Three Phases of the Quantum Computing Market
Intro
I envision that the quantum computing market will evolve over three broad phases.
If you have been a student of technology diffusion and market development, these phases won’t be a surprise to you. A key trait to monitor is enablement: how accessible quantum computers are to customers. Enablement emerges from market dynamics which include availability, performance, and cost, to name a few.
Uncertainty about how and when quantum will mature has been mistaken for permission to wait for confirmation of its arrival. Waiting creates risks (i.e. cryptography) and potential delays as human capital needs lead times to learn and prepare. If you have read any of my other notes you have noticed that acceleration is a defining trait of quantum computing’s current development. One can wait, but take note that timelines are shifting while you look away.
One caveat: these are guides and not binary outcomes. Not all actors will follow this evolution precisely.
Phase 1: Copy-n-Paste
Companies adopting quantum computers will use them to solve their existing problems, and integrate them into their existing workflows. They copy their existing problems and paste them onto the new quantum capability. Paste is doing a lot of work, because reformulation will likely be required. This is a key learning phase for organizations going from 0 to 1 on the learning arc. But, the primary goal is to begin the integration of quantum into their business, their infrastructure, and to get on a path to realizing ROI from quantum investments.
During this phase quantum computers are limited in supply and are relatively expensive. Quantum is accessible, but the end-users are few. Performance in a few problems is better than the classical alternatives, but there are still many quantum computing challenges to solve before quantum solutions are applied broadly. Management probably says something like, “Quantum improves our business, but it doesn’t fundamentally change it.”" “What will you do with Quantum?” is the marketing call from quantum tech companies to their prospective customers.
Phase 2: Innovation
Quantum computers move from solving known problems to delivering innovations. By way of example, innovations in Social Networking emerged after years of use and experimentation with the internet, and then mobile technologies. These innovations also emerged at a point in time when the cost of operating internet services decreased dramatically, and there was widespread enablement of both infrastructure and end-user capabilities (e.g. terrestrial broadband, LINUX servers, PCs, mobile devices, and wireless broadband).
Quantum enters this phase when enablement is broadening, costs are going down, performance is going up, and capabilities are expanding. Relatively low-cost datacenter-ready rack-mounted quantum computers emerge as an enabling substrate. The phase 1 bottlenecks of cost and performance are largely waning, opening up the market to low-cost experimentation. Entrepreneurs and business unit leaders can follow a hunch, attack a problem, and cost is not their primary concern. They can build quantum-native products and scaling becomes economically feasible.
Venture capital is heading towards a full-tilt allocation into quantum technologies and quantum enabled businesses. Materials science and chemistry begin to achieve new discoveries and improvements in the basic inputs of our economy. Quantum is disruptive to incumbents who are not able to adapt and change.
Management in this phase says Quantum is fundamentally changing their businesses. So much so that they are able to deliver new product lines, and are considering forming new business units, joint ventures, and are making meaningful corporate venture investment.
Phase 3: New Industries
In this last phase we can look back and see that quantum has moved from insights, to innovations, to new products, to new companies. Value chains are now reorganizing around new capabilities and new constituents. The aggregate of efforts from phase 1 and 2 is now producing quantum-native companies and new industries.
There will be several industry-defining companies. I won’t try to predict what those will be, but we can look at an example from prior eras: Uber. Uber is often referenced as a company that helped form the on-demand industry. Without the widespread enablement of mobile and location services, and the various attempts and failures in this category, this would not have occurred.
During this phase, quantum computers are widely available via cloud-services. There are likely a few quantum-native clouds, but the bulk of quantum computation occurs in AWS, Azure and GCP. Free tiers of service provide entrepreneurs with zero-risk access to quantum compute so they can experiment and validate ideas. (There is, of course, a class of quantum supercomputers that exists in corporate and government research labs, but most users rely on the cloud.)
While many agree that quantum computing will generate important discoveries and innovations in materials science and chemistry, it should not be ignored that nearly all economic activity is downstream of activity in these two domains. And, finally (the slow-pitch prediction that is easiest to predict): the biggest and most important innovations in the 21st century will be catalyzed by quantum computers.
Closing
Foundational technologies have century-long lifespans, and generate many innovations. They give birth to technology platforms, such as the PC, smartphones, and networks. Generally, these new technology platforms have a 20 to 25 year growth cycle and then a new platform and a new growth cycle emerges, creating new opportunities for innovation. During these cycles incredible efficiencies are achieved. The transformation of genome sequencing from a scientific research project to a commercial offering is one such example.[1]
For example, today we are about 20 years into the smartphone (if Blackberry is the base year). The PC growth cycle ran for about twenty years before smartphones became the dominant source of growth for the value chain. If Quantum is a foundational technology, we are at the beginning of at least 100 years of productive innovation generation, giving birth to many new technology platforms with their own 20-25 year growth cycles. We are at the beginning of a century-long cycle of scientific discovery and technological innovation, with massive societal benefits.
In other notes I have stated that there is commercial Q-Day, a sibling of the cryptographic Q-Day, that could appear as early as 2027. Waiting for that to occur may seem wise, less risky. But, waiting disadvantages organizations that need to migrate their security systems, acquire and train talent, and develop the institutional know-how needed to participate.
The first human reference genome required roughly six to eight years of active sequencing and an estimated $500 million to $1 billion to produce; the broader Human Genome Project ran for 13 years and cost approximately $2.7 billion. Today, an individual human genome can be sequenced in about a day for roughly $1,000. This represents a one-million fold gain in efficiency! ↩︎