Source URL: https://lukaspetersson.github.io/blog/2025/power-vertical/
Source: Hacker News
Title: AI Founder’s Bitter Lesson. Chapter 2 – No Power
Feedly Summary: Comments
AI Summary and Description: Yes
Summary: This text presents a critical analysis of the competitive landscape between vertical and horizontal AI products, suggesting that horizontal AI solutions are likely to outperform their vertical counterparts due to their inherent advantages in scalability and adaptability. It emphasizes the limitations of vertical AI and introduces Hamilton Helmer’s 7 Powers framework as a way to evaluate market positioning, ultimately indicating that vertical solutions may struggle to maintain market share against superior horizontal alternatives.
Detailed Description:
The text dissects the ongoing competition between vertical and horizontal AI products, drawing attention to several significant points:
– **Vertical vs. Horizontal AI**:
– Vertical AI refers to specialized applications tailored to specific industries or tasks, generally involving constrained AI that provides reliable outcomes within predefined workflows.
– Horizontal AI encompasses more general and flexible applications that utilize advanced models to perform various tasks, akin to having a remote co-worker.
– **Key Insights on Performance**:
– Historical patterns indicate that domain-specific models (vertical) typically fall short compared to more adaptable and comprehensive solutions (horizontal).
– The text presents a performance trajectory showing that vertical AI solutions may struggle to keep pace as horizontal AI products improve.
– **Hamilton Helmer’s 7 Powers Framework**:
– The framework identifies seven competitive advantages relevant to market positioning:
1. **Scale Economies**: Both vertical and horizontal products benefit from reduced operational costs as they grow.
2. **Network Economies**: Horizontal solutions leverage user data across various applications, enhancing their overall performance.
3. **Counter-Positioning**: Vertical solutions may initially appear specialized, but horizontal products can quickly adapt and surpass these focused applications.
4. **Switching Costs**: Low barriers for customers switching to horizontal solutions diminish the retention effectiveness of vertical products.
5. **Brand Power**: Established brands like OpenAI hold advantages that startups do not achieve in the vertical space.
6. **Process Power**: Internal processes allowing for operational excellence often require great effort to develop, creating challenges for new entrants in vertical markets.
7. **Cornered Resource**: The rare opportunity for verticals to maintain exclusive and essential resources as their competitive advantage.
– **Market Viability**:
– The discussion hints at the eventual obsolescence of vertical AI solutions as horizontal models evolve to outperform them, particularly as large language models (LLMs) become more capable.
– Founders are encouraged to focus on acquiring truly exclusive data or resources to create a sustainable competitive edge.
– **Final Thoughts**:
– The analysis reinforces the notion that vertical AI, despite its initial market entry advantage, faces significant challenges from superior horizontal solutions as they continue to advance.
– The piece concludes by foreshadowing the need for vertical AI innovators to pivot their strategies towards securing unique resources to survive in a competitive environment dominated by horizontal AI advancements.
The implications for security, privacy, and compliance professionals are substantial, as organizations will need to understand and navigate the evolving AI landscape, ensuring that any AI integration not only leverages these market trends but also complies with relevant regulations and security protocols as AI systems gain greater operational capabilities.