20Product: Enterprises are not Adopting AI Yet, When Will AI Break Into Enterprise, What are the Blockers, What Do Enterprises Need from AI & Why Services Companies Will Win in the Next 10 Years of AI Implementation with Howie Liu, Founder & CEO @ Airtabl

0:00I think like product market fit is just the beginning and there are so many more hard parts of building a business. I think a million dollar logo is the threshold of being kind of a real enterprise account. Now we are nowhere near the tornado of every enterprise just knows they want AI in heaps and is very ready to go. Maybe that'll happen, maybe the train will arrive, but it's my sense from my conversations that we're not close to that yet. This is 20 product with me Harry, Stebnings and 20 product is the monthly show where we sit down with the best product leaders in the world to discuss product and go to market and stay.

0:36We're joined by one of the OGs of product like growth in the form of how we live at air table. Now in this show with how we discuss if ant prizes are ready for AI, what they want in it, what their buying process is, what needs to change in products as you move from PLT to ant prize, this one is a gold mine of knowledge. And speaking of tools we cannot live without, I need your input on the 20VC Mirrorboard. About new guests we should feature for 20VC in 2023. Just head on over to mirror .com for slash 20VC. Mirror is a tool, like it's a truly game -changing tool. It's a visual collaboration tool, packed with the right tools tech and templates to help you think of and create that dream product.

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2:34I always love our chat. So thank you so much for joining me stay Yeah, it's great to be with you not a tool man But I always love to start with like founding stories But I want to see something a bit different today I wanted to start with, if you could cool yourself up the night before you started air table and gave yourself a beast of advice, what would you tell yourself? I think the biggest one is, it's really important to think not just about product market fit. Every percent founder is concerned about product market fit and there's this adage that like a second -pack founder thinks about distribution.

3:06My take on it is a little bit more do -off, which is it's still product market fit, but it's about figuring out the right product strategy that marries with an effective go -to -market model that lends well to that product, right? So certain products work well in a bottoms -up viral, organically adopted way. Certain products are single -user versus team -centric. You know, accordingly, I think you need to design a go -to -market model, whether it's outbound sales or performance marketing or organic and viral growth that really pairs well with that particular product dynamic. So in hindsight, we didn't think enough about go -to -market model.

3:40In the early days of the company, we just spoke some building a good product and happily and luckily that was good enough to get us to the next phase where we did start thinking about go -to -market, but I think it's something that we could have thought about a lot more. If you had a thought about it a lot more, what would you have done differently? Yeah, I think one of the differences was we built the product with the ability to become team centric, so we spent a lot of time engineering the backend to be real -time collaborative in nature, which was not a small technical feat. We thought about the team -centric use cases, and when we started putting out templates, this was a little after we launched.

4:14Initially, we built some templates that were more solo user -centric, some of that were more team -centric. In hindsight, I wish we had even more emphasis on the team -scale use cases, and especially those use cases that involved larger teams. I think we got to those sort of organically, but it was a little bit more diffuse. So early on, we got a very large range of different adoption. And I wish we had guided our adoption more and earlier towards the team -centric use cases with the anticipation that those would be the ones that A monetize better. The, you know, lent to more go -to -market models, right?

4:51You know, if you're taking a single user product out to market, it's just harder to make performance marketing work. You know, you can't really make outbound sales work, right? The economics of pitching a single user who pays a single and relatively small dollar cost to you is just hard. So being more committed to from the earliest days, the team -centric use cases and even larger teams would have led better to early on at a pairing of more aggressive go -to -market models. My question is I have so many PLG founders who say we have a horizontal product similar in the way that ad -tapes so many different use cases.

5:26Should we go for two or three verticals and product market aggressively towards them. Or should we let a thousand flowers bloom and just let the world try our products and be much more horizontal? What advice you have for those founders? Because I never know the answer. I think it's a genuinely tricky question. There's nuances, right? I think for products where the use cases are not as self -evident, the importance of verticalization, especially early on, is more important. It's the crossing the Casm versus inside the tornado metaphor, where early on I think especially when the market is still trying to figure out what is this thing?

