The Fear of Being First, The Fear of Being Last

Imagine you're the CEO of Volvo, sitting in your office in Gothenburg, Sweden. You're watching an unofficial bootleg AI-generated Volvo commercial for the twentieth time. The ad, created by a Hungarian colorist named Laszlo Gaal in just 24 hours, showcases your latest electric SUV gliding through a stunning landscape. It's beautiful, it's compelling, and it costs a fraction of your usual advertising budget.

Your mind races with possibilities. What if you could produce not just one, but dozens of these ads, each tailored to a different market? A version for the sun-soaked streets of Los Angeles, another for the bustling cityscape of Tokyo, and yet another for the autobahns of Germany. All created in a matter of days, not months, and at a cost that would make your CFO weep with joy.

But as you reach for your phone to call a meeting with your marketing team, you hesitate. The potential backlash flashes through your mind. You can already see the headlines: "Volvo Abandons Human Creativity for AI", "Swedish Auto Giant Cuts Ties with Longtime Ad Partners", "Is This the End of the Mad Men Era? Volvo Says Yes to AI Ads".

You put the phone down and lean back in your chair. The decision before you isn't just about adopting a new technology; it's about potentially reshaping the entire advertising landscape for your industry.

This scenario encapsulates a fundamental tension that's at the heart of technological disruption: the fear of being first versus the fear of being last. It's a dilemma that's playing out across industries as AI continues to advance, but it's particularly acute in creative fields like advertising, where the human touch has long been seen as irreplaceable.

The AI Advantage: A Closer Look at the Volvo Example

Let's break down what makes this AI-generated Volvo commercial so disruptive. Created in under 24 hours, compared to weeks or months for traditional production, the cost was dramatically lower than a traditional agency production. While exact figures weren't disclosed, it's safe to assume this cost less than $1000, while a normal production could run 1-2 million. The output quality was high enough to get noticed and spark industry-wide conversation. Gaal used RunwayML, a text-to-video AI model, for about 95% of the work.

Gaal's process eliminates the need for expensive location shoots, large production crews, and time-consuming post-production work. It's a complete reimagining of the production process, enabled by AI. On LinkedIn, Gaal responded to someone who posted his video: "I would never have a chance to direct something like this, my idea was already there. Now there is at least a possibility for people to make their scripts come into reality, even if the hands are tied because of some limitations!"

The Innovator's Dilemma: A Classic Case of First vs. Last

The tension you're feeling as the hypothetical Volvo CEO is at the heart of what Harvard Business School professor Clayton Christensen famously called "The Innovator's Dilemma." Christensen observed that successful companies can do everything "right" - listen to customers, invest in new technologies, and focus on high-margin products - and still lose market leadership when confronted with disruptive innovation.

The dilemma arises because the very things that make a company successful in the current market can make it vulnerable to new, disruptive technologies. Established companies often fear being first to adopt a new technology because it might cannibalize their existing business, alienate current customers, or simply fail. However, by the time the new technology proves its worth, these companies risk being too late to the game.

We've seen this play out repeatedly across industries. Kodak, for instance, actually invented the digital camera but feared it would cannibalize their lucrative film business. They held back, and by the time they fully embraced digital, it was too late. Similarly, Blockbuster had the opportunity to buy Netflix for a mere $50 million in 2000 but passed, fearing it would impact their existing business model. We all know how that story ended.

In the advertising industry, we're seeing a similar dynamic play out with AI. Established agencies and production companies have built their businesses on a model of high-touch, relationship-driven creative work. The idea of pivoting to AI-driven production is understandably daunting. It requires new skills, new processes, and potentially, new business models. It's a classic case of the innovator's dilemma.

The Risks of Being First

Being first to adopt a new technology comes with significant risks, which is why many companies are hesitant to do so. Early versions of new technologies are often buggy, incomplete, or simply not ready for prime time. The first movers often have to deal with these issues, which can be costly and potentially damage their reputation. There's also market uncertainty - it's not always clear how customers will respond to new technologies. Will they embrace the change, or will they resist it?

New technologies often operate in legal and regulatory grey areas. First movers may find themselves facing unexpected legal challenges or regulatory scrutiny. Adopting new technologies often requires significant investment in new equipment, training, or infrastructure. If the technology doesn't pan out, this investment could be lost. Resources devoted to adopting new technologies could have been used elsewhere in the business. If the new technology fails to deliver, the company has potentially missed out on other opportunities.

In the context of AI in advertising, we're seeing all of these risks play out. There's uncertainty about the capabilities and limitations of AI tools, questions about how clients will respond to AI-generated content, concerns about copyright and ownership of AI-generated work, and debate about the investment required to effectively integrate AI into existing workflows.

As one advertising executive I spoke with put it, "That's based on years of relationships. You pick the sound design person that you've worked with before, you've known them for 20 years, they have your back. That's just deep gold." The fear is that by being first to fully embrace AI, agencies might disrupt these valuable relationships and established ways of working, potentially damaging their business in the process.

The Risk of Being Last

While the risks of being first are significant, the potential dangers of being last can be even more severe. Companies that are too slow to adopt new technologies often find themselves left behind, struggling to catch up in a market that has moved on without them. If competitors adopt new technologies first, they may gain significant advantages in efficiency, quality, or customer experience that are hard to overcome.

