The Wave of AI Disruption in Professional Services

This transcript was created using AI tools and is not a verbatim, word-for-word transcript of the episode. Please forgive any errors or omissions from the finished product.

Courtney: [00:00:00] Out of all the industries that will be disrupted by AI, which one stands to be disrupted the most? What are the implications of this disruption for knowledge workers and the companies they work for? Did you hear about the new AI pin that may become your new best friend at cocktail parties?

Hi, I’m Courtney Baker, and this is AI Knowhow Podcast from Knownwell, helping you reimagine your business in the AI era. As always, I’m joined by Knownwell CEO David DeWolf and Chief Strategy Officer Pete Buer. We also have a discussion with Scott Varho about why the moment for enterprise generative AI is coming faster than you might think. But first the news.

Courtney: Pete Buer joins us as always to break down some of the latest AI headlines and how they [00:01:00] apply to your business. Hey, Pete, how are you?

Pete: I’m good. Courtney, how are you doing?

Courtney: This is a big week in the news for AI. I feel like I’m a broken record on this show, uh, but just to confirm that for us, CNN had this blaring headline. This was a massive week for AI. That’s literally the title of the article. The biggest news they cite were some bombshells from OpenAI’s Dev Day.

So number one, OpenAI will be allowing users to create their own GPTs, including for internal company use. Custom GPTs are what some people are calling OpenAI’s app store moment. Number two, the latest and greatest version of ChatGPT called GPT for turbo is apparently right around the corner. It will make [00:02:00] ChatGPT’s knowledge base much more current and will dramatically increase the amount of text users can feed it in one go. Pete, pretty big news here.

What were your takeaways from open AI’s announcements for executives?

Pete: Well, first, Courtney, let me thank you for sending a CNN article. It’s not about the vagaries of the election cycle.

Courtney: Yes.

Pete: There was a lot going on at this, um, uh, open AI dev day. And I would encourage people to read the full article because we won’t be able to cover it. Uh, and do it justice, but, um, this was a big event kind of in the style of, um, you know, Apple new feature launches, except a little more going on in this one than a third camera, you know, lens for your, for your phone and the implications are, um, significant for business, the piece that I would attach to first. And probably the one that’s most important for folks [00:03:00] listening is this notion of customizing GPTs for your proprietary uses business. If you think about it, current course and speed GPT, enables productivity in an amazing way, but ultimately it’s democratized access.

So you and I can benefit equally from GPT as long as we can get to it and query it intelligently, what’s different here is that, when you can incorporate your own data, your own insights, your own experiential, uh, information base, uh, it changes the game and it’s a way that you can differentiate, uh, stay ahead of the competition and create unique value for customers.

So this one strikes me like a real benefit for, for first movers who gets, who gets up and running fast. There were some interesting stats in the article as well. Uh, on use of open AI generally, 90 percent of the Fortune 500, I had no idea, uh, and 100 [00:04:00] million users after launch. Just what is it a year ago?

Something like that. It goes without saying you have to stay on top of this stuff. You have to know where the innovations are. Otherwise, you’re left in the dust.

Courtney: Yeah. That’s so good. It feels like a very important and exciting moment for all of us business leaders. One note on accessing this article so you can dive into it, uh, more fully, you can sign up for our newsletter and we send out links like this on an ongoing basis. You can do that at knownwell.com.

Next up, is an AI powered wearable going to be the thing that breaks the iPhone’s stranglehold on our attention? That’s what Humane is betting on. This story was also covered by CNN, but we also liked this one from Verge.

Humane officially launches the AI PIN, its open AI powered wearable. Pete, what do you take away from this?[00:05:00] Yep.

Pete: Both to understand, um, what it does, maybe even more so what it stands for, starting with what it does, you, you pin it to your shirt, like, uh, grandma’s Tony Stark AI powered brooch, you know? And it uses a combination of microphones, cameras, and various sensors to to experience the life that you’re experiencing as you walk through it.

Because it’s AI powered, it can bring your context into play as it’s making recommendations. You speak into it. It, you know, I think it plays answers back to you on your hand with a, with a laser. Hopefully it doesn’t burn through you. so like, imagine you’re on the South side of town, you’re running late, you’re hungry, you’ve eaten there before.

