AI product innovation for SME

Hero vs Hype

It’s been long since we’ve seen such a clear winner in the Hero vs Hype debate as with generative AI, particularly large language models. AI is here to stay and will affect the way we live, shop and do our work. Much like your customers expect your business to operate and be visible both online and offline in the current era, your customers will expect your products to become cheaper, more efficient and more intelligent by the use of AI in the future.

Although AI technology is here to stay, there certainly is a lot of hype. At the moment of writing (mid-2024), we’re definitely past the peak of inflated expectations: the time where slapping AI on anything and everything is making place for a more grounded approach. Many big tech players and VC-backed start-ups are currently failing to deliver on the overhyped expectations. Does this mean AI is a flop? On the contrary! Currently the market is figuring out where and how to apply current AI technology best. This is a game of trial-and-error, whilst figuring out customer needs, educating users in and maturing the underlying technology. Will an AI-driven toothbrush really be the future for dental hygiene?

So long story short: despite the disillusionment of AI, we expect more useful AI applications to pick up in the near future. Currently, we see most promise in language-related applications, such as creation of personalized content, conversational UI’s, text parsing/summarizing, but also code generation. However, instead of burning big money on the next AI-driven gimmick (AI whisky, anyone?), the market will move to more cautious and grounded product development. Customers will be more critical of the value AI provides and will consider downsides (e.g. privacy) as well.

An opportunity for smaller businesses

Now the dust is settling on the hype, opportunities are arising for smaller organizations. Implementing AI becomes cheaper and easier, particularly since AI models are becoming more and more available and competition is emerging in the market. Also, the pioneers of the AI landscape have been testing the waters for you, meaning you can learn from their experiments as to what works well and what doesn’t.

That’s why this is the perfect moment for innovative SME companies to hop on the bandwagon and start creating AI solutions in their products. This is because of three market trends:

1. The technology is maturing fast: with the availability of cheap pre-trained, off-the-shelf models, there is no need to worry about the underlying AI technology. What pain your AI solution solves for your customers becomes more important. And you know your market best!
2. Second mover advantage: no shame in stealing a great idea. With big tech throwing spaghetti against the wall to see what sticks, there are plenty of learnings you can translate to your niche or market.
3. Customers are more AI-savvy: with AI being available in broadly used applications ranging from Windows to Snapchat, your AI application is likely not the first your customers will encounter.

An AI strategy for SME

As with any new product or feature you’re going to launch, it is important to take the right steps to get to a good product/market fit. However, the relatively fresh AI landscape gives some extra caveats to focus on, not in the last place because technology and customer behavior related to AI is changing rapidly. Here are our tips to keep budget under control and to make sure you hit the mark:

1. Determine why you want to start with AI: do you fear competition? Will your customers start to expect something different from your service? Are new substitutes or alternatives emerging, or do you expect price drops in your market due to more efficiency? All of these can be valid reasons for starting AI product development, but the underlying reason could determine what underlying areas of your customer journey you should investigate first.
2. Focus on creating real value for your customers: the problem you’re solving is more important than whether AI provides a solution. Look at steps in your customer journey which take a lot of time, incite frustrations or are inaccurate or difficult. Based on these customer pains it is possible to create a solution, and it could very well be that the new possibilities AI brings are just the way to solve this!
3. Launch early and small, iterate towards perfection: in a market where no-one really has all the answers, it’s important to guide investments based on customer feedback. Launch a small MVP and gather insights from test users. In fact, the cheaper the MVP the more budget you have left to hone your solution to perfection.
4. Keep an eye on competitors and big tech: the big spenders in this market have tried and tested a lot, which can give fruitful insights for your business. Can you translate generic solutions that seem to work well to your specific market or niche? Also keep an eye out for competition to see what works well and what does not.

In conclusion, the focus of the AI-hype shifts from the new possibilities, to a more grounded search for applications, with your customer’s needs being leading in what new features you should develop. It’s an interesting time for smaller companies to start experimenting with AI features in their (digital) products, and of course the team at Dutch Coding Company is here to help and guide you along the way. This is the perfect time to copy and learn from the AI-pioneers and to translate these insights to your market and customers. But beware, competitors could (and should) be doing the same!