Silicon Valley is proclaiming that the next hot thing for investors will be AI-native services. The idea is to apply SaaS-like margins and scale to the five times bigger service markets.Industries like Law, Accounting, Consulting, or Advertising are the prime targets.
And this is already happening. AI-native firms are rolling up existing businesses, and closing deals.
But what are AI-native services, and what does it mean for you? Will AI-native services dominate the service market in the near future?
In this article, I’m gonna outline what AI-native services are, where they apply, and how you can embrace your service business or agency against that new group of competitors.
Summary
AI-native services are attracting large amounts of funding and are threatening traditional service businesses. Service business owners need to reduce cost and increase quality of repetitive, intelligence-based delivery work, and at the same time become trusted advisors for complex decisions involving judgment and experience.
What are AI-native services?
AI-native services, as the name describes, are services that are fundamentally built on AI. Everything in such a company is AI, except where a human is explicitly needed.
All work that doesn’t require a human is being performed by AI.
Compared to tech-driven traditional service businesses, the difference is that they start with “everything is AI” and then just add humans where necessary.
Traditional businesses transform their delivery from human to AI.
Intelligence versus Judgment
Some players in the industry also add a differentiation on what services will be disrupted through AI.
Intelligence-based work (i.e., work that is complex but follows rules) can be fully automated through AI.
In contrast, expertise-based work that requires judgment and intuition is hard to replace through an AI-native service.
This differentiation is critical because it describes a competitive edge that most service businesses have: Industry experience.
For example, if you’re running an accounting firm, the actual bookkeeping and month- or year-end closing can be automated through AI.
However, if your client asks you for advice on how to deal with a specific tax optimization, this will require your instinct, experience, and judgment.
Are AI-native service businesses a threat to my established service business or agency?
Yes, potentially. The reason is that AI-native services are backed by large venture capital firms and therefore have a lot of horsepower behind both delivery and acquisition.
That is a benefit that you don’t have.
So it means they can go to market with a cheaper offer and pay, at least temporarily, more to acquire clients.
What can you do if you run an agency or service business?
I think there are a few things that you can do.
Automating intelligence-based work
Accept the fact that merely intelligent-based work will be mostly done through AI and automation. Start transforming your service delivery now and treat this as a continuous improvement effort.
The goal of this is to stabilize performance and decrease cost of delivery.
Not be able to compete with high-priced manual service delivery for low-value tasks.
Double down on judgment-based work
Your intuition and experience is what sets you apart from AI. Double down on the complex decision that required judgment and expertise.
Find an efficient delivery mechanism for repetitive intelligence-based work with high-value experience-based judgment, then you have a winning service model that will survive AI.
Clients that come to you for decision making and judgment will definitely give you the execution of the strategy you developed if your delivery is cost-efficient and good.
