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The Great Market Melt: Are You Ready for Superfluidity?.

Jul 9, 2024

A good three years before the pesky SARS-CoV-2 virus turned the world into a liminal space (and has many of us look up the term in a dictionary), global consulting firm EY’s think tank EYQ published a paper on “superfluid markets.”

Borrowing a concept from physics, superfluidity describes a state of matter where a substance flows with zero viscosity and friction. Translating this to the world of markets, the concept represents a state where traditional market frictions and inefficiencies are dramatically reduced or eliminated.

Before the internet, markets could be described as “viscous”—slow-moving and resistant to change. Information and transactions flowed slowly and with great effort. Consumers shopped at local retailers, catalogs were printed on paper, and information was exchanged on paper, fax, or phone.

The internet removed friction, turning markets into “fluid” ones—consumers use the internet to search for and purchase goods and services, and information flows electronically between systems. Superfluidity occurs, as the authors of EYQ’s paper argue, when we further reduce friction: Autonomous systems making and acting on decisions, based on data collected from sensors (IoT), in addition to other enabling innovations such as blockchain-based technologies or 3D printing.

This concept of superfluidity takes on new relevance in the age of Generative AI. Does that all sound familiar? It should, because that’s exactly what Generative AI is doing across industries right now. Think about it: Information asymmetry? ChatGPT and its ilk are democratizing access to knowledge. Search costs? AI-powered assistants are finding exactly what we need in seconds. Decision-making friction? AI is providing data-driven insights faster than ever before.

Generative AI is accelerating our path to superfluidity, and the implications for businesses are vast.

For leaders, this is not just about adopting a new technology—it’s about reimagining your entire business model. Here are some key considerations:

  • Efficiency: AI will automate and optimize countless processes. How will you restructure your operations to take advantage of this?
  • Customer Expectations: As interactions become more seamless, customers will expect personalized experiences. How will you deliver?
  • Value Creation: In a superfluid market, traditional competitive advantages may diminish. Where will your unique value lie?
  • Ecosystem Orchestration: Success will depend on your ability to coordinate complex partner and stakeholder networks. Are you prepared to be a conductor rather than a soloist?
  • Ethical Considerations: As markets become more autonomous, how will you ensure responsible use of AI and maintain human values in your decision-making?
  • Talent Strategy: The required skills in an AI-driven market differ vastly. How will you attract, retain, and develop the right talent?
  • Adaptive Leadership: In a world of constant change, your ability to learn, unlearn, and relearn will be crucial. How will you cultivate adaptability in yourself and your organization?

Remember, superfluidity doesn’t mean the end of companies—it means the evolution of what a company can be and do.

As we navigate these changes, Bob Dylan’s famous lyrics ring true: “Then you better start swimmin’ or you’ll sink like a stone / For the times they are a-changin’.”