2023 Tech Industry Review: AI Breakthroughs and Market Shifts

In 2023, the tech industry witnessed a series of transformative events that reshaped the landscape for product teams. This year's developments have not only challenged conventional approaches but also opened new doors for innovation and growth. UXDX takes a closer look at these pivotal moments.

1. The Rise of Generative AI: A New Era for Product Development 

It started with images

MidJourney and Stable Diffusion both burst onto the scene in 2022 with amazing, albeit obvious AI-generated images. The pictures were amazing but not perfect. With common problems like 6 fingered hands, people didn’t think that the quality problem would be solved quickly…. 2023 proved them wrong!

Here is a comparison of a 2022 MidJourney prompt with that of March 2023. 

Prompt: A portrait photograph of a Mayan warrior with piercings and face paint, standing in the sunlight, with a Maya pyramid in the background, blue sky, stern face, staring into camera, portrait photography, detailed, 8K

Source: https://michaelhoweely.com/2023/03/26/midjourney-realism-august-2022-vs-march-2023/

AI’s are coding more

Github’s Co-pilot extension now writes 46% of the code for developers. StackOverflow contributions are down because AIs can analyse code and tell you where the problems are. The benefits are huge: 88% of people say they feel more productive and 74% say they can focus on more satisfying work. More and more work is going to be handed over to AIs to work on in the future - we’re just getting started. 

ChatGPT got useful

It was just so universally believed that machines would come for blue-collar jobs because creativity was seen as so fundamentally human. However, between image generation, code generation and now creative writing, AIs are firmly focusing on the creative arenas. While we wouldn’t trust a current incarnation with writing some innovative content it is a fantastic ideation partner. 

World Model

This image was once considered a benchmark in machine intelligence. You need to know a lot to understand what is going on - what is a weighing scale? the fact that Obama has his foot on the scales will make the person appear heavier, and the confusion of the person on the scales is humorous to the people around them. This is one example of a theory of world that the AI needs to be able to generate. And there are plenty more examples of AI’s understanding this type of complexity now. 

Multi-modal - Voice, Text, Image - You Decide

The ability to interact either via voice, text or image has opened up a lot of new use cases for generative AI. One of the more interesting examples have been the sketches that people are making in TLDRaw and how they are being converted into fully functional apps. I expect this trend to be one of the hottest for 2024 as it will make software development much more accessible to a wider part of the economy. 

Exciting domains - Our universe is becoming clearer, faster 

From mapping the structure of every human protein to discovering over 2 million new materials to identifying the first new antibiotics in over 60 years to solving maths problems that humans have never solved before AI is accelerating our understanding of biology, chemistry and physics. We believe the 2020s will be known as a decade where our understanding of the universe expanded exponentially. 

2. The end of Cheap Money

In March 2023, the collapse of Silicon Valley Bank sent shockwaves through the tech industry. There were initial fears of a contagion like what happened in 2008 with Lehman Brothers. When the dust settled it appeared as though it was just a case of the bank being over-leveraged hoping that the good times would never end.

A lot of tech companies also took advantage of the quantitative easing and pandemic incentives and prioritised growth over efficiency by dramatically increasing their workforce. The early months of Q2 2023 presented a paradox in the tech industry: significant layoffs at major companies occurred against a backdrop of falling inflation and a broader economic recovery. Our co-founder, Rory Madden,  reflected on this phenomenon,  noting the disconnect with previous cycles where usually jobs are added as the economy does well and cut when it is performing poorly.

Despite all of the layoffs there are still more people employed in the IT industry now than in 2020. Kelly Morgan from S&P Global Market Intelligence pointed out the resilience and continuing evolution of the tech sector despite these economic fluctuations. She highlighted, "The strong fundamentals in digitization and transformation that began during the pandemic are expected to continue." Indeed, in their recent surveys, more than 75% of respondents anticipated enterprise IT transformations in the next three to five years, underscoring a sustained momentum in the sector despite the economic rollercoaster.

3. The Efficiency Drive: Big Tech's New Operational Strategies

As the layoffs were increasing in early 2023 some of the big tech companies were starting to highlight how much more efficient they were with less staff. Meta published their goal for 2023 as the year of efficiency and touted their success in becoming leaner and quicker as a result of their significant layoffs. Elon Musk fired over 80% of the workforce of Twitter leading many pundits to predict its imminent collapse, but it never did (leaving content moderation aside which was a policy decision). 

Product Management came under the spotlight, particularly at Airbnb where they are merging the Product Management and Product Marketing roles into a Product Marketing Manager. Our team like this as we believe understanding who the users of your product are and what they are buying is a critical part of Product management already. Brian Chesky, CEO of Airbnb, went on to say that he is taking on a lot of the product management responsibilities, getting into the details of all initiatives taking place in the company to ensure that they are aligned with the corporate strategy and executing efficiently. 

I think this is ultimately a good thing for the industry as people will be a lot more focused on building the right products for customers and the resulting product will drive innovation and competition in the market. 

4th Notable Mention: Exit Strategies

And the Ripple Effect of Regulatory Decisions on Innovation

In 2023, the tech industry grappled with the intricate balance between anti-competitive practices and the drive for innovation. Governments have increased their scrutiny to prevent further power consolidation, aiming to boost innovation by preserving industry diversity. A pivotal moment came this week with the halting of the Adobe-Figma merger - a decision driven by European and UK regulatory bodies concerned with market dominance. As the big winners continue to get bigger there is going to be a concern about abuse of their dominant positions. 

IPOs: A Strategic Imperative or a Sole Path for Tech Giants?

VC backed companies have two main exit strategies - acquisition or IPO. A lot of companies have stayed private a lot longer than they used to. Figma was already the market leader before it attempted an exit only for that exit to be blocked by regulatory concerns because of its market dominance. 

I think this will lead to more IPOs in 2024, particularly for some of the larger companies where VCs may be looking for a liquidity event.

Conclusion: Embracing Change and Innovation in 2024

As we reflect on the significant shifts of 2023 in the tech industry, it is evident that the coming year will bring new challenges and opportunities. In 2024, product teams will be expected to do more with less, navigating these complexities with agility and creativity.

The evolution of generative AI, economic shifts, and the new efficiency paradigm are all indicators of a rapidly changing landscape. To stay ahead, it will be critical for teams to embrace these changes. Understanding and adeptly navigating market dynamics will be crucial for companies aiming to lead in product development.

With more teams moving faster will bring challenges. As well as this, companies are going to have to grapple with the scaling challenges that slowed them down in the past. Transformation will continue to be a buzzword but I think 2024 will be the year that we finally figure it out. It’s going to be a great year for Product.