The companies that win each technology shift are the ones that stay close enough to customers to notice when their problems change and keep innovating to solve them.

I’ve sat through many conversations lately about which incumbent software categories AI-native startups are about to wipe out. The narrative typically goes like this: Incumbents are bolting a chatbot onto a 10-year-old product while new startups have built AI-native solutions from day one; therefore, incumbents are losing their edge.

And yet, many incumbents are thriving in the AI era. What gives? While the age of the software stack can certainly drive customer relevancy, I think that’s often the wrong paradigm.

At this point in my career, I’ve watched this dynamic play out across three technology curves: from web to mobile, then to cloud, and now to AI. In each, some incumbents thrived, some decayed. Some startups redefined categories, some were side-swiped by incumbents.

In my experience, the winners often aren’t the ones with the newer stack. They’re those who stayed close enough to the customer (from their first dollar of revenue to hitting $500M+ in ARR) to notice when the problem the customer hired them to solve quietly changed shape — and they kept innovating around that problem set.

Consider a cloud-based SaaS company selling small-business accounting software today. It built a great market position by giving a business owner a single place to track transactions, send invoices and, most importantly, close the books accurately. For years, that was enough.

But as the company grew and gained market share, its customers’ problem set quietly changed.

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