AI replacing service industries?

It's like having a robot as your hairdresser. Sure, the cut is perfect, but the gossip? Nonexistent.

The AI Race in Service Industries

Why Read:

• This article provides a comprehensive overview of the AI revolution's impact on services industries, outlining key opportunities and a strategic playbook for AI-powered startups to disrupt the space.

Featuring:

• Rex Woodbury (@rex_woodbury) , Founder & Managing Partner at Daybreak

• Link: 

  “AI Is a Services Revolution”

Key Concepts and Tactics:

• Understanding the AI Revolution in Services Industries:

  • Point: The rise of Large Language Models (LLMs) is transforming knowledge-based services industries like law, healthcare, and education.

  • "LLMs work by digesting huge amounts of text, synthesizing that text, and then generating an output from the input. Naturally, we need language to power LLMs, and language happens to be the lifeblood of services industries."

  • "The Industrial Revolution came for farmer's jobs (and some factory jobs). The AI Revolution is coming for desk workers."

• The Gradual Adoption of AI in Enterprises:

  • Point: While there is a lot of hype and experimentation around AI, most enterprises are moving slowly in actually deploying AI solutions.

  • "Enterprises are also learning that LLM capabilities vary across use cases. Based on the chart below, it looks like over time, executives are increasingly impressed by AI-powered sales and software development, while a bit underwhelmed by legal, HR, and operations use cases."

  • "The point is: AI disruption is happening, but slowly. It may seem like the race is over, as we see copilots emerge for every industry under the sun. But it'll take time for the true winners to emerge, and for metrics to catch up to the hype."

• Opportunities for AI Startups in Services Industries:

  • Point: There are still many opportunities for AI startups to disrupt services industries by automating workflows and augmenting workers.

  • "I still think the formula for a compelling AI startup goes something like this: 

    • 1) Pick a large, text-heavy services industry (choose from the charts above!). 

    • 2) Use LLMs to automate workflows and augment workers.

    •  3) Leverage industry-specific data to fine-tune the model over time, improving the product in tandem. Specialization = your edge."

  • "We're seeing innovation across various services industries. Some examples...law, healthcare, education, investment banking, insurance."

• The Vertical SaaS / AI Playbook:

  • Point: AI startups can use a Seurat-inspired "vertical SaaS" approach to build defensible businesses by starting with a key pain point and then expanding the product suite over time.

  • "Identify the most salient pain-point for your customer and solve it. Use that wedge to win over customers. Layer in more products over time—cross-sell and up-sell, improving customer lifetime value and becoming more defensible."

  • "A vertical SaaS company might start out looking like a feature—a single dot of paint—but over time it becomes a constellation of products with a strong moat."

• The Race is Just Beginning:

  • Point: Despite the current hype and early movers, the AI revolution in services industries is still in its early stages, with many opportunities remaining.

  • "It might seem like all the AI co-pilots and agents exist. For nearly every industry, there are now dozens of players. But it'll take time for the true winners to emerge, and for metrics to catch up to the hype."

  • "We're still early, and there are still many, many opportunities. The right combination of industry insight + product/engineering chops can catch up and surpass early movers."

Wisdom from a 3x Founder

Why Read: 

• This interview provides practical, experience-based insights that can help startup founders manage expectations, build high-performing teams, leverage AI tools, and maintain focus during the challenges of early-stage entrepreneurship.

Featuring:

• Peter Yang (@petergyang), Principal Product Manager at Roblox interviews Siqi Chen (@blader), CEO at Runway

Link:

• “AI Hacks from a 3x Founder to Scale Your Business and Life | Siqi Chen (Runway)”

Key Concepts and Tactics:

1. Value experience and set realistic expectations

   • Insight: Experience is valuable in startups, particularly in setting realistic expectations about the challenges ahead.

   • Quote: "I think the number one thing that I didn't appreciate the first couple of times around is how valuable experience actually is when you are first starting out... what I mean by that is one of the hardest things about doing a startup is the ambiguity of not knowing how long it's going to take and how hard it's going to be but somehow expecting it just to be really hard it makes it not as quite as hard anymore and it helps you keep going"

2. Balance long-term vision with short-term reality

   • Suggestion: Founders should maintain a long-term vision while confronting short-term realities and building momentum step by step.

   • Quote: "You have this vision when you start a company of this what the world could be and the art of operating a startup is how do you bridge that vision and what you have today and get there step by step and you can't just like always go directly there and that requires confronting reality and talking to customers and building momentum"

3. Cultivate self-awareness

   • Insight: A founder's self-awareness significantly impacts the company's performance.

   • Quote: "Really the performance of the company is capped by you as a founder and if you are not aware of the things that you are good and bad at and if you aren't able to quickly learn by confronting reality the performance of the company is capped"

4. Continuously raise standards

   • Insight: Constantly elevate hiring standards and push the boundaries of what can be achieved.

   • Quote: "One of the things that I believe in is it should always be hard because if it's too easy that means you could hire better people than you otherwise are hiring... The only way to make sure that you to have the opposite is make sure that every person you hire is better than the average person you currently have in the company"

5. Embrace AI tools for productivity and learning

   • Suggestion: Utilize AI tools to increase productivity and accelerate learning in various aspects of business and personal development.

   • Quote: "Use ChatGPT, use perplexity and use it for everything and develop a habit and intuition for this... if you don't understand anything like you can just ask it to teach it to you and if you don't understand what it explained you can ask it can you make it simpler"

8. Expect team turnover in early stages

   • Insight: It's normal for many early team members to leave before the company finds success.

   • Quote: "What happens in between for people on the team… they're not all going to make it... just because things are slow you don't have evidence that it's going to work or not work. It is kind of the norm"

10. Focus on creating understanding within the team

    • Insight: As companies grow, ensuring team members understand the business becomes crucial for alignment and fast execution.

    • Quote: "If you want the team to move fast they have to collaborate and have to be aligned and what enables that is context is understanding... if we can build something where you can look at it an engineer or designer or PM can say this is how the business works I get it and this is how I fit in and this is how we can like make the business better I think it really has a huge impact"

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