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Every growing business eventually In-House AI confronts a critical decision: Should we remain focused on our core operations or explore new and unexplored avenues? This dilemma involves choosing between improving our current offerings or embarking on a journey to develop completely innovative products.
Tech giants looking to venture into new territories often opt for the strategy of acquiring early-stage companies or teams and assimilating them into their existing ecosystems. In-house AI is primarily due to the fact that established organizations find it challenging to deviate from their core activities. In reality, starting from scratch and building something new is always more arduous than expanding an existing venture. In fact, less than 8% of internally launched ventures manage to achieve significant growth.
The M&A strategy is not always the solution for achieving growth. This method requires significant financial resources, which are typically only available to major players in the industry of In-House AI like Adobe, Google, and Meta. Additionally, it requires expertise in acquiring and integrating new ventures. Despite these requirements, a large percentage of acquisitions, ranging from 70% to 90%, ultimately fail.
Reface undertook a formidable task of acquiring the knowledge to establish fresh ventures within the organization. This article will divulge our approach to assessing novel product concepts and the criteria we employ to ascertain if a particular idea is worth pursuing.
Is In-House AI enlightenment or methodology?
The Y Combinator’s traditional advice on “noticing” ideas is undeniably an effective method for uncovering new concepts. However, it may not be sufficient for a company that requires a continuous stream of ideas to work on. As a result, we have been refining our own methodology through a combination of trial and error, seeking external advice, and conducting extensive research on the subject.
This approach has proven to yield a greater quantity of ideas that meet the criteria for testing, surpassing the limitations of solely relying on the “noticing” approach.
To foster innovation in an established In-House AI company, it is crucial to establish a designated area where fresh ideas can be generated. In the midst of the daily operations of a functioning business, employees often focus on their routine tasks and tend to adhere to established procedures and objectives, rather than exploring novel concepts or launching new initiatives.
Hence, it is imperative to create an environment that promotes the generation of innovative ideas.
During the initial stages of idea exploration, In-House AI advocates for the implementation of collective brainstorming. This can be followed by a gradual transition towards clear ownership during the idea execution phase, mirroring the circumstances of a founder launching a startup.
To facilitate this process, it is recommended to establish a small, dedicated In-House AI team consisting of no more than five individuals. This team will be responsible for managing the idea backlog, creating an analytical feed of ideas, and developing a framework for evaluating and prioritizing ideas in alignment with your company’s strategy.
It is imperative to construct an analytical stream of concepts of In-House AI. Our team has developed a mechanism that scrutinizes current ML research papers, responds to popular topics on social media and search engines, and monitors diverse sources of inspiration.
During the entire process of generating ideas, we have two In-House AI important recommendations.
Firstly, it is crucial to adopt a highly focused strategy by conducting concentrated sprints that target a cluster of ideas. If one idea is rejected, it is essential to promptly shift focus to the next one.
Secondly, the emphasis should be on identifying promising areas for ideas rather than fixating on a particular idea. Even if the initial concept does not succeed, exploring the right space can potentially lead to the discovery of viable alternatives. Essentially, we search for fertile ground, having faith that within it, the seeds of innovation will naturally flourish.
It is of utmost importance to establish a structured approach for assessing ideas. Once you have spent several weeks generating In-House AI ideas, you will inevitably be faced with a multitude of options, which can prove difficult to evaluate and prioritize without a systematic framework.
Hence, I would like to present the methodology that has proven effective in our organization for consistently generating, refining, and testing novel product concepts.
1. Query: Does your product provide relief or prevention?
Throughout centuries, there has been a consistent pattern of In-House AI: every product is created with the intention of solving a specific problem faced by its users. Therefore, it is crucial to comprehend the nature of the problem and how it can be alleviated. The importance of your product idea lies in its ability to act as either a painkiller or a vitamin.
However, determining this is not a simple task. Take, for instance, Character AI. At first glance, it may seem like a tool for entertainment purposes only, without any apparent problem-solving function. Nevertheless, it has managed to maintain an impressive retention rate, surpassing 30% after 30 days [Sensor Tower].
This level of In-House AI performance is comparable to the top social products available in the market. By September 2023, it had amassed 4.5 million active users in the U.S. This data serves as concrete evidence that AI chatbots are effectively addressing a significant issue – the problem of loneliness and social isolation, which continues to be highly relevant for our generation.
2. when conducting research on a problem.
Whether In-House AI is observed in online forums, social networks, or casual conversations with friends, any indication of this demand strengthens the belief that the problem truly exists and individuals are ready to invest in resolving it.
We conduct a thorough analysis of the existing solutions available for the given problem. Our aim is to actively identify competition that effectively addresses a specific issue. The presence of a successful business catering to the problem indicates its existence and the willingness of users to pay for a solution.
However, we also assess the quality of the solution. Is In-House AI customized for a specific user base? Is it technologically advanced? Is it widely accessible? A prime example of a “strong idea space” is Excel, which has evolved to cater to more specialized use cases. Numerous successful startups have emerged to replace Excel, offering CRM systems, HR software, personal finance management applications, and more.
These tools all stem from the common spreadsheet, originally used for organizing information, but have since developed into specialized applications with targeted functionality and design to meet diverse user needs.
Certain products, such as Airbnb, are naturally used infrequently, with users only engaging once every six months. Although these products can be exceptional, their low usage frequency requires the implementation of scalable strategies to ensure user engagement and retention.
Market scope: Each industry operates on its own set of principles, and in the realm of B2C apps, it is highly improbable for a new product to secure more than 10% of the market. Hence, it becomes imperative to concentrate on issues of significant magnitude that allow for the attainment of a practical market share in line with your objectives.
3. The hypothesis for the product significantly distinct from its competitors
Once you have evaluated the potential of your idea space, it’s time to engage in brainstorming and formulate a product hypothesis. It’s crucial to address two key questions at this stage. Firstly, does your product offer any superiority over existing alternatives? Secondly, can it generate revenue and establish a profitable business model?
Utilize the Delta-4 method by evaluating current market products and their performance in relation to various issues or target audiences. Only enter the market if you can confidently identify a difference of at least four points in quality, cost-effectiveness, or other distinguishing factors. Even if your product is rated a 10, if existing solutions score a 7, customer reluctance may hinder adoption. Therefore, aim to be superior or distinct from competitors when entering the market, catering to specific customers and use cases.
