In spring of 2023 I remember having a chat with a founder who was exasperated by all the buzz around AI by those who did not actually understand what it meant. “I can add an AI chatbot onto the platform if it’ll make people happy” he said facetiously. Fast forward three years and clients are much more well informed and expect sophisticated AI integrations, so that joke just doesn’t land anymore. What a founder might have considered differentiation a mere three years ago is just table stakes now.

It wasn’t so long ago, but I clearly remember the founders I knew feeling extreme pressure to perform with the sense that they had to tack on AI to everything they made just to gain credibility with the market. Of course now both clients and investors alike are expecting meaningful integrations rather than some clumsy feature bolted on as an afterthought. One of the clients we advised provided IoT infrastructure and involved a sophisticated blend of hardware and software that was well received, no buzzwords required. Although still a fairly young company they had landed some impressive early clients and were growing rapidly.

This startup was lauded by those early clients and was used as an example of commitment to “digital transformation” so there were high stakes to keep a cutting-edge image. Once AI became a top of mind topic, the founder and team felt a lot of pressure to add AI features to existing products. However, as this add-on wasn’t organic (that is, they added AI features because they felt they had to, rather than naturally adapting AI because it truly streamlined the product), the initial iteration quickly fell flat with the existing customers. Unsurprising, as they were quickly able to discern it was indeed just an afterthought.

We pride ourselves on our insightful guidance but in this case, it did not take a seasoned advisor to recognize they had to pivot, and fast! The engineering team already had a planned expansion, and the AI fluency of the additional team members meant new, more adapted AI features could be launched fast. It was a rocky period, but the company quickly regained its footing.

Not all companies, particularly those bootstrapped startups, have the resources to be able to rebound after this type of misstep. When clients, or potential customers, ask “does it have AI” we have to take a step back and consider the implications rather than rush in order to tack an AI feature on haphazardly. Of course, that pressure doesn’t always have to come from customers naively asking for features they don’t understand, or investors who want to ensure their portfolio companies stay competitive and provide healthy returns. It can also come from founders and their teams watching their competitors launch AI features left and right and wondering if they are missing out. There is a genuine and justified fear in looking like they are falling behind, and that can be a powerful motivator to panic-add a new feature that no one actually needs or wants.

So what can we learn from a company that had to learn this lesson the hard way? Essentially, “does it have AI” has always been the wrong question, be it asked in 2023 or now. The real question that deserves exploration is what problem the AI is actually solving. Is it solving something that fundamentally matters to the product and the customer? Anyone can tout AI as a buzzword but there has to be something substantial behind it.

Consider the following:

How does the integration of AI capabilities improve the product? Is it meaningful or contrived?

If it does indeed significantly improve the product, how does it impact the unit economics? Because it absolutely will, and the price must be adjusted to account for the increased costs to keep margins healthy.

Once that is considered, how will this impact your market positioning? Think about how you’ll keep a product competitive in the marketplace, and how your conversations will need to shift both in terms of capabilities but also pricing.

Fear is a powerful motivator but can lead to expensive mistakes. If you need a strategic call on whether that new feature actually earns its place, let’s connect.