Everyone is talking about how AI is going to revolutionize our operating models, and they are right to do so.? But we also need to take note of how it will impact our business models as well.? Here are a couple of early takeaways:
- AI eats billable hours.? This is a good thing when the billable hours represent low-value tasks mandated by regulatory regimes.? Human talent is freed up to do more high-value work, either post-sale or pre-sale, and the customer can get a better price.? But if your entire business model is driven by billable hours, and competition for high-value work leaves your pipeline less than full, you’re in trouble.? The fix is to migrate to a fixed-fee model, which bills for customer-valued deliverables, typically on an accrual basis for longer projects.? You are taking on more risk, but your model is better aligned with your customers’ interests, and you are highly incented to adopt AI sooner rather than later.
- AI eats seat licenses.? Specifically, when agentic AI displaces human agents, the total number of seat licenses your customers need goes down.? The good news is you are releasing a lot of trapped value, so customers are willing to pay a premium for the new service.? You just have to find a billing model that fits, typically one based on number of transactions processed within a given period.? Generative AI, on the other hand, actually creates a new set of licenses, which looks like a windfall, but be careful here.? GenAI is going to commoditize very rapidly, so customers will be quick to demand massive price discounting or simply an all-you-can-eat enterprise license.
- AI supports retainer billing.? Customers entertain retainer billing whenever they want to ensure immediate access to scarce expertise, be that from a strategic advisor, a concierge doctor, or a wealth manager.? They get uncomfortable, however, paying a fee for a period in which there was no value delivered.? Co-pilot GenAI can keep tabs on an entire portfolio of clients, suggest next best actions for each of them, and draft communications to keep clients up to date and service providers up to date.? The key is to proactively convert some subset of these contacts into additional value-adding service moments.
- AI is a godsend for maintenance billing.? Here all three kinds of AI prevalent today can make a positive contribution both to customer success and vendor profitability.? Predictive AI can catch maintenance problems early enough to prevent downtime from unplanned repairs.? Generative AI can support customer self-service by answering installation-specific questions or escalating them to an expert.? Agentic AI can proactively intervene when processes drift outside their control limits, while at the same time alerting the maintenance team to the situation at hand.?
I’d love to get other people’s takes on AI’s impact on business models, so please feel free to comment on this post.
That’s what I think.? What do you think?
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CEO of The Peebler Group (Energy Consultant and early stage Investments), Founder and former CEO of HOW Water LP, and over 40 years of management experience in oil and gas upstream technology
2 天前Excellent post Geoff! That change also better aligns with the customer needs and reduces the incentive to bill more hours.
Head of Lab at 1835i | Innovation | FinTech | Venture Building | Mentor | Strategy | Product Development | Emerging Tech | Corporate Innovation | Corporate Venture Capital
5 天前Another one to add is how AI will disrupt the traditional procurement, marketing and supply chain models in a future where your customers become machines. As customers, both consumers and businesses, leverage agents to make purchases on their behalf, how will we trust these robots and how will robots make purchasing decisions?
Geoffrey Moore do you agree a clear shared vision of how AI will be adopted in an organisation is one of the precursors to successfully leveraging it. There is often a temptation to adopt AI everywhere without a clear focus or direction and very little product or technology strategy and roadmap, not to mention a lack of AI driven architecture. AI gets bolted on rather than intentionally designed in. Enthusiasm can lead to worsening outcomes if it isn't supported by other sound practices.
A thought provoking read - thank you. No question we are facing business model disruption. Pricing and billing are going to change - just as the introduction of API created a new “billable transaction” so too with agents - do we bill per question or per answer or some other model ? And what is the overhead of this? Fundamentally, both buyer and seller will need to rethink how they think about value, how well they can create it and then also how best to capture it.