6:02It's helpful to really go deeper into a few different use cases and make sure you fully solve those. While at the same time preserving the optionality of the long term, you know, not overcommitting the platform of the product roadmap in such a way where, you know, you're so brittle, you're so hard -coded for those narrow use cases that you can't expand outwards. So I think these are pity statements that are easy to speculate on at the abstract, But when you get really specific in terms of what is the use case, what are the functions? What is the product roadmap, one way or the other and the go -to -market model?

6:32I think that's where it gets really interesting. We first kind of reconnected and decided to do this nice discussion because of a tweet that I did on AI and essentially how it's integration to enterprise. I want to start with kind of a thread, so to speak. And is wire advancement in AI as significant as the instruction of cloud computing? They're different, but potentially going to be more profound. The reason for that is the benefits of Cloud Compute are pretty easily grokable, right? You don't have to manage your own servers, there's infinite scalability, you know, as hardware costs go down, you kind of instantly realize the benefits of that, right?

7:09Like we just pay our AWS bill every month and over time, over the long term, you get more compute, more scalability. By all means, there's a lot of power and value to the Cloud Compute model. I think AI, while still in its infancy, especially LLAMs, are going to be profound in a very different way, which is, you know, when you think about the broad range of knowledge work, every function, right, whether it's legal or finance or even the more creative functions, marketing, etc., you know, you can just see the glimmers starting to emerge of how a really, really broad set of work can be automated or accelerated with especially Gen AI.

7:46I think objectively, it is able to produce useful output, right? And it's easy to squint and imagine as the capabilities of these models only get better. Or, you know, it's really about the, the breadth and the depth of value that can be created with Gen AI. If you believe that we're just at the beginning of this curve, of not only adoption, but technological improvement, right? I think with Gen AI, we're going to see more and more use cases get powered by AI, right? And it's going to attack all these different functions, industries, etc. Peace by peace. And so the total amount of disruption, I think, just a lot bigger.

8:23So if we think about peace by peace in enterprise, but you know, you speak to some of the biggest enterprise leaders in the world, what are the commonalities, I guess, in what enterprise is one and we achieve through the implementation of AI and Gen AI, do you think? What are those commonalities? One thing I've learned is, it's just that it's super early. I think a lot of customers are still trying to figure out what you can do with AI. So to some extent, I think we're still limited by the broader understanding of what Gen AI is capable of, what its affordances are. So, you know, what are its limitations?

8:54Obviously, there's, you know, hallucinations and accuracy issues that are a major challenge, right? So there's all these limitations, for sure. We're still in the education phase where I think every enterprise is getting savvy as we speak or trying to get savvy as we speak in terms of what is an LLM? What are these basic primitives? I'm hearing the words, even vector database and other technical concepts we talked about in the enterprise. And to me, that's really exciting because I think once there is this baseline level of understanding of what is actually this technology is and what's capable of, that's when the real fun will begin where we'll see enterprises actually get really smart about applying this powerful technology to specific problems that they have.

9:37So I'm in Europe and we're chatting about kind of how shows have changed over time and how I've changed over time and much more honest, but like we don't have Slack in a lot of large enterprises I have friends who see us of 50 to 500 % coming to them. They don't know what Slack is and then if Gen AI and AI is the net is one My question to you is like how far away do you actually think we are and is this tech bro's getting a little bit excited too soon? one difference between Genai and traditional enterprise tech. Genai is not going to be confined to just enterprise. The way that we've all become aware of and it's become top of mind is through the consumer applications, whether it's chats, you see mid -journey, these products have gotten real scale.

