As I’ve been working in the field of artificial intelligence for a few years now, there is one bad habit I see that does not seem to want to die. Ambitious AI experts decide to create AI consulting companies with the end game of becoming a startup. I have spoken with at least 10 entrepreneurs in the past 6 months with the same idea. They aim to cumulate experience as an AI consulting company to become a SaaS company later on.
However, I have yet to find any company who succeeded in this switch. I have a few theories why:
#1 - AI Consulting Companies and Startups deliver opposing value propositions
A great AI consultant can be defined as someone who is able to understand their customer better than anyone. A consultant listens to everyone in the company, digests the pain points, objectives and proposes a tailor-made solution. Software startups propose an opposite value proposition: standardisation. With SaaS, you get 80% of your tailor made solution for 20% of the cost and all the upgrades for years to come.
AI consulting companies deliver projects that perfectly fit what the company needs today, like a pixel perfect picture. Startups sell a movie trailer that will solve most needs and evolve over time. Companies adapt themselves and their process to the software to hitch their wagon to the innovation train.
#2 - AI Consulting Companies sell through empathy, Startups evangelize through conflict.
When a Machine Learning expert tries to sign an account, they not only demonstrate their expertise, but also demonstrate their ability to listen to stakeholders, reassure and inform anyone who needs to know what is happening and gather all of the information top management needs to make educated decisions. A consultant’s magic power, even in technical subjects, is the ability to create consensus across organizations and over the life of a project.
When I worked with Accenture in the past, they always discussed project governance with the term RACI: Responsible, Accountable, Consulted and Informed. I personally joked that RACI means every task needs one worker and three “managers”.
Once startups have studied the market, identified an opportunity and targeted a potential buyer, they do not listen to customers. They evangelize a vision for the future. Startups preach their values as self-evident, go after an “enemy” to explain how they are different. This is similar to artistic movements. Realism rose to prominence as a criticism of Romanticism. Prospects may adhere to this vision or not, but it’s better for a startup to have 100 customers love the product than 10,000 customers who don’t care.
When Marc Benioff created Salesforce and declared that Cloud was the future of Tech, he did not wear gloves when hitting on traditional software vendors. He created an enemy, preached a vision and created a following.
#3 - You can’t change a company’s DNA.
I’ve discussed above why AI Consulting Companies and Startups are very different. Both are essential to an ecosystem, complementary like two sides of the coin. But the differences are more than just product and sales cycle, the differences are in the DNA.
Startups need to balance speed with excellence. It’s a high stress environment. Resources are scarce, arbitrages are tough and no-one can hide behind corporate politics as they would in a big company. Conflicts are always present and need to be managed permanently. The people able to thrive in this environment are few and precious.
The main reason why AI consulting companies cannot become startups, in my opinion, is because they hire employees who are consultants. Everyone, from sales to technical staff, breathes and lives to deliver a five-star service to their customers. They don’t manage conflict and don’t tell customers what to do or how to behave. If these employees had wanted a startup environment, they would never have joined an AI consulting firm.
So what to do if you created an AI consulting company and have found a great idea for a startup? Let the consultancy go, start on a fresh slate, and go after the status quo.