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Every board meeting in 2023 thus far had the same item on the agenda: What’s the impact of AI on our business? More specifically:
What’s the impact of AI on our own product?
What’s the impact of AI on our daily routines and workflows?
Today, I’d like to share my generalized perspective on both of the above questions and why I believe it will be significantly easier to start a software company in the future. Please challenge my thoughts and share your perspectives with me!
1) The impact of AI on your product
Of course, the answer to this question depends a lot on the product. Flipping things around and looking at the question from a user’s perspective, there are two main groups of companies/products:
Existing (non-AI) incumbents like Microsoft (with “AI-powered Teams Premium”), Notion (with “Notion AI”) or Duolingo (with “Duolingo Max”) extending their well-established and broadly adopted product offering with AI-powered features.
New (AI-native) challengers like Jasper, CopyAI or Runway rethinking products from scratch with AI in their core.
While the “non-AI incumbents” are likely to have great penetration and large, trusted user bases that are familiar with their products, “AI-native challengers” are able to leverage this new technology and rethink their solutions from scratch. Wearing my investor hat, the major question is whether add-ons can be as good as something purposefully designed from scratch?
Clearly, challengers believe the answer is no. This is why they started their companies in the first place. The majority of companies across startups, scale-ups, SMBs and enterprises, however, falls into category 1 above. Therefore, they should urgently explore how AI-powered add-ons or even new product lines can bring their offerings as close to AI-native solutions as possible.
The longer incumbents wait to add AI-powered features, the higher the chances their customers see their own competitors getting more done with less by leveraging other AI-native solutions. At some point, FOMO will exceed the friction and switching costs of migrating to a new AI-native tool, resulting in slowly but gradually fading customer bases for the incumbents.
