Why Personalized AI Companies Win
As AI continues to advance, it's clear that Personalized AI companies are the future. The reason for this is simple: people want not only better products but also a better experience.
What is a Personalized AI company? We think of them as companies that use AI to offer custom-tailored, bespoke experiences to each individual customer. The advent of AI means personalization and customization costs are dramatically reduced.
For example, content moderation used to be a manual process involving humans individually checking each post with minor amounts of automation. Now, companies like Mindshare can partner with Personalized AI companies to moderate content harmful to the brands they represent. By using AI to offer better experiences, companies can meet demand at an unprecedented high velocity and low cost, with a truly delightful customer experience.
SaaS has long been the preferred business model in Silicon Valley because of its high margins, low COGS, and predictable recurring revenue. Building repeatable, automate-able software was cheaper than hiring people to perform those same tasks over and over again, or hiring engineers to build the same software every other company was building.
But SaaS also has one big drawback: Using new SaaS products requires users to change their behavior and learn new ways of doing things. No user actually likes having a learning curve; they simply tolerate it because the reward has been worth the inconvenience.
Furthermore, there have been no solutions that incorporate the best of both worlds. You could either have:
The white-glove personalized-service experience, but at an absurdly high cost (e.g.: Accenture)
A self-serve platform that’s cheaper, but gives you only some of what you want with a steep time investment and learning curve (e.g.: SaaS products)
AI dramatically reduces the cost of personalization and customization, meaning customers no longer have to tolerate steep learning curves. Therefore, a one-size-fits-all SaaS product will no longer be able to compete in an AI-native world.
After all, if customers could choose between using a prefabbed product like a platform or a custom-tailored software for the exact same cost and same velocity, the choice of which is preferred is abundantly clear. (Ask yourself: if all costs were the same, which would you prefer - a mass-manufactured vehicle, or a custom-made vehicle with your exact desired preferences?)
Instead, Personalized AI companies taking the service approach as their initial GTM strategy will outperform the aforementioned SaaS products. These companies will reach Product-Market Fit much faster because they are able to build customer relationships, deepen their understanding of customer problems, and iterate on their product much faster and cheaper than their SaaS counterparts. These are the major advantages that Personalized AI companies have over their competitors.
Ultimately, by using a service-based approach, Personalized AI companies can explore and hit PMF much faster. Personalization requires working hand-in-hand with end customers to solve their specific needs. In doing so, Personalized AI companies can observe patterns of general needs much faster and build toward the biggest pain points across a large swath of users.
This is especially true when the initial customer is a large enterprise, such as Fortune 2000 companies: SaaS is a less viable option for them as they tend to be technology-backward and have too many custom needs to make a self-service platform work themselves. System integrators, such as Salesforce contractors, add further cost in time, effort, and money for setup and continual maintenance.
There is a reason these kinds of customers still heavily rely on the Accentures of the world:
They have too many specific needs that generic SaaS platforms can’t meet
They are used to receiving the best service (and are willing to pay for it)
They don’t have the software expertise to build and maintain the complex integrations they need to work with legacy software
The AI company that can offer what Accenture offers in customer service with a delivery speed that’s 1000x faster will ultimately win the market.
Ultimately, the adoption of AI-based products will be based on whoever can provide the best “surprise and delight” product. This is why Personalized AI will win - and it won’t matter if the user knows AI was responsible for it or not.
Bozhao Yu and Regina Gerbeaux are the co-founders of Isoform AI. Want to find out more? Connect with Bo here and Regina here.
Many thanks go to George Zeng, Lucas Gerbeaux, Jing Jin, and Andrew Rea who read early versions of this document and provided helpful comments and feedback.