Why customer centricity is the key to success in generative AI

We are living through a fascinating era in technology. Generative AI is a significant platform shift that will impact every facet of the enterprise, and we have the privilege of watching this unfold in real time. 

In 2023, generative AI became mainstream in the zeitgeist of tech. Looking ahead at 2024, however, a lot of challenges still remain for startups looking to get deployed in the enterprise. Fortunately, software budgets are still growing faster than other areas of IT spend such as hardware, services, and communications. Within software, generative AI has also become top of mind for CIOs, with 68% of them reporting an impact on investment priorities. So clearly there is a compelling ‘why now’. However, only half of CIOs expect projects to be in production by the second half of 2024 and beyond. 

This gap – between interest level and readiness to deploy – actually represents an enormous opportunity for founders with the right mindset and approach. At Lightspeed, we’ve met with hundreds of startups looking to build the next-generation of AI companies. What we’ve observed is that the companies gaining the most traction all have one thing in common: an obsession with being customer centric. 

Focusing on first principles: five questions

As we did with our SaaS 4.0 framework, we’ve identified first principles that we believe the best founders are embracing to differentiate themselves in what is already becoming a noisy market. CIOs today don’t yet have a concrete roadmap to follow. There isn’t an established path yet to becoming “AI mature” and no benchmarks for enterprises to measure themselves against. Many are still in experimentation mode. We believe embracing these five questions will help startup founders navigate this market transition.

1) What problem are you trying to solve?

Budgets in IT stem from priority areas for concrete problem areas and real pain points that keep decision makers up at night. The technology you’re leveraging is obviously important, but even more paramount is what problem you’re solving. Start there, not the other way around.

In the case of Intenseye, for example, their technology relies on sophisticated machine vision and machine learning models to drive accuracy. They don’t lead with that however, and instead focus on marketing a real problem that budget holders in their industry face every day – nearly 3M people die every year from workplace accidents and their solution reduces casualties and injuries. 

Similarly, identify where you sit, and whether you need to go after a new line item or if you’re replacing/competing for an existing budget line. Roughly 30 percent of tech leaders are carving out space in their IT budgets for net-new AI projects. 

2) Which segment of the market are you targeting?

Specificity is key. Trying to be all things to all people is so tough in technology today. Figure out what segment of the market you want to target first — SMB? Midmarket? Enterprise? — and the industries you want to approach first. 

EvenUp, for example, identified that the greatest market need at the outset was within small injury law firms that cannot afford large paralegal teams. Their solution was deeply focused on this segment to start, and incorporated a lot of the workflow requirements that were specific to smaller law firms. This focus allowed them to win significant market share. 

3) What integrations do you need to pursue?

Software purchase decisions are never made in a vacuum. Existing IT infrastructure is complex and interdependent; if your solution doesn’t integrate easily into what an enterprise is already using, you’ll have an extremely tough time convincing a CIO to take a chance on your software. For example, if you’re building a healthcare solution that doesn’t integrate with an industry-leading electronic medical record platform like EPIC, you don’t stand a chance of winning a large enterprise deal. Abridge understood this early. The more your product fits like a jigsaw piece into an organization’s sprawling tech stack, the greater your chances of success.

4) Who are SI partners that can accelerate your path to market?

As a startup it’s hard to go it alone. Fortunately, systems integrators (SIs) are often looking for new technology that they can bundle to add value to their offerings and make life easier for their customers. Identify the reputable alliance partners with the most clout in your vertical and customer segments, and work on ways you can collaborate to enhance your go-to-market story.

UiPath famously leveraged this on their journey to being a public company. By partnering closely with firms like Deloitte and Accenture, they created a win-win-win for their customers, the SI firms, and UiPath. 

5) How can you be a thought partner with the CIO?

The most effective way to gain the attention of CIOs — and have your solution become an integral component of their technology stacks — is to help them navigate an increasingly complex IT environment. By defining where you believe the industry is headed, as well as showing how leading companies are responding to the moment, you’re giving them valuable input they can use to do their jobs better. There is a clear imperative for enterprise IT to be a revenue center instead of a cost center, and CIOs are thirsty for knowledge on how to make that happen. By being a thought partner with your customer, you can help define the direction the industry is moving towards.

Customer empathy

Besides first principles, the other key element to success in the burgeoning gen AI market is to encourage your team to put themselves in the shoes of your customers. Understanding customer pain points and building empathy for the challenges they face each day will enable you to build products that solve real problems, while also enabling you to stand apart from the crowd.

For example, when I was at Salesforce, each executive was asked to sponsor at least one customer. By developing a closer relationship, executives could both see what that customer’s needs really were – even if they weren’t in sales.

The larger point is that many tech startups are so head-down-focused on building great products that they sometimes fail to realize that it’s people who are ultimately using these tools on a daily basis. Customer centricity can and should become a cultural norm that distinguishes you from the pack.

If you’re building a disruptive technology with customer love at the center of it, I’d love to hear from you.