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E131: Protecting Your B2B SaaS Against the AI Moat Problem

AI has lowered the bar to entry into markets meaning more competition for your customers.  This has the potential to cannibalize the market. 

How should you respond?  Let’s discuss.

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Episode Transcript
 Hey folks, Sean here, and today what I want to talk to you about is something that I’ve been referring to as the AI mote problem. Now, if you’ve heard me share any of this terminology before, you probably have an idea of what I’m about to say, but what it is, is more context around how you should be thinking about strengthening your value proposition for your B2B SaaS, given the remarkable capabilities of the AI tools which are arising.

Very quickly in popularity and their capabilities in terms of enabling people to be able to do significantly more with their SaaS applications much faster and more cost effectively. Now, before we had access to these tools, converting inputs to outputs generating remarkable outcomes may have required significantly more coding, solution design, engineering, innovating.

The challenge with these tools, the good and the bad is that they’re capable of remarkable things, and they can do that relatively quickly. So you can plug in an AI tool into almost any component or feature in your product and make it better, if not significantly better, not just much more quickly, but also more cost effectively.

Now, that has raised the bar for what all of our tools need to be capable of in order to compete successfully within our respective markets, but at the same time, That has also lowered the bar to entry into creating a product that is more capable faster and more cost effectively. So that raises the competition is really what I’m trying to say.

Different way to say it is what I started this episode by saying is it’s a moat problem, as in AI has created a potential scenario where there’s no moat around what it is you want to build because potentially what you’ve built, leveraging AI is something someone else can. Probably just as quickly cost, effectively, easily, all that kind of stuff.

So if it hasn’t taken you very long to build whatever you were leveraging with the AI technologies, then more than likely someone else is either working on it or maybe working on that relatively soon. So I wanna talk about what you do if you find yourself in a situation like this. Well, it all depends on the problem that you’re trying to solve, right?

We always go back to that. It essentially d. Everything or the, the most that it can for any individual B2B SaaS application project. The problem that you’re solving is also going to help you with defensibility, that key element which will prevent potentially more people from cannibalizing the target market in your space.

Because you’ve selected a particular problem, perhaps in a niche or in a horizontal that is, doesn’t have as. Competition for that target market. Now, you can always go more niche and you can always find a subset of a subset. To continue to make your tool more specialized and to dive deeper into whatever target market it is you’re competing.

That’s always going to be preferential and helpful, and is always gonna be probably the most effective strategy to increase the defensibility of what it is that you’re building. The other thing that does is it enables you to benefit from, you know, the expert scenario as in where the you, the more you are specialized.

The more that is typically in demand, as in think of it from the perspective of if you have to have a knee operation, right? Who do you want to work on your knee? Do you want the generalist who works on basically all potential health related problems? Or do you want the specialist, somebody who only works on repairing knees?

Right? That’s a pretty easy way to think about that. The other benefit to that is, number one, there’s typically less specialists. Also makes supply a little bit harder to come by. Uh, at the same time, because they’re so specialized and in demand when they, that problem is out there and needs to be solved by someone in their target market, that also raises the prices for what it costs to acquire their services.

And you’ll stand to benefit from those same elements as well. So if you’re concerned about the AI mode problem, it’s real. I’ve seen it and I’m continuing to see it, and we’re gonna talk more. These types of strategies that you can lever to leverage to go deeper into your respective niche to increase the defensibility for your B2B SaaS.