It sends you to the nearest McDonald’s, right? It doesn’t need to be connected to a computer, a phone or a watch. But gives you access to all the [00:06:00] information that those devices would otherwise be brokering for you without making you stop and open the screen. And I think that’s the big deal. What it stands for.

Um, essentially acting as an agent sitting between you and the applications and the devices that address your specific needs, um, without you having to carry something or stop what you’re doing, open up a screen and run a, run a query. There was a related article, uh, written by Bill Gates, who kind of knows a thing or two about this space, uh, who describes, uh, these wearables as the next chapter in… Personal computing, no doubt big implications for businesses where, you know, team members in whatever work it is that they’re doing benefit from having agency and the flow of information in the act of doing their work.

Possibly also big implications for Santa Claus as the AI powered brooch goes on sale this Thursday for 699 retail.

Courtney: Oh, it’s, it’s so true. And [00:07:00] do you know what I’m looking forward to, Pete, is I’m, I’m assuming this pin at some point will be able to tell me that person that I’ve forgotten their name, really quickly on my hand. Hey, that’s Pete Buer there. Uh, hey Pete, how are you?

Pete: It’s got it. Yeah. Good for cocktail. Good for cocktail parties too.

Courtney: That’s right.

That’s right. Um, I’m feeling like we are verging on to some of the things that the Jetsons promised me as a child actually coming to fruition.

Pete: There was a Star Trek reference in the article as well.

Courtney: Yeah. Pete, thank you so much.

Pete: My pleasure. See you soon.

David DeWolf knows a thing or two about leading professional services companies through an era of unprecedented change. So, I was excited to get to talk with him about a recent study that identifies professional [00:08:00] services as the industry that will see the most disruption from AI.

Courtney: Hey, David, welcome to the show.

David: Hey, Courtney, I’m feeling a little lonely. I don’t have a partner in crime today.

Courtney: Yes. Mohan is not with us today. It won’t be for a few episodes. We will all be missing him. All right, David, uh, today you and I, I want to talk to you about this really interesting article that Bain posted earlier this year. And in the article, it has this really great graph that breaks down by industry, the industries that are going to have the most disruption specifically at the very top of the list is professional services. And it has it marked at 41%. And I thought this was an interesting topic to talk to you about specifically because of your background. to kind of break down why that might be. For executives that are listening, what do you do with that when you’re getting these kind of [00:09:00] projections?

David: So let’s frame this first when that research was published, it is a publication of an estimate of the amount of time labor that’s going to be disrupted by AI, right? The estimate is that professional services over any other industry will be disrupted. And my first reaction to that is yes, of course.

And the of course comes from the spot that having in this professional services world for many, many years, what I’ve known and I continue to grapple with is that of all industries, professional services has not been disrupted by digital. And if you think about the why, it’s actually pretty obvious.

Um. Services are all about providing knowledge, providing expertise to other organizations. And [00:10:00] in the world of digital, the benefit that we have gained is being able to reach more people and to provide them more of these digital offerings. Well, knowledge to this date has not been something that we can digitize.

Right? We haven’t figured out how to take these services and turn them into bits and bytes that we can sell multiple times to two different people. Well, I think AI changes that game. What does AI do? AI takes this idea of knowledge and starts to distill it into different components, right? We know that computers have great memory.

They can recall things from memory. We give them a piece of data it can pull it up. We know that it can provide information. It can do computations. Well, what AI allows us to do now is actually make inference [00:11:00] and judgments. And when you think about professional services, legal is one of the professional services that is provided out there.

There are a lot of accounting and finance professional services. There are advisory services. All of these are all about judgment. They’re all about inference. And so, What I think this research is exposing is here is one of the last standing industries that hasn’t been digitally disrupted, and now the technology has got into the place where it can be, and that makes logical sense to me.

It sounds right to me, I think it’s actually an exciting time because it means that business models that historically have been unscalable have had very little leverage. All right. You scale a professional services organization by hiring more people. All of a sudden there may be more scale. There may be more leverage in that business model.

And I think that’s exciting.

Courtney: [00:12:00] What would you say for executives that are in professional service organizations that all of a sudden, you know, right now their, their heart rate has gone up a little bit, you know?

David: Yeah, about the disruption. I think there’s a couple of different areas that leaders should be looking at. I think the very first one, and if you’re not doing it already, you are absolutely behind is leaders need to be looking at the pure execution of the work, right? So when I am writing a report, if I am doing software engineering, right?

