Building AI and Achieving Good Retention: Key Insights and Actionable Advice

Building AI and Achieving Good Retention: Key Insights and Actionable Advice

Introduction:
Artificial Intelligence (AI) has become a transformative force in various industries, offering new solutions to previously unsolvable customer problems. However, it's crucial to remember that the fundamentals of business still apply, and AI alone is not a guarantee of success. In this article, we will explore the common points between building AI and achieving good customer retention, shedding light on the key factors that contribute to long-term success.

The Power of Moats and Durability:
While AI technology may not be an impenetrable moat in itself, the true power and durability of a business come from traditional sources such as economies of scale, network effects, counter-positioning, switching costs, and brand reputation. These factors have always been instrumental in building a strong foundation for any business, regardless of the incorporation of AI.

Differentiating Growth from Hype:
In the realm of AI, it's vital to distinguish between genuine growth and mere hype. The former holds significant importance, while the latter should be disregarded. Growth and hype are independent variables, and focusing on sustainable growth should be the primary objective. Rather than getting caught up in AI commentators' discussions on alignment, defensibility, and AGI, builders should prioritize practical matters such as where to source affordable GPUs.

The Significance of Execution:
Achieving excellence in any endeavor, including building AI and attaining good retention, largely depends on working hard and paying attention to countless small details. Execution is an exponential factor that can make or break a project. While the initial "big idea" may serve as a seed, it is the meticulous unfolding of that seed that truly determines success.

Understanding Good Retention:
When it comes to measuring customer retention, different industries have varying benchmarks. In consumer social platforms, a retention rate of around 25% is considered good, while a rate of approximately 45% is deemed great. On the other hand, in consumer SaaS (Software as a Service) businesses, a retention rate of roughly 40% is considered good, with a rate of around 70% being classified as great.

Connecting Building AI with Achieving Good Retention:
While seemingly unrelated at first, building AI and achieving good retention share common threads. Both endeavors require a focus on execution, attention to detail, and a deep understanding of the customer's needs. By incorporating AI technology effectively, businesses can enhance their ability to solve customer problems, thereby increasing customer satisfaction and ultimately improving retention rates.