👨🏻🔧📲 From Service to Product (FSTP): The AI-Driven Shift in Business Models
🔖 Introduction
Welcome to the AI automation era! As we advance into this technological revolution, service-led companies are increasingly being replaced by software and product-led businesses.
As per Marc Andreessen’s infamous 2011 prediction, software really is eating the world, and AI is driving this transformation even further.
This shift is evident in several emerging trends:
- AI-Native Startups: New startups are being built with AI at their core.
- Operational Automation: Scale-ups are actively automating their processes to remain competitive.
- Big Tech Transformations: Major tech companies have initiated layoffs, replacing these roles with software solutions.
- Corporate Caution: Large corporations are observing and awaiting best practices before fully automating their workflows.
While the ease of building a product has significantly improved, managing teams has become more challenging, often due to rising mental health issues. This shift inevitably tips the balance in favor of product-led companies.
In this thought piece, I’ll explore why this trend is irreversible and what steps you can take to adapt and thrive in this new landscape.
Software really is eating the world, and AI is driving this transformation even further.
👨🏻🏫 Definitions
Before diving deeper, let’s clarify what we mean by service-led and product-led companies.
Service-Led: A service-led company primarily offers a service. These businesses often are consultancies or agencies, where each new client requires a slightly different approach. This results in:
- Low Replicability: Each service is tailored to the individual client.
- Low Consistency: Client requests vary widely.
- High Human Involvement: Significant human interaction is needed at every step.
A typical example of a service-led company would be a travel agency or a strategy consulting firm.
Product-Led: On the other end of the spectrum, product-led organizations offer a product that users interact with directly. This is often an app, software, or website. These businesses exhibit:
- High Replicability: The user experience is generally consistent.
- High Overlap in Client Requests: Most interactions are standardized.
- Software-Centric: Minimal human involvement is required as the product handles most interactions.
A typical example of a product-led company would be a booking app or any business that primarily interacts with customers through software.
Note: It’s important to recognize that this is a spectrum rather than a strict dichotomy. Many companies may appear product-led but operate quite differently behind the scenes. Every new wave of technology forces businesses to be more product-led.
Minimal human involvement is required as the product handles most interactions
⚖ ️Why does AI push businesses to become product-led?
- Lower Costs: Ease of Building Software
The scale towards building software has dramatically tipped in favor of product-led models due to the decreasing costs and increasing speed of software development. The rise of AI and no-code platforms has played a crucial role in this shift.
Many operational workflows traditionally handled by service teams can now be automated. For example, AI-driven tools can streamline lead generation and internal operations, making technology and software the preferred choice.
2. More Sales: Product Companies Sell Better to Product Companies
There’s a reinforcement effect where product companies find it easier to sell to other product companies. They share a cultural and technical understanding, making their products more compatible.
For instance, a cybersecurity firm selling an AI-based threat detection software will find more success with a product-led company that needs seamless integration into their existing security infrastructure, compared to a service-led firm that might require tailored security consulting.
3. Larger Scale: Product-Led Businesses Scale Faster
Product-led businesses have a significant advantage when it comes to scaling. Leveraging technology and AI effectively increases their chances of raising capital and outscaling the competition.
In the coming years, AI-native companies are likely to outgrow their predecessors unless those companies pivot to adopt AI and product-led strategies.
For instance, a product-led health tech company providing a telemedicine platform can quickly expand its user base globally. By leveraging AI for diagnostics and patient management, it can serve more patients efficiently compared to a traditional healthcare service provider, thus scaling its operations and revenue rapidly.
Every new wave of technology forces businesses to be more product-led.
🤔 What does this mean for your business?
Supercharge Your Product Skills
In the era of AI and automation, you, as a company leader, must ensure you have strong product skills within your management teams. Many founders believe they possess these skills, but often, the reality is different.
Staying ahead of technology is crucial; you need to know how to leverage the latest tools to solve your company’s most significant problems. This means thinking beyond standard frameworks and applying experience-based, strategic, and operational thinking to drive innovation and efficiency.
Smaller, More Strategic Teams
Additionally, expect to see smaller, more strategic teams. Unlike the giants of big tech, smaller companies like yours must focus on efficiency and agility. Strategic thinking becomes more important than traditional people management.
In the era of AI and automation, as a company leader, you must ensure you have strong product skills within your management teams
⚔️ What can you do about it?
You have two choices: up-skill as founders or hire a product leader.
Traditionally, if you’re in late Series A or Series B, you would hire a Head of Product or perhaps a CPO. But what if you’re earlier in your journey or looking for targeted expertise?
This is where hiring a consultant becomes highly strategic. A consultant brings immediate expertise without the long-term commitment and overhead of a full-time hire. They help you define priorities with precision, establish effective methods tailored to your business needs, and structure your team for optimal efficiency. By setting up these foundational elements, a consultant positions you for success, bridging the gap until you’re ready to hire a full-time product lead.
If you’re interested in learning more about how to move in this direction, check out my method on how to make your business more product-led.
If you enjoyed the article, give it a like, if you have any questions, feel free to reach out to me at hello@regenerativeproducts.io! 📧
