I’ve been talking to founders across the Global South as often as I can about Generative AI since early 2023. The founders in our portfolio of 350+ companies are GenAI users, not creators. Not surprisingly, as with any other disruptive situation, the founders’ GenAI plans can be divided into three groups. “Ahead of the Curve” companies have already shipped something; “Fast Followers “ are watching and prototyping but have not shipped yet, and those who are “Late for the Train” don’t yet know how to get on the train, or don’t have the resources to apply now. This article is for any founder who feels they are “Late for the Train”, or feels they are on the train but that it’s not going fast enough.
First, reviewing examples of all three groups will help founders know where they really stand. The Ahead of the Curve group had at least three things going for them – they saw the opportunity early, they had ready-made situations to which they could apply GenAI, and they had engineering talent available to get something prototyped and into production in a timely way. One example is a farming e-commerce company that has already taken 30% out of its customer service costs by putting a farmer-lingo-capable chatbot in front of its customer service agents. They expect to get savings to 50% over the next quarter or so. An example of a Fast Follower company has prototyped means to cut costs and increase the speed of recruiting blue-collar workers by adding GenAI-driven steps to the interview and candidate engagement workflow. They have a complex workflow with high throughput so must be careful about how quickly they deploy; initial testing is showing massive improvements in multiple dimensions. Finally, an example Late for the Train startup provides solutions for call centers and has done some initial evaluation and planning, but has not yet determined how/when to best add GenAI to their product roadmap which is already stressed with demands from existing customers.
Here are five clear steps to move from being Late for the Train to being On the Train and speeding ahead, in much less time than you’d think. They are 1/ adopt a simple language so everyone can communicate clearly about this disruptive tech; 2/ get your entire team onboard at the high level – many of them may already be there without your knowledge; 3/ ensure you are not letting the cloud LLMs “Hoover up” your data in ways that expose it to competitors or bad actors, 4/ establish a “red team” to be disruptive internally, and 5/ measure progress on your GenAI adoption and communicate to the company on a consistent basis.
1. Simple Language, Big Ideas: Type One, Two, and Three
There are plenty of new technical words and concepts around AI, and many have written about them, so you don’t need more from me, except this one concept. From a GenAI adoption perspective, there are broadly two paths you can be going down, which are not in any way exclusive. The first is using GenAI to enhance what you’re already doing by increasing productivity or quality of operations of existing customer interactions. Let’s call this a Type One application. The Ahead of the Curve example above is Type One. Companies using GenAI to improve sales communications or help with market research are doing Type One work. Type One projects can be implemented on an individual or departmental level. And most importantly, Type One initiatives are table stakes for every startup these days – they are must-do activities. If you want to get funded and can’t show clear adoption of Type One applications, you’re in trouble. And Type One initiative will not make you an “AI Company” from a VC perspective. Soon, neither will even Type Two.
Type Two efforts are around making an existing business better. They are bigger, riskier, and much more important to your survival as well as to your ability to attract capital. With Type Two, you are looking to create new ways of approaching a vital aspect of your business, or potentially your entire business, building on GenAI. The upside from Type One is a reduction in cost and increased speed/productivity – everyone is doing or will soon be doing these. The upside from Type Two is potentially unlimited, as you are creating new ways to create and deliver value that might get you access to new customers or gain substantial competitive advantages over others who are not deeply embracing GenAI. An example of a Type Two innovation might be a regional B2B marketplace that currently publishes information only in English as it’s the common denominator language in the region. That marketplace now can use GenAI to cost-effectively publish information simultaneously in four local languages and also enable its customers to find products/services with a conversational interface (rather than cumbersome search queries and complex filtering) using their language of choice. This Type Two innovation opens the market to untold numbers of non-English speaking customers and also makes it faster for all customers to find what they are looking for and close the deal. It could not have been done without GenAI.
Another Type Two example would be a gig worker aggregator who adds a new line of business that empowers their giggers with GenAI to accomplish tasks in entirely new use cases for new customers that they never could have served before. Giggers got smarter by the “augmented intelligence” of GenAI; they and their aggregator both make more money.
We have not found a Type Three services business as of the time I am writing this blog, but I know someone is building one. While Types One and Two are making existing businesses better, Type Three is creating an entirely new business (or business line) from the ground up that simply could not be created if it were not for the capabilities of GenAI. I’m not talking about GenAI-based tools – there are amazing new ones coming out every day. (Check out some of the reviews we’ve done as we evaluate them for our founders and our own use, here). I’m talking about services sitting on top of the best available tools and LLMs that meet the aforementioned criteria. It could be that the cost advantages make previously unfavorable unit economics work; that the communications modalities open up new markets that were previously unreachable, or that the use of the latest multimodal and other capabilities of the newest LLMs enable the creation of new text, voice, image, and video-based services that simply could not have been created before. We look forward to speaking to founders who have Type Three businesses underway that operate almost anywhere in the Global South.