10:22So it's not just the Silicon Valley elite score adopting this product. I'm just rolling with this one. It's the end of the day and it's Monday's it's Friday. Yes, employees don't want it. You know, I'm invested in several companies where I speak to the CEOs and I'm like, hey, are we using acts? We're using why? The teams are pushing back. On what basis? Because I've heard all kinds of different perspectives on this from employees, including around. Media companies to gaming houses, where asset creation, where content creation, where graphic creation, to getting rid of 90 % of the team over to my replacing them with these tools.

10:58and the teams know this is a gradual transition. What happens when the employees don't adopt because they know this is a transition? It's almost like the screenwriters right now. I think we have to get very solemn and serious about the very real economic implications of AI. I tend to be a believer that AI has the potential to actually lower the cost of goods and services production and therefore increase also for the man. I think we're in this weird transition phase where the risk is that everything happens very quickly before we as a society know how to kind of adapt But I do think there is potential for every person to figure out how to augment their capabilities and ultimately become more productive and And you're more valuable because of this human and AI symbiosis For those that are educated in enterprise and those that are aware what are the biggest reasons for them not to adopt What are the biggest implementation challenges that they face?

11:58Why are they not adopting it if they're post -education phase? The technology has actually reached this breakthrough point, even now public market investors are pricing into our stock based on whether we're going to be an AI winner or a looper. And that's not just for tech companies. It's, of course, even for traditional companies. If you're a retailer, the ability to gain off -ex margin is driven by your ability or the perceived ability to implement AI and improve the leverage of your business. So that being said, I think some of the other bottlenecks are going to be around data privacy and whether enterprises are comfortable trusting these cloud -posted providers opening eye for instance has an amazing model offering, but right now they don't have a way for you to deploy in a self -hosted way inside your own infrastructure if that's something that you care about, right?

12:46And of course, there are going to be open -source models that help bridge that gap. you're going to be able to adopt your own models that are pre -trained. But even then, there's going to be challenges around, you know, what is the nature of the training data? Is there copyrighted content on which this model is trained? Does it have the risk of plagiarizing content, you know, especially if you're producing content that's going to be public facing? And ultimately, you know, how do you get the accuracy and the safety of these models high enough to be useful for the intended application? A lot of it also comes down to kind of hand holding for the enterprise.

13:20Despite what you said there about those challenges, they might try it. And we kind of chatted because I put a tweet out saying, the biggest companies built in AI will actually be services companies helping integrate AI into large enterprises. Do you agree with that statement that services companies helping integrate AI into large enterprises will be some of the biggest winners of the next few years? I think services companies will definitely play a very important role. For how long and how much of the cake they take versus application companies, the services companies are going to be the handholders.

13:55They're going to help these enterprises both with the technical know -how. For instance, how do you implement a vector database? What's the right embedding model to use? These are all technical implementation details that actually not are in a lot, right, to getting a useful solution. I think enterprises are going to need some help, you know, figuring this out. Otherwise, you know, I've seen some, you know, go off and do this themselves. And it's possible, but it's also a lot of heavy lift, right? It's a very uphill journey to go and gain the internal technical expertise to do this. When we think about enterprise and startup or smaller company, I think it comes in like two different lenses.

14:32One is in the providers of AI themselves, and income and versus startups. And then the other is in terms of like actually normal company world. Big toy company startup, to which I'm sure. If we start in the traditional tech world, who does AI favor more? Does it favor Adobe? Or does it favor the next generation creative cloud company? Does it favor air table? Or the AI first air table from two months ago in YC? One thought I have is it grows the entire pie. When you think about Microsoft's Copilot offering, it's going to add significant arpooh to every single seat of office, which is a massive install base.

15:14It's actually growing the pie of dollars because it's creating new economic value in the world. I don't think it has to be purely a winner takes all Adobe wins and Canva loses type of equation. I think AI could actually enable both Adobe and Canva to grow and to actually create disruptive experiences that both deepen the value prop, I mean, in general, it's still, for instance, in Adobe is amazing, right? It's amazing for existing Photoshop users in a way that I think I personally would be willing to pay a lot more money for, but some of the AI capabilities are also going to be amazing from the standpoint of creating disruptive capabilities that open these products up to new user basis, right?

