AI Rule #1 - Customer First

4 Jun 2024 — 3 min read

In 1985, Warren Buffett wisely said,

"The first rule of investment is don't lose. And the second rule of investment is don't forget the first rule, and that's all the rules there are."

Similarly, the first rule of AI investment is to focus on the customer first. And the second rule of AI investment is don't forget the first rule.

In the four decades since Buffett's quote, investors around the world have shown how hard these words are to live by behaviorally. We just can't seem to collectively manage our irrational behaviors in the market. Business leaders are facing a similar "hot stock" siren call in the AI arms race - throwing enough funds into random investments and speculative moonshots that we could have sent another space station into orbit. This manifests in several ways, but there are a few red flags that commonly pop up:

Investing in a hot new technology to appear cutting-edge (resume-driven)
Creating features that would be better built programmatically, but using AI for the sake of using AI
Creating splashy, over-generalized features that don't meet real needs

During my time as a consultant, I've had a front-row seat to the AI frenzy, watching companies pour millions into ambitious projects. They often solve fascinating problems but miss the mark on what their customers truly want or are willing to pay for. The allure of cutting-edge technology and the hype of flaunting "Powered by AI" on their websites lures them into a costly trap. They end up with expensive solutions no one asked for or needs.

These companies run costly models on borrowed cloud infrastructure, tying up their brightest minds on use cases lacking business viability and customer appeal. It's like constructing a bridge to nowhere - technically impressive but ultimately pointless. A few of the more public strikeouts serve as a reminder to us about the dangers of getting our AI investments wrong:

Buffett emphasizes that the most crucial quality of an investment manager is temperament, not intellect. We've found this also applies to managing AI investments. It's not about mastering the technology first; it's about having the wisdom to prioritize the right use cases from the start.

Instead of treating AI as a hammer and viewing every problem as a nail, we need to begin with the voice of the customer—their journey, hopes, desires, and needs. You already know where to start with this. It's how your company has a moat in the first place. What does your customer value, and what is AI especially suited to solve? Use AI as a secondary tool to enhance a customer-driven use case.

Many organizations are finding tremendous success with AI today by leveraging the technology to supercharge various use cases while adding additional value to their customers, which allows them to charge more:

We believe that the success in these examples is rooted in design thinking. Instead of starting from the "left" side of the user journey with AI capabilities as a solution in search of a problem, start from the "right to left" with the customer's voice and work backward. Seek technology solutions to meet those demands; sometimes, AI use cases will be the perfect fit.

We've seen how building AI products without a rigorous focus on user needs can be a company's bridge to nowhere: an expensive and potentially impressive product that ultimately remains disconnected and unused. A customer-centric approach gives your AI efforts direction and purpose. It ensures that the technology serves customers, not vice versa.

Feeling overwhelmed about where to start? Imagine having a head start in the AI race with a roadmap crafted by experts who've faced the same challenges you are. We've distilled decades of experience into a dynamic 45-minute presentation on Leveraging AI for Your Business. If you'd like to discuss having us come out and deliver the presentation, reach out to learn more.

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