Really confused to see the conclusion of "It's a good time to start a service business because of AI". AI can't perform, or even semi-perform, a single one of the example services the author used except maybe "design agency".
But otherwise, it does seem that starting a service business is sort of the ultimate "do things that don't scale" strategy.
Caveat: I'm approaching this from a 'indie hacker' mindset. The article mentions $10 million funding rounds, so they're probably approaching this from a different mindset.
The article distinguishes between a product business and a service business. In the former, the founders find a problem, build a solution, and then sell that solution to people who have the problem. In the latter, the founders find people who have a problem, and then build a solution for that problem.
In a product business, the risk is that you solve the wrong problem. In a service business, the risk is that you never find a problem to solve.
I used to be a schoolteacher, in schools where teachers tended to be on the verge of retirement. Most of my colleagues used computers because one day their typewriter had been taken away and a computer put in its place. Their technology use tended to be quite basic: emails and basic word processing. Most workflows were unchanged since the typewriter and mimeograph days. Almost all planning was still done on paper, on especially-printed planning books. (We were individually asked whether we wanted week-to-a-page or day-to-a-page when the stationery order was being prepared for the next school year.)
(Lesson planning is not a problem to be solved; I'm just using it as an example of the kind of mindset I was working alongside.)
This is a problem-rich environment filled with people who don't know that many of their problems can be solved by computers. You can't ask these people what problems they want solved, because they don't know that their problems can be solved. You have to have something to show them and point to and talk about before they can grasp the idea that it's even possible to automate some of their work.
However, I speak from a position of privilege. I spent years working in that environment, and I walked away with a list of problems - a list of potential products. If you've only worked in software, you won't know any good problems. You'll know some bad problems, and they'll be bad because your potential customers - other software engineers - are just as capable of building their own solutions as you. In that case, a service business is probably no more risky than a product business.
If you start a product business, your moat is the insider knowledge you have of how to solve the problem you solve. If you start a service business, your moat is your reputation for solving people's problems. If you have no insider knowledge, you start your business with no moat at all, and have to dig it while building your castle, whereas the founder with inside knowledge just has to build their castle within their pre-dug moat.
Is the kernel of this advice to start with a known problem which is already solved with a paid service, and then just sell that service more efficiently? That's how I'm interpreting the "skip the R&D phase" idea. In that case I think the question becomes "why is this a better strategy for a startup", since this framing implies going after well-established markets with (at first) an undifferentiated product. Both 'productize' and 'automate' sound like things that incumbents would be able to do more effectively than startups, and likely has already happened in most cases silently in the background.
We started selling services in earnest alongside our SaaS product this year, and it’s working out well. We didn’t think of doing this during ZIRP; it was relatively easier to invest in more rapid product development.
Palantir is a classic example of what is a hybrid services => product business. It was a _very_ long road for them to get to a point where their product could actually scale without massive implementation effort, but I think they’re finally getting there (they offer a cheap self service option now AFAIK)
If the service opportunity is to resell AI skill to the people who lack it, consider productizing and selling Education instead. Otherwise the clock is ticking for a new model to put you out of business. Most folks will need to learn “AI for ___” eventually, and product businesses are way better to own. Service businesses are a lot like being employed. (Having run both.)
On a really long timeline, it's probably high-end services businesses that have the most job security. I'm thinking of professions like Michelin-quality chefs, performance coaches for top CEOs and athletes, etc. These will likely never be replaced by any sort of automation, at least within our lifetimes.
I disagree in part.
It really comes down to your own temperament.
I think micro SaaS solutions for small tiny verticals that are neglected by VC backed firms are the better option.
- They scale better
- Less competition
- Customer service is less of a headache with a physical product or SaaS
- Easier to exit
Sorry for the off-topic, but reading this text I thought about myself.
I find myself at a critical point where I wonder what I should do next. I'm over 40 years old and have accumulated years of experience. Sometimes I feel like Neo when he controls the Matrix. Maybe I've been in the same role for too long, but it doesn't matter what project I'm assigned: I implement it with little difficulty (beyond the time cost, exhaustion, etc.).
On the other hand, despite the confidence they've always had in me, the place where I work is starting to feel hostile. Being an introverted person, I try to figure out if this is something that depends on me (and if I can redirect it) rather than looking for answers where I should. Being introverted, it seems unwise to start something that depends on my social skills. Conversely, every day it seems like new obstacles appear, as if going to a job that I liked 90% now feels like a problem.
I have to say, I work in a flat-structure company where the boss is a megalomaniac who wants to control everything. A good part of the new things we do are his impulsive ideas. The office is filled with figurines (dinosaurs, busts from 80s movies, ...) and motivational quotes. He gives talks about how well he does things and how great it is to work there, but he doesn't improve salaries or do anything to provide training, a better work environment, etc. He also plays dirty tricks on employees, like unexpectedly complicating pre-arranged vacations or trying to delay them without a real reason
While writing this, I realized that the 10% that made me not like the company has always been because of him. And if I don't like it, it's because of him.
The only thing that keeps me tied to this place (besides the money, since I don't live in the opulence of certain regions where software is very well paid) is the entrepreneurial spirit of having done so much in the product.
PS: If someone saw our product, the things we have done with just 4 people (on average), they would be amazed. And, with all humility, a large part of that has been driven by me, which ties me and kills me.
very curious question to the author here: how is this different than the "gig" or "expert" economy thats offered from places like upwork and fiverr? these are technically all "services" offered by various people, but often feels like a race to the bottom (lowest price wins)
>The most interesting reason why now is a good time to start a service relative to other times is automation enabled by AI
A good time to start a business is when you know a lot of people with some pain who could become your customers. Obviously, you should know how to solve their pain better (i.e. making a better design) and more effective than others.
There are lots of existing businesses that are not stupid. Of course a lot will try to integrate AI into their workflows. They have clients, you don't.
> How do you find that first customer? Talk to the people you would have recruited as your first users if you were starting a product company.
How to find customers? Go find them.
> Instead of convincing them to use your product to solve their problem, just solve their problem yourself. Charge more than you would’ve if you’d sold them a product!
They have some pain, and you are trying to convince them to pay more because you are spending your time to solve their problem yourself, but you will use AI.
There are existing businesses that already have pipelines and experience solving their problem, with or without AI.