15:56And even new use cases. And I think that's where potentially the startups or the newer companies that have more ability to lean into the tech and kind of build products without the need to support existing customer expectations, distribution models, et cetera. When you think about products like Gamma or Tome, for instance, disrupting how you create slides, I think there is a possibility that while Google sides and Microsoft PowerPoint are for sure going to implement GenaI capabilities into their own products. These new upsarts implement them in a way that actually goes after novel use cases. They're not competing for existing PowerPoint use cases, but they're actually going after completely new ways of sharing, expressing information that arguably are not even really about slides, right?

16:43So much as a better way to communicate visually. I kind of think of it like Prezi, which I never personally like that much as a product, because it always may be dizzy, the fly around the screen. But what they were doing was not going after traditional PowerPoints, but rather creating a new, improved way of communicating content in an engaging way. Can I ask, in this situation, you'd be considered the incumbent if we'd been blind? Are you able to move as fast as startups are? Yeah, so the short answer is yes, and it's a spectrum of how much of an incumbent versus an absurd you are. And within our table, there is this conscious choice that we always have to make of, we still have a finite number of resources, right?

17:23We may have raised over a billion in capital, but there's always resource scarcity. I think it's ultimately a choice of, if we wanted to cut corners, launch something completely separate and new, we could move really, really fast. I mean, maybe some startups are able to take even more aggressive shortcuts like not having to worry about security as much, right? I think for us, though it does slow us down versus a truly cavalier new startup. But I think when we're building stuff into the existing product for the existing customer base, I think it necessarily is a little bit slower than building it as a clean slate, cut all corners, a new product entirely, but you can be advantages, of course, of compiling the value that you already have.

18:03So I think it's always a choice. What are the hardest things about the transition to enterprise, how you're the PLG kind of glory child? Making the transition to enterprise is no mean feat. What are the hardest paths? Yeah, going back to one of the early questions you asked, I think it comes down to product go -to -market model alignment. Meaning you can have a product that's amazing for, let's say, individual users or small teams. But let's just say hypothetical product X. Product X is purely for individual usage. There's no team collaboration built in at least from day one. You get all this viral adoption.

18:41But at some point when you try to go into enterprise, it becomes really tough to sell the value of X to a senior buyer within the enterprise. If its value is only experienced by individuals, and then you have to do a productivity sale which is to say, you go and you say, well, every person that uses X gets 10 % more productivity or saves two hours a week or whatever a baby or they like it and you should pay more money for this or buy it for more people. And maybe that works, although I think increasingly in this environment where every enterprise is trying to rationalize their toolsment, right?

19:15They don't want to have a million different products. I mean, some enterprises I've talked to, they literally have thousands of SaaS products. And they're trying to consolidate down 50 different collaboration tools into three, right? For good reason, right? It's easier than to develop internal know -how around that one product, right? Instead of having to support 20 different ones. and you have one vendor really if you ship the manage, et cetera. But for product X, if you're coming in, and it's the value that you're selling, is purely a function of, we have X number of people who use us individually, and there's no team or org -wide value that becomes more than the sum of its parts, or that matters specifically to the executive buyer.

19:57I think that's going to be a really tough position to be in if you're trying to transition into the enterprise and especially sold enterprise, which say for it last year, I think every great enterprise product eventually has to be sold to a strategic buyer in the enterprise, whether it's the head of IT for service now selling ITSM or initially for Salesforce, head of sales. I think you have to define that senior buyer who really has a business case for adopting your technology. Can I be a dig? Everyone should. I'm a Brit, so I feel very uncomfortable. I'm quite direct questions. Everyone talks about the bundling of a CFO, perched -scene decisions.

