How Do Businesses Innovate With Traditional Products And Services In The AI Era?
Innovation requires disruption and data and AI are this decade’s disruptors. We think about innovation in terms of technology products, but what about traditional products and services?
This week, I taught Continuous Transformation in my Data and AI Strategist Certification course. Disruption follows technology waves, and we’re in an era where technology waves are only separated by 2-3 years. Since 2008, we have seen cloud, BI, Data and Analytics, Machine Learning, and AI. AI has multiple waves: Autonomous Mobility, GenAI, Robotics, and Simulations, to name a few.
Transformation is a continuous process because disruption is also continuous. Businesses that stand on the sidelines aren’t standing still. They are falling behind and managing their own declines. As Sam Altman said, “Stasis is a myth.” Responding to disruption is a dangerous strategy because the window to respond is shrinking. Wait too long, and businesses will deliver innovative products just in time for them to be disrupted by the next wave.
Innovators are built to thrive on disruption. In this article, I’ll explain how to innovate even with traditional products outside the tech industry. I will use my products and services as case studies, but the lessons generalize broadly. I will explain the data and AI innovation frameworks I teach in my certification courses, which we’ve used at V-Squared for over 8 years.
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Breaking Business Models Means Breaking Our Own
My courses don't make sense to people in the consulting industry because I'm teaching students to replace me. I'm delivering all the frameworks and my expertise…everything they need to do the job the same way I do and achieve the same results. Courses like these undermine and eventually destroy a consulting company’s core business model by watering down its value proposition and removing its differentiators. Why would I do that intentionally?
My business won’t survive the next five years if I don’t. Part of every product cycle is the end. Innovation only succeeds if companies don’t wait for the end to be driven by external factors. Innovators accelerate the end of their product cycles. Business models that are built to thrive on disruption want more of it. That works for traditional products and services, but only if we define innovation in value-centric terms.
Innovation is a necessity, but most companies can’t justify innovation for a few reasons:
No one can explain how innovation creates value in the first place.
There’s no framework to begin and manage innovation.
Innovation is poorly defined, so anything can be called innovative, making it impossible to prioritize initiatives.
Innovation budgets can’t be justified, so there’s never enough funding or will to deliver innovative products.
The incentivization structure at most businesses punishes innovation, so no one wants to risk it.
Novel products and technologies can be threats, but innovation turns them into business enablers. Innovators’ business models are built to monetize disruption, making them more resilient and adaptive. They seek out disruption instead of hiding from it. In the GenAI marketplace, there’s nowhere to hide. Companies that don’t innovate won’t survive, but it’s not enough to just bang that drum. We must explain why and provide a pragmatic alternative. Otherwise, C-level leaders won’t have the will to act.
I'm working with Naas AI. For the last 3 years, Jeremy Ravenel’s (its founder) team has been creating an AI-driven automation layer that replaces people like me. His platform is built on some of my frameworks and delivers the same benefits as consultants like me do. The platform undermines V-Squared’s core business model, and I am helping Naas AI do it as a design partner. I only have the will to act because I understand why innovation is so critical.
Naas AI is a more efficient way of delivering value, and pretending it isn’t would be the end of V-Squared. Fortunately, business model platforms offer an alternative to competing against each other.
Innovating And Rethinking Platforms
The power of platforms is they enable partnerships and an ecosystem business model. Platforms allow companies that would have been competitors in the past to partner and collaborate to improve both businesses. In the GenAI era, platforms have monetization superpowers. Few companies are taking advantage of them because they look like a threat. In reality, it's one of the most significant opportunities businesses will ever have.