Service firms stand to benefit from AI more than startups
Why now is a great time to be a lawyer, accountant, architect, or fractional exec
By Chris Roth
AI products are getting all the hype, but I predict that service firms will be the real benefactors of this AI revolution more than the thousands of AI startups popping up every day.
Why?
Service firms [think law, medicine, accounting, and software] exist precisely because they cannot be automated away using a single product. Products have popped up left and right such as pharmaceuticals in medicine or Quickbooks in accounting, yet nothing has killed the services firm model itself. [Side note: I really hope that tax can be automated away.] I argue that there are 3 big reasons why service firms will not just continue to exist, but actually come out ahead:
1. When clients seek out agencies, they by definition have a problem that cannot be automated entirely.
Service firms naturally have pipelines of clients who have complex problems that require human touch, are difficult to automate, and who have been hired based on empathy, trust, and connections - all traits that AI does not possess. What’s more, humans create powerful relationships with other humans, which is irreplaceable by AI: think about how recruiters are entirely relationship based, how your CPA may have first-hand experience working as an IRS auditor, or how your fractional COO may already know dozens of well-known investors that she can introduce you to.
2. Humans crave help from other humans.
Service firms are hired at a moment that humans desire the help of other humans, and that basic human instinct is not going to disappear any time soon. Because clients present complex problems that require human touch and are difficult to automate, a high degree of trust and empathy is required - and this empathy and trust is exactly what AI does not posses.
3. AI cannot be trusted.
AI can do nearly everything, but it should never be responsible for making judgement calls that a human manager should make, such as making the final call on an investment, hiring, or worse, something as heavy as whether to pull the plug on a patient that's on a ventilator or whether or not someone should go to jail. Service firms might not be making judgement calls quite on this level, but they are absolutely making high-stakes judgement calls for their clients every day. Consultants have had spreadsheets to calculate management decisions for decades, but they are paid for their human touch.
Service firms won’t lose clients en masse because there will always be demand for a final human judgement call and human expertise. Yet, they stand to benefit from new ways of automation that have never before been possible. The gap between this human touch and the newfound efficiency will be enormous as service firms streamline their processes to get faster results for their clients while doubling down on building trust and empathy - the precise thing that they are getting paid for.
I’m sure that some service firms will indeed find themselves getting put out of business by AI - but I argue that these are the firms that were not built on trust and judgement in the first place; or, perhaps, these firms will be the ones that fail to adopt the AI and become sluggish and outdated in the face of competitors.
In my humble opinion, now is the most interesting time in history to be running a services firm.