Unfortunately (in my view), group #1 is making all the products and is responsible for the majority of applications of technology that get deployed. Obviously this is the case because they will take on projects that group #2 cannot, and have no compunction against shipping them. And we can see the results with our eyes. Terrible software that constantly underestimates the number and frequency of these "edge cases" and defects. Terrible software that still requires the user to do legwork in many cases because the developers made an incorrect assumption or had bad input data.
AI is making this problem even worse, because now we don't even know what the systems can and cannot do. LLMs nondeterministically fail in ways that sometimes can't even be directly corrected with code, and all engineering can do is stochastically fix defects by "training with better models."
I don't know how we get out of this: Every company is understandably biased towards "doing now" rather than "waiting" to research more and make a better product, and the doers outcompete the researchers.