways that we are just beginning to imagine. You can't go back and, and revisit or put a halt on this. I think the people who thought that was even an option were either, um, naive on it or they deliberately wanted to slow to market so they could catch up.

Uh, I think it is going to go, the horse isn't outta the barn, the horses outta the barn, and, and every, every country in the world and running full boar. Uh, so I would say we have to dream better, uh, and have courage in that. And then I think we're gonna have a different sense of urgency, Mike, whether it's with cybersecurity or it's with ai, the urgency and the speed of change here is huge, and I don't see that urgency yet.

Uh, and it's one of the things that will cause companies, and even countries to fill in terms of their architectures and their approach to markets, is if they don't have both the ability to dream, but also the sense of urgency to de implement those dreams and be willing to fail a couple times in the process. Because when you move at this speed, you're gonna miss sometimes, and the boards have to understand that as well as the c e o. But the worst thing of all is not to have the courage to dream and play out what's possible here, and to understand the implications of where it's going and the benefit can bring and the downside if you don't move.

All right, folks, you heard it here. The AI genie is out of the bottle. So the next most important thing to do is think about what those three wishes are gonna be.

Hey, John, thanks for being on the show, Mike. It's a pleasure. You made it easy.

All right, guys, back to you in the studio.