If you are looking for funding and do not have one or more Type Two efforts underway and/or a vision for Type Three, you will have a difficult time raising money. That’s as of July 2023, only 7 months after ChatGPT changed the world. The expectations of investors are increasing as quickly as technology advances.
2. Getting Your Team On Board
The best way to not miss the train is to get everyone on it, even if you don’t know exactly where it will take you yet. Have an all-hands meeting and announce your high-level intent, and be clear that you want everyone to be experimenting and learning (with the important caveats in #3 below), every day. Get them focused on Type One adoption, being clear that NOT applying Type One strategies everywhere possible will lead to the company losing its competitive edge. Also, tell them how you will approach Type Two and how vital that path is to your success. You could raise awareness in all areas with department-level brainstorming sessions, starting in the middle management of your team, or by asking ad-hoc teams to form and do the same. I’ve also seen some companies doing weekend hack-a-thons, and others are doing team meetings with fun games to help people understand the value of GenAI.
3. No Hoovering
I recently published a story in a CXO magazine and our website about the dangers of cloud GenAI providers “hoovering up” your data and using it to train their AI for the benefit of all, including your competitors. In worst-case scenarios, your employees could inadvertently expose personally identifiable information of your customers to the GenAI which could end up being available to bad actors. You don’t want either of these things to happen. It’s not too hard to avoid them – please read my article “Don’t Let GenAI’s Hoover Your Data“, and use Bing/ChatGPT4 (or maybe Google) to find other options that could have been published more recently, and act on it ASAP!
4. Red Team
I worked at Sun Microsystems in the 80’s during its first intense growth phase. One lesson I never forgot from founding CEO Scott McNealey was that it’s better to disrupt your own business rather than let your competitors do it for you. A few years later, Clayton Christensen famously described this problem in “The Innovators’ Dilemma”. The book has seen some years but is plenty relevant in any time of rapid technological disruption. In this phase of disruption, my strong recommendation to founders –which I’m pleased to say a number have taken and already shown great results from– is to form a “Red Team” charged with prototyping a new business that has the goal of taking away the majority of your customers in less than a year by using a combination of Type One and Type Two GenAI strategies from the ground-up to create offerings that are simply better/faster/cheaper/more-profitable that what you do today. The Red Team has the benefit of full knowledge of all the good bad and ugly at your company, no legacy baggage of any kind, and freedom to operate enabled by the piles of VC funding that are coming into AI-forward companies every day. I recommend three people on the Red Team: an up-and-coming young-ish developer who has shown some propensity to dive deep into GenAI already on his/her own; a data science or strong data analyst who can [safely] access all of your most valuable data; and a business development / marketing leader who can help chart the disruptive business strategy alongside the technical members. That’s it. One of our portfolio companies formed 4 red teams, each charged with disrupting a different aspect of their business. How long should this take? The first report to your executive staff should be in less than sixty days from when you start, and you should plan to have results presented to the company no later than thirty days after then.
Google’s Sundar Pichai allegedly declared a “code red” after the OpenAI ChatGPT launch in November 2022. One might presume that if they had a few well-staffed Red Teams looking at disrupting their cash-cow search business with the very tech that they themselves pioneered starting in 2017, they might have avoided being caught so flat-footed. This leads to a final point. Your Red Team should help you see the opportunity to get ahead via GenAI, but you will need to seriously evaluate if you can maintain strong market differentiation in this new world, and if not, how do you further modify your plans and create new innovation moats that will give you long-term room to grow ahead of fast-moving competition.
5. Measure & Report
You should apply the principle of “if you can’t measure it, why bother” to your GenAI initiatives just like everything else. Since the adoption of GenAI is a journey, you want to measure both activities — for example, % of the team who reports using GenAI tools to increase productivity at least 3 times a week — and results, such as savings in customer service expenses, increase in conversion rates, etc. Pick a small number of KPIs in these areas, not more than three at the top corporate level, do a baseline measurement, and then report at the company level at least quarterly. At team levels, you might look for weekly reporting in the early days to ensure you are seeing trajectories heading in the right direction.
Ride the Generative AI Bullet Train. The Nozomi is Japan’s fastest “bullet” train, reaching speeds of 300kph. It was disruptive when it started over 30 years ago, and it’s still among the fastest in the world. If you are feeling Late for the Train, or even like you are on the train but not moving fast enough, follow the five steps above, and in under 90 days you will be transporting your team and company to a different world as your competitors watch you speed by.