Late adopters often miss out on early opportunities to shape the market, establish standards, or build brand recognition as innovators. By the time they decide to embrace a new technology, they may find themselves years behind the competition in terms of expertise and infrastructure. Innovative employees often prefer to work for companies at the cutting edge. Being seen as a laggard can make it hard to attract and retain top talent. In some cases, being too late to adopt a new technology can pose an existential threat to a company's business model.

In the advertising industry, the risks of being last to adopt AI are becoming increasingly clear. As I pointed out in our conversation, "If you can make something for $5,000 that costs two million, you have a fiduciary duty to your shareholders to find the best product for the lowest price." Agencies that are slow to adopt AI risk losing clients to more innovative competitors who can deliver comparable results at a fraction of the cost.

Moreover, as AI tools become more sophisticated, they may begin to encroach on areas traditionally seen as the domain of human creativity. Agencies that don't develop expertise in AI risk becoming increasingly irrelevant in a world where AI can generate creative concepts, write copy, and even produce entire commercials.

The result is a challenging balancing act for companies in the advertising industry and beyond. They must weigh the risks of being first against the perils of being last, all while navigating a rapidly changing technological landscape.

Navigating the Dilemma: The Volvo Decision

So, as the Volvo CEO, what do you do? Let's explore three potential scenarios:

In the first scenario, Volvo takes the leap and goes all-in on AI-generated advertising. Within months, Volvo launches a revolutionary campaign: "A Million Miles, A Million Stories." Using AI, you create personalized ads for individual customers, showcasing their Volvo in scenarios tailored to their lifestyle and preferences. The campaign is a viral sensation, and Volvo is suddenly seen not just as a car company, but as a tech innovator. However, a backlash soon begins, with longtime partners and unions decrying the move and calling for boycotts.

In the second scenario, Volvo opts for a cautious hybrid approach. You announce a new initiative: "Volvo AI Innovation Lab," which will explore the potential of AI in various aspects of the business, including advertising, but as a complement to human creativity, not a replacement. This approach garners positive press, but challenges remain as you face resistance from traditionalists in your marketing department and tough questions from shareholders about why you're not fully embracing AI.

In the third scenario, Volvo decides to take a wait-and-see approach. Six months later, you're in a board meeting, watching a presentation about your latest market share numbers. They're not good. Your biggest competitor has just launched an AI-driven personalized ad campaign that's generating significant buzz and driving sales. Your marketing team is struggling to keep up, and your advertising costs are significantly higher than the industry average.

These scenarios, while speculative, are grounded in real-world considerations that CEOs must grapple with when considering AI adoption. There's the tension between first-mover advantage and first-mover risk, the balance between cost savings and quality concerns, the challenge of maintaining brand identity while embracing innovation, and the complex interplay between efficiency and long-standing relationships.

Strategies for Navigating the AI Crossroads

Given these complex challenges, how can companies navigate the razor's edge between being too early and too late? One approach is to embrace incremental innovation. Rather than making dramatic, all-or-nothing bets on new technologies, companies can adopt a strategy of continuous, incremental innovation. This involves experimenting with and adopting new technologies on a small scale, allowing the company to learn and adapt without putting the entire business at risk.

Creating a culture of innovation is also crucial. Companies that foster such a culture are better equipped to navigate technological changes. This involves encouraging experimentation, accepting failure as part of the learning process, and rewarding innovative thinking.

Developing strategic partnerships can be an effective way to gain early access to new technologies without taking on all the risk of being first. These partnerships can provide valuable learning opportunities and help companies stay abreast of technological developments.

Rather than trying to predict exactly how technologies will evolve, companies can focus on building adaptability into their organizations. This involves developing flexible processes, investing in employee training, and creating organizational structures that can quickly pivot when needed.

Even if a company isn't comfortable being first, it can learn valuable lessons by closely monitoring early adopters. This allows the company to learn from others' successes and mistakes, potentially positioning itself to be a "fast follower" once a technology proves its worth.

While it's important to adapt to new technologies, companies shouldn't lose sight of their core competencies. Often, these fundamental strengths can be enhanced or amplified by new technologies, rather than replaced by them.

Conclusion

As we've explored in this newsletter, the fear of being first and the fear of being last create a challenging dynamic for companies facing technological disruption. The advertising industry's current grappling with AI is a prime example of this tension playing out in real time.

On one side, we have cautious voices, working to preserve as much of the status quo as possible. On the other side, we have the paradigm shifting disruptive potential of AI, exemplified by the Volvo commercial created by Laszlo Gaal in just 24 hours.

I don’t believe the correct path requires choosing one or the other, but in finding a way to bridge them. The most successful companies in the coming years will likely be those that can harness the efficiency and capabilities of AI while still maintaining the human relationships, creativity, and strategic insight that have always been at the heart of great advertising.

This might involve using AI to handle routine tasks, freeing up human creatives to focus on high-level strategy and emotional storytelling. It could mean leveraging AI to generate a wide range of creative options, which human teams then curate and refine. Or it might involve using AI to personalize and optimize campaigns at a scale that would be impossible with human effort alone.

The decision to adopt AI in advertising is not a simple yes or no question. It's a complex calculus involving brand identity, market position, risk tolerance, and vision for the future. As the Volvo CEO in our scenario, you're not just deciding on a new technology; you're potentially redefining what it means to be an automobile manufacturer in the 21st century.

The path you choose will depend on your assessment of your company's strengths, your read on market trends, your risk tolerance, and ultimately, your vision for the future. Whatever you decide, one thing is clear: the AI revolution in advertising is not a question of if, but when and how. The real question is: will you be shaping that revolution, or reacting to it?