Advice for Building in AI: The DHM Model

Advice for Building in AI: The DHM Model

AI has become a valuable tool in solving customer problems that were previously unsolvable. However, it is important to remember that the fundamental dynamics of business still apply, regardless of the presence of AI. While AI technology itself may not be a strong differentiating factor, there are other sources of power and durability that can be leveraged to build a successful AI-driven business. In this article, we will explore the DHM (Delight, Hard-to-copy, Margin-enhance) model and how it can be applied to AI.

Delight: Delighting customers is a crucial aspect of any business, including those built around AI. Take the time to jot down how your product delights customers, both currently and in the future. What unique features or capabilities does your AI offer that bring joy and satisfaction to your customers? Understanding this is essential for creating a compelling value proposition and attracting a loyal customer base.

Hard-to-copy: Creating a hard-to-copy advantage is another key element in building an AI-driven business. One example of this is Netflix's personalization technology. By leveraging the data they have on the movie tastes of their 185 million members, Netflix can accurately forecast streaming hours for each potential title. This allows them to invest in original content strategically, ensuring they allocate resources to titles that will generate the most engagement. Think about how you can create a similar advantage for your AI product. What unique capabilities or data can you leverage to stay ahead of the competition?

Margin-enhance: Margin enhancement is an important consideration when building an AI-driven business. How can you structure your pricing and business model to maximize profitability? Consider experimenting with different pricing strategies and business models to find the optimal balance between customer value and profit margins. This might involve offering tiered pricing plans, introducing subscription models, or exploring partnerships and collaborations.

In addition to the DHM model, there are other sources of power and durability that can contribute to the success of an AI-driven business. These include brand, network effects, economies of scale, counter-positioning, unique technology, switching costs, and captured resources. While not all of these may be applicable to every AI business, understanding and leveraging the ones that are relevant can provide a significant advantage.

Building a strong brand is essential for gaining customer trust and loyalty. Focus on consistently delivering value to your customers and minimizing any trust-breaking actions. Over time, this will help build a solid reputation and differentiate your AI product from competitors.

Network effects and economies of scale are also valuable sources of power. Consider how your AI product can benefit from these factors. Can you create a platform that becomes more valuable as more users join? Can you leverage economies of scale to reduce costs and increase efficiency? These are important questions to ask when building an AI-driven business.

Counter-positioning is another source of power that can set your AI product apart from competitors. Find ways to offer something that is impossible for others to match. This could be a unique feature, a specialized service, or a combination of factors that make your product stand out.

Unique technology, switching costs, and captured resources can also contribute to the durability of an AI-driven business. Invest in research and development to develop cutting-edge technology that sets your product apart. Create switching costs by making it difficult for customers to switch to a competitor's product. And if possible, secure patents or other intellectual property rights to protect your innovations.

In conclusion, building a successful AI-driven business requires a combination of factors. The DHM model, focusing on delighting customers, creating hard-to-copy advantages, and margin enhancement, provides a solid framework for building a strong foundation. Additionally, leveraging other sources of power and durability, such as brand, network effects, economies of scale, counter-positioning, unique technology, switching costs, and captured resources, can further enhance your chances of success. Remember, execution is key, and paying attention to the small details will make a significant difference.