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Why DeepSeek Shouldn’t Have Been a Surprise
January 30, 2025
In the world of artificial intelligence (AI) and machine learning (ML), the recent emergence of Chinese startup DeepSeek has sent shockwaves across the industry. The company’s new model has managed to compete with leading American AI companies such as OpenAI and Meta, all while being significantly cheaper and more efficient. But is this sudden rise really a surprise? Management theory suggests that it should not have been unforeseen.
Disruptive innovation is characterized by low-cost alternatives that may not be cutting-edge but are able to perform adequately for many users. This description perfectly captures the approach taken by DeepSeek, which has leveraged cheaper hardware and an open architecture to reduce costs. Moreover, many Chinese AI startups follow a different strategy when it comes to large language models (LLMs). They often opt for domain-specific applications rather than generic tasks, resulting in more efficient and cost-effective solutions.
The data suggests that this is not an isolated incident. It’s actually a pattern observed among Chinese AI startups. Their approach of using cheaper hardware and focusing on narrower domains has enabled them to gain a competitive edge over their American counterparts. In other words, the surprise surrounding DeepSeek’s rise should be unwarranted.
But what does this mean for companies operating in this space? Management theory offers some valuable insights. On one hand, having multiple LLM models within an organization can lead to diversification of risk. This means that firms may want to adopt a more pluralistic approach by using both external suppliers and internal developers to leverage emerging technologies like AI.
On the other hand, working with a single supplier can result in reduced administrative costs and better understanding of capabilities on both sides of the partnership. Therefore, while it’s possible to find multiple models that perform similarly, the best solution may still depend on factors such as cost and scalability.
In conclusion, the rise of DeepSeek should not have been unexpected. The company has simply leveraged its unique strengths to outmaneuver more established competitors.
Source: hbr.org