The personal productivity, the small team based productivity aspects. Absolutely. We should be using AI for that. In one of our previous episodes, I remember we had Dom from 2x on talking about how his organization was again, a professional service, right? Providing outsourced marketing services, but starting to use [00:13:00] AI and in very real tangible ways in order to accelerate the productivity of their team members doing the actual work.

So that I think is here and now. The second phase, though, that I think organizations need to be looking at and getting ahead of is the operational components of a professional services organization. Right? So we’ve talked about the inherent lack of scalability in a services model, right? You scale with people.

Well, I think another very challenging aspect of professional services is that you’re dependent on and highly dependent on very complex, multi constituent relations. What do I mean by that, right? It’s all about the clients you serve. It’s very much a relationship sale. And most of the time in complex, uh, professional services, there’s multiple buyers or at least influencers at the table.

And then those relationships aren’t just with a piece of software. You’re reporting [00:14:00] issues through a system. No, there’s. People actually

Courtney: Hmm.

David: There. And so it’s multi to multi relationships, many to many relationships. You have multiple employees as well, serving those multiple client sponsors. Right.

And so the nature of that communication and the information flows between all that is very hard. Rarely does a single person sit at the center of all of that and catch all of that information, all of the nuance, all of the tone, everything about that. And so managing relationships is difficult and often directly correlated to the retention of that customer.

So are you thinking about how might you use technology? How might you use AI to interpret and understand all of those conversations and communications going on and assess. Oh, what clients are at risk? And most importantly, if you’ve lived in professional services, you know, one of the fundamental questions is why, why might they be at risk?

Because there’s [00:15:00] always different reasons. It’s not black and white. It’s not, oh, this product doesn’t work. It’s, you know. A little bit of this, a little bit of that, adding up to, oh, this client may be at risk. And so that’s just one example of a use case that I think is more operational in nature than execution oriented that organizations need to be thinking about

Courtney: So to open that up just a little bit, what are, you know, again, I ask this almost every week, you know, for our executives listening, what do I do with this? If I find myself in a professional services organization or one of these other, you know, highly anticipated disruptive industries, where do I go from here?

David: Yeah, so I’d give you two takeaways. I think one is short term. One is long term short term. If on the execution plane, you’re not empowering your consultants, services, professionals, whoever it is in your organization who’s doing the work for the customer to [00:16:00] leverage and experiment with AI to get their work done.

More productively in a more efficient fashion. Do it faster. All of those types of things. You’ve got to begin that experimentation because it is coming for you. There is no doubt. And I have spoken to a lot of organizations in the space who are already using it. Just like Dom. We brought up earlier how 2X is already using it.

Um, you will see more and more of that is not going away. You better figure out how to do it. Number two is start looking at the long term. Look at those operational components. What is it that is infinitely hard and difficult for you, right? Is it employee engagement, right? In organizations that rely on Human capital, professional services are very reliant on people.

How are we doing at engaging those employees and retaining them to serve our customers? Is that a use case that you can look at? How does AI impact that? And how can we begin to improve in that area and drive [00:17:00] outcomes, right? So be looking at that second plane as well, that operational plane.

Courtney: David. Thank you. I think two of the things that really stand out to me, as we summarize today, the first being what you said earlier of knowledge and expertise being something We haven’t been able to digitize yet. And so, you know, that really driving. These high disruption factors for service industries and the second being, you know, for executives, listen, that find themselves in those industries to start pushing your team to use AI to figure out how they can automate their knowledge work and for executives to be preparing their organization for that next altitude of using AI in their operations.

Thank you for joining us as always.

David: Oh, it was a pleasure, and we actually survived without Mohan.

Courtney: It was close.

[00:18:00]

Courtney: If you’re listening to this and you haven’t taken our AI assessment yet, may I politely ask what are you waiting for? In just 10 minutes, you’re going to get a diagnosis on where your organization should be focusing its time and energy to get the most out of AI. What’s in it for you, a customized result.

That’s going to show you the path forward with all of your AI initiatives. You can take the assessment right now at knownwell.com.

Our guest for this episode, Scott Varho, has spent the last six years in leadership roles at 3Pillar, the company David DeWolf, founded and led as CEO for 16 years. Scott talked recently with Pete Buer about why he thinks the moment for enterprise generative AI is here

Pete: Scott Varho, you’re a sight for sore eyes, [00:19:00] my friend. It’s so nice to see you and thanks for being here on the show.

