Latest / GTM Made Simple / Every AI Company is Failing at the Same Thing

Transcript

Every AI Company is Failing at the Same Thing · GTM Made Simple

• 0:00
  All AI companies right now are in problem market fit. There's
• 0:06
  not one. None, regardless of what their revenue is, is in product market fit much less than a
• 0:13
  in a platform market fit. Let me tell you what we have assessed at 2000 companies over the last
• 0:20
  five years through our research. We call it the go to market assessment. Since we wrote the move book,
• 0:25
  which became a Wall Street Journal bestseller. Thousands of companies, CEOs that we have talked
• 0:29
  to, interviewed and have done advisory work with, they've gone through this assessment. And the
• 0:34
  number one mistake, number one mistake most CEOs do is that they think they are in a product
• 0:39
  market fit, and they think they are in a product market fit because of the revenue. Some even think
• 0:44
  that in a platform market fit. But when you really dig in, they really are not. They are actually in a
• 0:49
  problem market fit. And let me explain to you what that means. A problem market fit company is when
• 0:55
  you market has a real pain. They know it hurts or at least they have that inclination. They want it
• 1:00
  and they're searching for a solution. That's why I say all these companies are in properly market
• 1:06
  fit because, you know, everybody is looking for AI solutions. So there is a huge market in all these
• 1:13
  AI companies that are trying to figure out, well, I can install data problem, I can solve supply
• 1:17
  problem, I can flat demand problem, whatever that might be. You're still looking and searching for
• 1:22
  the problem market fit and therefore that is a big challenge. That is a big area. Lots and lots of
• 1:27
  companies are here. They never move from here to the next stage of this product market fit. And one
• 1:33
  more thing on problem market fit. You could be a $20 million company and still be a problem market
• 1:39
  fit. You might say how? Well, let me tell you a quick story. I was on a board of a company where
• 1:44
  they were about 25 million in revenue, and and their valuation was roughly 200
• 1:51
  million. And at the same time, there is a competitor that has only 5 million revenue, and
• 1:57
  their valuation was half a billion. So the CEO, because I was on the board, I was very close with
• 2:02
  them. He was like, man, what is this is crazy. I'm 25 million for a same category, same product, same
• 2:08
  price point. And we still with 25,000,000oz, you know, roughly 200 million. Valuation. And this
• 2:15
  other company that has 5 million. That's it. 5 million revenue. How come their valuation is half
• 2:20
  a billion? And I looked at him straight and said, dude, because you're a problem. Market fit. He's
• 2:25
  like, are you crazy? I'm 25 million. The CEO was like my friend. He is a friend. And he was really
• 2:31
  mad. And I'm like, look, here's the thing. The 25 million, when you break it down, it is for
• 2:35
  different ISPs, different type of customers, different geos. Your team is bloated. You have you
• 2:41
  need lots of customization. You're doing a different delivery every single time. The sales
• 2:46
  process cannot be replicated. Yes, you have a few big veils and big deals that has got you to 25
• 2:52
  million, but it's not repeatable enough. You cannot go from 25 to 50 with the same. You're going to
• 2:57
  need so much money to raise. Therefore, your valuation is good, but not great. The $5 million
• 3:03
  business is replicable. Yes, they have a similar product, similar price range, but they're only
• 3:07
  focused on this one ICP and going after this one market and this one persona. And they're going to
• 3:13
  go to ten to 20 to 25 million without even adding net new employees in their organization. Therefore,
• 3:20
  their valuation is so much higher. So revenue is not what will determine if you are in a problem,
• 3:25
  market fit or product market fit. It is. Is it replicable? Which brings me to product market fit
• 3:31
  your product? If it solves that pain point that you identified in a problem market fit and is
• 3:38
  better as better than any other alternative out there in the marketplace, maybe it is in price or
• 3:43
  package or positioning that customers are going to stay, and they even might refer to other folks,
• 3:48
  and you might even be able to expand within them. That's where you get product market fit. Now, most
• 3:54
  AI companies have not achieved that. You might see this hockey stick of adoption on tools like
• 3:59
  lovable and whatnot, but they have no idea. They have been there for a year or two years, maybe. Max,
• 4:04
  who knows? Yesterday I had somebody reach out to me and said, hey, I built this new product, and two
• 4:11
