Creating opportunities with AI to transform service industries
There is a large chunk of the economy composed of businesses that will benefit from the introduction of AI into their operations. These businesses are all low margin service businesses.
They could really use AI, but convincing them to use your AI solution will be a challenge.
Let’s look at the problem and a novel solution.
Here is why service businesses need AI
What they have in common is they have a lot of repetitive, non-strategic but necessary work. This includes things like data entry, triaging customers enquiries or responses by leads, reviewing submissions, double-checking applications, comparing Form A to Form B, etc.
The roles in this type of work involve high volume, low- to medium-difficulty decision making with strict performance requirements. It is dull work and often stressful due to the sheer volume of it. And so these roles experience a high turnover rate.
These businesses are also operating under labour market shortages. The high turnover rate is amplified by difficulty in recruiting for these roles. This is due to the unattractiveness of the role, but also there may be fewer people entering a field or industry. For example, many of these roles are finance related and accountancy graduates in Australia have halved over the last 10 years.
Finally, these businesses also have margin pressure. Some of this is local and related to interest rate changes, and some is from global competition.
These three challenges – margin pressure, labour shortages and staff turnover – means there are a lot of businesses out there who would benefit from AI based solutions that could give their margins some breathing room.
Don’t sell to them, become them
However, as Brian Murray from the VC firm Craft Ventures writes, these businesses are hard to sell to.
They tend to have been around for a while, their operations are deeply ingrained in the culture of the individual business and in the culture of the industry. Convincing them to adopt your product is hard, especially in the early days when you don’t have a track record.
Murray suggests pursuing a different path. Become the target market.
These businesses, despite the challenges, are essential and profitable. And being established businesses, many of them have owners who are ready to retire or move on.
Instead of selling your solution, buy a potential client. Use your new business to test and hone your product.
As the business owner you have the ability to make the fundamental operational changes needed to adopt new practices built upon your product. You will gain firsthand experience in implementing those changes, and if your product does everything you were promising, you now have a major advantage over the competition.
At this point you have three directions you can go. You can use the business as a base to grow in the market through M&As, or as proof-of-concept to license your technology to the rest of the market, or simply grow it through direct sales of your competitive services.
Each of these strategies has its own merits. M&As can provide rapid growth and market share expansion. Licensing can offer a scalable revenue stream with lower operational overhead. Direct sales allow for greater control over the customer experience and potentially higher margins.
You can also do some mix of all three options.
Go transform an industry
This is an era of transformation. With generally available AI that can offer decision support on the text and document-based forms, applications, invoices, reports and policies that have until now required a trained person to process, new opportunities are appearing.
Spotting the opportunities and finding ways to take advantage of them requires a new way of looking at what is possible.
Hopefully this article has given you some pointers on what to look for. And a new direction to consider when you decide how you’re going to build out your AI powered business.