Scott: It’s an absolute pleasure to be here, Pete. I’m, I’m glad to see you.

Pete: My shorthand for describing 3Pillar’s product development as a service, uh, totally it, I’m sure. But, uh, building important product for companies who need the assistance understanding is there’s, um, uh, some work you did recently about, uh, applying enterprise, uh, generative AI, in the customer context. I’d love to hear, get some color on, on that work.

Scott: Absolutely. Um, you know, uh, you, you know, the hype cycle on AI is out of control. There’s, there’s so much hype. Um, some of it real, some of it deserved some of it a lot more sci-fi and, and, uh, and popular myth. And so… one of the things that I really took away, I took a course from, uh, Google’s former head of, of, uh, artificial intelligence and he really recommended not starting with strategy.

He really recommended starting with proof of concepts, and [00:20:00] then figuring out, and then figuring, getting some momentum around the tool, some experience, and then doing strategy because you’re much more likely to get swept up in, in imagination rather than, uh, feasibility and, um, what is this, what does this tool actually do?

And then this is one of the things that I start almost every conversation with is AI is a tool. And it’s an, it’s a really fascinating new tool, but it’s a tool. It’s not actually intelligent and it’s not sentient. It doesn’t have an agenda. Um, it’s, it’s patterns reproduced. Um, you know, so once you get inside the box, it’s, it’s just a tool.

It’s pretty cool tool. But anyway, so getting enterprises and leadership, you know, the, you know, Gartner’s statistics on how many leaders are thinking about AI is off the charts, but how many of them are thinking about them in a grounded way? Um, and, and I think that the proof of concept offering that we put together at 3Pillar, it was great because, you know, a lot of it was born out of an engineer just deciding to play with large language models, uh, for his own purposes.

And, came up with some great proof of concepts that I was like, you know, we should do [00:21:00] this with, with clients. We offer a workshop up front, um, to try to figure out what a good proof of concept would be. Again, trying to find that something that’s going to give you a little bit of momentum, but also give you insight into what the technology is and isn’t.

Um, and then you can start to think about strategy.

So that’s, that was, that was really exciting to think it’s the right way to start with AI.

Pete: You recently, um, brought to our attention, uh, HBR article, how generative AI can augment human creativity. Let me start by asking you, why send that our way? What was interesting in and about you? And then I’m going to follow up with a question about application to business.

Scott: Well, as you know, there’s, and the article even calls out, there’s a lot of people talking in, in, from fear about AI, right? It’s going to replace humans. Because I, I’m a little more familiar with the technology, I’m very clear that it’s not going to replace humans. But there’s a lot of really interesting and as yet undiscovered use cases for, for AI and one of the, it just so happens [00:22:00] that my interest was also piqued because I, I just authored a whitepaper, um, at 3Pillar that should be coming out pretty soon on high performing teams and how what we should be thinking about. for high performing teams in the new workforce environment. You know, we’ve got remote work, we’ve got hybrid work, we’ve got deep thing you know, deep work, which we’re trying to do, and we’re trying to collaborate more, and how do we find the balance?

So I I’d been doing a lot of thinking about that, and one of the things that I thought about was how important it is to have diverse perspectives, but common values. That really high performing teams should have both of those things. And we can tend to over index on either, um, and, um, over index on sameness, uh, and call it fit.

Um, when we should be thinking about what makes a great team. And so that the, the, the concept, you know, one of the first points they make in the article is about how to promote diversion thinking. And I thought about that. I was like, that’s, that’s great. To have a voice at the table that I know doesn’t have an agenda.

It, it’s a machine. It does not have an agenda. It has biases, it hallucinates, it does all these funny [00:23:00] things that we read about. Um, but, but it doesn’t have an agenda. And, and, and so to be able to bring ideas into, into a team, um, to evaluate. Uh, it just seemed like a really important, uh, concept.

Pete: In the work of building high performing teams and promoting divergent thinking, um, if you roll that up to guidance for, a CEO running a business, HR thinking about talent inputs and roles and skill mixes, Does this become a set of to-do’s ultimately for how companies can be thinking differently about their, the mix of capabilities that they’re putting together on the ground?