20:37How do you think about that? Would a table be a bundling or an unbundling? Would you be vulnerable to a Google suite? And is it true that there is the bundling happening? So I think bundling, it already is very important for products that fit into that core productivity suite. If you're a product that generally provides very horizontal, but in my mind, shallow value, right, or commoditized value, meaning like there's a lot of different products that do the same thing, right? So certainly if you're doing video conferencing, Zoom is great, but there's also other products that offer the same thing, whether it's teams or meat, there were many other products like BlueJeans, et cetera, that predated the current era of products.

21:19For those products, for if you're doing whiteboarding or if you're doing any kind of like free reformed or a very generalizable document editing. I think those products are screaming to be bundled, right? Because they're very broadly applicable. Every company wants some form of it. Maybe not for every employee. Like does everybody need video conferencing guests? Does everybody need white boarding? Maybe not. I'm clear to me at least. And but either way, you think of it as an underget decision that you make across the entire company, right? So the CIO can say, look, I'm gonna go with teams and not use Slack.

21:53I'm going to go with Office and I'm going to buy it all together as a bundle and not necessarily need every single specific product that Otherwise would be unbundled because the benefits of each of those products just are not that different You like I need one big bundle. It's really about finding simplicity and cost effectiveness and if some of my users would have preferred XYZ, let's just say like document editing product instead of word too bad because it's close enough and I don't hear of a strong enough argument for the business impact of using one or the other. I think that's different from making an ROI sale, which is by definition about differentiation of saying this is not a commoditized product.

22:35I think as we move up market, it allows us to fight the bundling effect by creating differentiated value that can be sold in a business ROI to a senior buyer. When you're selling into enterprise today, To what extent do you lead with, hey, we have all these cool sexy AI features that make our table great versus we are a foundational tool that you will use and we have AI integrated. So, what is that? So, I've tried the former and it doesn't work. Well, there's a lot of excitement around AI in general and you know, maybe you'll get conversations that are just more exploratory in nature, right? But interest and excitement alone don't close deals, right?

23:17A real business case, real justification of budget, of value, closes deals, right? And what I found is I think it can be a conversation opener in the sense that, you know, if we come in and say, look, like AI has the ability to disrupt a lot of key pieces of this specific use case. Let's say that marketing supply chain end -to -end process, right? So I think when we come in, we tease a point of view of how AI can specifically help in a certain use case. I think that's a lot more interesting and actionable than just talking about AI as this very abstract thing. Because then we're back to score zero of Interprises are still trying to figure out what is this AI thing and what can we use it for.

24:00So we are nowhere near the tornado of every enterprise just knows they want AI in heaps and is very ready to to go and throw their own resources at deploying AI to every quarter of the company, right? Maybe that'll happen, maybe the train will arrive, but it's my sense from my conversations that we're not close to that yet. I think the hard thing for me is I mean, a lot of AI companies obviously is my role as an investor, and they have these massive logos, your Walmart, your Nestle, and they're like, wow, but truth be told, that two seats in one department, in one order. And actually it's 10K spend for these enterprises, for them to task see, it means nothing.

24:40To what extent do I start taking those logos seriously? In my crash course on enterprise that I've gained over the past 10 years of, you know, doing the PLG thing and then shifting into an enterprise centric model, I think a million dollar logo is really the threshold of being kind of a real enterprise account. Now, you know, you could argue like, there's an earlier stage milestone before that that's still meaningful. like I would think of even like 250K, 500K as a meaningful milestone. But the truth is what I've come to appreciate is that anything less than a million is really a spec of spend for a really large enterprise, right?

25:17And frankly, if a million is just a starting point, I mean, you've got really large enterprise vendors service now or Salesforce that literally are doing multi -deca -million or even a hundred million dollar deals with some of their large enterprises. And that's where you're really powering a really critical part of how the enterprise runs, right? So I think a million is kind of a real threshold at which you're a truly battle tested or like significant value delivery enterprise vendor. How long did it take you to get in a million ARR contracts? I think it happened fairly early for us. I think probably 2019, maybe a year after we got our unicorn valuation, you know, that was four years after launch, admittedly, and we had gotten a lot of PLD adoption.