  days later, somebody else replicated that entire product into their existing product, and all of a
• 4:16
  sudden, all the customers from here just went over there. There's no loyalty in AI. Today, everybody is
• 4:21
  testing. Everybody's experimenting. What is out in the marketplace. Which brings me to platform
• 4:28
  market fit. This is the gold mine. This is where you make money. This is where revenue source. And
• 4:34
  this is where you can actually say, I got a real business. Your product becomes the system of
• 4:41
  record. Think about Salesforce for CRM. Think about HubSpot for marketing automation. Think about any
• 4:47
  of the tools. No matter what industry you're in. You will know and recognize. Yeah, this we can do
• 4:52
  without that. It's not even a question of do we have and do we get any ROI out of it? It is how
• 4:58
  your business is transformed because it is a system of record. Your customers will be building
• 5:03
  workflows around you. And switching cost is very, very high from from your product to any other
• 5:09
  product. That's where you go into platform market fit, where you can now sell not only to them, but
• 5:14
  adjacent markets. You can go deeper to different personas. You can go to different ICP, you can go
• 5:19
  in a different region. This is how you become a platform, not just a point solution as a product.
• 5:25
  Now the distinction of where you are. Most CEOs absolutely miss it. Most
• 5:31
  CEOs I talked to have to validate and they have validated the problem. They have done the customer
• 5:37
  interviews, they have heard the pain. So they assume like, oh yeah, I have the pain. We have the
• 5:42
  product and here's the market. So they assume that they have product market fit. But here's what
• 5:47
  really happens. Just because people have a problem doesn't mean your product is the answer. Problem
• 5:54
  market fit gets you early meetings, that's for sure. Product market fit gets you
• 6:00
  revenue. That's when when they're ready to pay. You know you're in a product market fit and a
• 6:05
  platform market fit gets you the mode. This is around which the entire business is running. Give
• 6:11
  you another example. If you think about businesses that have melt. I'll talk about like a blue collar
• 6:17
  business and a white collar business. So you think about like HVAC. Um, we have an HVAC. I live in
• 6:23
  Atlanta, and over there one day the guy came in and said, hey, what if we actually do a monthly
• 6:28
  subscription for your HVAC units where you never have to worry about if they go down or not? We'll
• 6:33
  have service. We'll have maintenance. You don't even have to know about it. If there's an issue
• 6:37
  with fluid or whatever in it, coolant, we'll take care of it. It's going to be 100 bucks a month. I'm
• 6:42
  like, sign me up, because it's going to be very hard to switch, and it is going to be for not not
• 6:48
  just my house, but also my rental house. We signed up across the board. I take a white collar job, uh,
• 6:53
  think about a CRM platform like, you know, to yank it, like, I'll tell you like Pardot, for example.
• 6:59
  Then Pardot got acquired by Salesforce, part of this marketing automation company that I ran
• 7:03
  marketing at, and then we got acquired by Exacttarget and Exacttarget. We got acquired by
• 7:08
  Salesforce for $2.7 billion. Right. And Pardot is a marketing automation. Guess what? Salesforce had
• 7:16
  another marketing automation platform in it. It was so hard for them to yank everything out of
• 7:21
  that marketing automation. The switching cost was so high that even though we were selling
• 7:25
  marketing automation of Pardot, aliquot was still there behind the scenes doing the work. So it was
• 7:30
  very hard. That's why it's the platform market. That's where you get the most. So if you are stuck
• 7:36
  anywhere between 3 million to, let's say 15, 20 million and can break through. This is usually
• 7:43
  why you have validated the problem, but you've never validated the product. All the companies
• 7:49
  right now on a problem market fit. If your organization is looking and trying to figure out,
• 7:54
  I'll highly encourage you to go to run on GMOs. What? It will help
• 8:01
  you to figure out what your next move should be, regardless of what stage you're in. It will assess
• 8:07
  if you're in a problem, market fit or product market fit or platform market fit. It will give
• 8:11
  you frameworks so you can literally deploy those in your organizations to move in transition, and
• 8:16
  it will help you figure out, diagnose, pinpoint exactly what you need to do as 2000 plus other
• 8:22
  companies that have used it to do to move from one stage of the business to another, because that
• 8:27
  movement is going to drive the greatest transformation for your business. So with that, if
• 8:32
  that makes sense, let's get moving.