Scott: one of the first challenges in an organization that I see is how leaders perceive the process of product development. What is the purpose of the team? Um, if, if it is a, you know, as I mentioned earlier, if it’s a manufacturing mindset produce on time under budget, Thinking is not required, then there’s nothing really, there’s no creativity really needed.

If you think that [00:24:00] there is opportunities for innovation on a micro and a macro scale in a business doing product development, then, preparing teams to make use of tools like this. And building in, building into the rituals and, and you don’t have to describe it for them. You can say, look, let’s build into our ritual.

Maybe it’s your quarterly release planning process. Um, I have a, fairly robust process I put in place at Interfolio. I know exactly where I would insert, insert these tools. Because those are the times when we’re really thinking about the next quarter’s bit of work. And all ideas should be entertained at that moment.

Um, because this is where we’re formulating somewhat of a plan. The, spine of a plan. But, you know, we should be open to this, every sprint as well. We have sprint planning, we’re executing on features. Have we thought about all the possibilities here? Um, there’s lots of opportunities to leverage these tools for micro, mid level, and macro innovation and the article sort of hones in on the, on the macro or on product design. Um, and it has a lot of cute use cases that I, I, I, in and of themselves, I don’t find very compelling.

Pete: Right. [00:25:00]

Scott: The paradigms and the, and the way they are playing with these concepts in novel ways. I think is, is more what we should want to see our teams doing is inviting novelty, understanding what the Einstein I’d never heard the term Einstein long effect until I read this article.

Um, and I love it because I speak German. Um, but, but this idea that humans have a really hard time imagining, um, novel solutions to problems they’re familiar with. Um, they, they have a sort of fixedness, um, on which just makes sense. I mean, humans are pattern recognizers. We are all about a pattern patterns and adaptation.

So, um, so again, bringing something in that that just, you know, pokes, pokes a hole in that balloon, um, gives us an opportunity to think a little bit different about what it is we’re doing.

Pete: How does culture, uh, evolve?

You know, is this… Is this threatening? Is this enabling? You know, how do you, how do you, how do you bring it back to your, d’etre in a lot of ways around, around high performing teams and culture?

Scott: Yeah, no, I think that’s a that’s a fantastic question because [00:26:00] our biggest impediment to even creating, unleashing human creativity in teams at all is this idea that it is not about execution. It is not purely about execution. That this is a creative endeavor. That we are taking literally a blank repository and putting a team of people to write a bunch of text that then produces amazing amounts of value. That’s what code is.

It’s, it’s it’s incredible when you think about it, when you really break it down. But, um, if you, if you start to think about the processes that there at every stage of, of, these ideas moving through the, the execution pipeline, there’s an opportunity for innovation and improvement and then you think about, well, at any moment in that, in that flow, you can say, I don’t, I just don’t feel like this is going the right direction. I understand the spirit of what we’re trying to achieve here. And as I’m doing it, I’m just, this doesn’t feel like it jives. And I, I, I did a lot to tell my teams, I will absolutely sacrifice velocity.

For you to raise your hand and have the courage to [00:27:00] say that.

Pete: Mm hmm.

Scott: And give up a day’s productivity for us to like, let’s have an aside. Because one of two things of the outcome. One, you didn’t fully understand what we were doing. And this actually is totally convergent with what we’re trying to achieve or you have a really great point and we just didn’t think about it. And so that’s, that’s such a huge opportunity, I think, to get it right and not just be right.

Pete: Scott, thank you. It’s been a pleasure to spend time with you, and I know we’ll be talking again soon.

Scott: All right. Thanks, Pete. I appreciate it.

Courtney: That’s it for this week’s episode of AI Knowhow from KnownWell. Don’t forget to visit knownwell.com to get a handle on your organization’s AI maturity. And of course, we would really appreciate it if you would take a few moments to rate and review our show, your feedback really matters to us. and by the way, you can also watch the show on YouTube. You can find it on Knownwell’s YouTube channel.

We’ll also put a link to [00:28:00] it in the show notes so you can see our faces, uh, along with our names. As always, we like to get input from some of our favorite AI tools on the topic for each episode. So, hey, ChatGPT, what industry do you think is most likely to get disrupted by you?

And now, you’re in the know. We’ll see you next week with more AI news, round table discussion, and interviews. [00:29:00]