Ex-Harvard Professor Reveals the Hidden AI Formula for Explosive Startup Growth

ever catch yourself feeling overwhelmed by all of the AI hype and just not knowing where to start well the good news is you're not alone and that's exactly why I created today's video I have an incredible guest joining me for this video Talis tashera he's an exh Harvard MBA Professor who has advised all sorts of companies from startups to established companies including Mark Zuckerberg in the early days of Facebook and what he is going to teach us today is how do you think through the customer value chain so how do you identify the problems to

solve and then create the software solutions that will solve those problems a lot of people do this backwards they create that product because it's cool and because it's trendy and then they try to force a customer problem onto that solution which is not the way to go so we're going to be talking about the entire customer value chain and how do you think in terms of Frameworks when you're trying to come up with your startup ideas and how do you structure your business in the age of AI first of all thank you so much for

being here today it's such a pleasure to speak with you I know that AI has been all the hype and every company is thinking about how do I Implement AI right so how do you think through are you using AI correctly and when and where should you actually be using it in ways that help you grow your business instead of just jumping onto the hype well thanks for having me it's a pleasure to be here with you I'm really excited about this conversation yeah yes I think you you just uh immediately touched on the big

question the question now is not anymore should I use AI as a company as a manager um with open AI chpt really the the barriers to start using the technology anywhere have gone to practically zero very little cost very little experience and so all companies managers Executives in my experience are adopting and using AI in certain capacity inside their companies and roles and the big question as you ask is am I using it correctly am I looking at the right processes in my business at the right functions and features really given that all of the

tremendous opportunity to use AI gen AI predictive AI automation AI did I choose the few areas in the company that will give the biggest bang for the buck the biggest impact and I've seen working with both Executives in my capacity as uh owning a digital transformation agency I've worked with big companies as well as I teach NBAs and entrepreneurs on how to adopt AI in business model Innovation so I've been seeing both sides of this coin so starting with the big company Executives you know things that we've seen is for example recently McDonald's tried to

use gen through a chatbot in their drive-throughs now what happened so first problem number one they partnered with a company IBM that I'm sure they've worked with many times before but between you and I IBM is not a a company that is really going in the frontier of AI research and AI products I never read about anything regarding IB and AI so that is Strike number one it's when a company uses a partner that is not known for advancing the tool I'd say number two is they focused on an activity that by and large customers

are fairly satisfied with people that go to McDonald's you know with the few exceptions you don't see long lines in the Drive-Thru it's very fast it's not a big issue a big problem for for customers so you're not being very customer Centric if you're not applying AI to solve a customer problem you're just applying because hey that seems like a logical step to do so strike number two and then strike number three was when they applied it they didn't really test out if that there would have significantly reductions in cost time and effort these are

the three currencies that you should look at do you see improvements in that so when they applied what happened was many people that were going through they weren't getting their requests fulfilled correctly because the AI chatbot misunderstood them a little bit more time so there's videos on Tik Tok of people ordering things on McDonald's and then the AI tool was was saying did I understand you correctly do you want bacon on top of your your ice cream or yes do you really want 300 box of chicken nuggets and the consumer is like no that's not

what I want I want three boxes not 300 and you can see that the tool wasn't you know ready for prime time which caused actually an increase in the drive-through lines as opposed to a decrease so you know strike three this is not the way to go about it the way I advocate for large companies thinking about how to adopt AI is finding the right partner really figuring out what are the areas that distinguish your company what I call Strategic drivers of success what makes your company distinct in the eyes of customers relative to competitors

and in the case of McDonald's it's not the drive-thru so don't try to apply AI there apply where you have an advantage and you want to leverage that Advantage even further to be more distinct than your competitors right and then point number three you should really test test test test and learn make sure that whatever you do before you launch it you're actually reducing the cost of the process you're reducing the time for the customers to make something that they did before faster and you're making it easier for them so you know I think that's

the framework that I tend to use for B now for startups using AI there's there's quite a few differences because they might be applying it in in an activity to kind of launch a business and again I'm really focusing on the customer Centric approach to Innovation and I've written a book called unlocking the customer value chain and I've visited dozens and dozens of startups and written Harvard Business School cases on them to really identify that the startups that really grow to disrupt markets they start focusing on one or two very narrow activities in the customers

value chain because they identify the established companies are unsuccessful at doing those activities well to give an example you know big Banks they do a variety of services for customers but historically they've never did payments that well payments you had to go to the bank it took time two three days you know High fees all these things and so when PayPal came and said do payments online with us you don't need to leave your bank you can still have a checking account you can still have a savings account you can still have your mortgage you

can go to your bank for all these things but do online payments with us why very little to no costs and it's much much faster and simpler and so that's how they disrupted started the process of disrupting the market in fintech that's kind of the approach once you understand this approach which I which I call decoupling as a startup you should think how can I decouple the activities in the customer value chain and steal one activity that customers are unhappy with the established companies with the incumbents and how can I do it better and then

you say can I use AI to do this thing better so you you you mentioned about decoupling um can tell us like how do you break down the customer value chain to find those specific problems you know so you can identify things that you can now solve absolutely so so let let me start with an example I used to play video games when I was a kid my customer value chain was you know video games were expensive and so I didn't want to just buy one that I didn't like so how do I deal with

that well first I was interested in a console and then I would you know go around with my friends and see who had this console and then I would visit their houses say you know let's play together you play my games I play yours I I watch you play your games I learn which games I like and then after looking at those games I would say you know okay I'm ready to buy this game because I like it and then so I would go physically to a store buy the media whichever it is a cartridge

a CD or whatever it was come back come home you know play the game try try try improve talk to my friends learn watch them play Come Back play my game until essentially I got at the end of the game and then if I didn't want it anymore I would try to reset to get more money to to buy another game so that was my customer value chain and in if you think about these activities some of them derive value from me when I did that activity I got a lot of pleasure value was created

for me so playing the game created value for me watching my friends play that game created value for me because helped me understand which games should I play after I uh bought that game selling the game was a way for me to capture value so that's a second type of of activity value creation activities value capturing and when I paid and bought that game I I was creating you know a company was capturing value from me and everything else you know the act of going to my friend's house the act of going to the store

staying in line uh the act of buying a game that I didn't like all these things were value eroding activities I was forced to do it but I didn't get value out of it so the customer value chain is all the sequence of steps that customers do in order to derive value from products and services and you can classify them into value creating value capturing value eroding activities okay so having said that you can see this was the traditional business model and there were video game manufacturers and retailers and that that were in this business

and then Innovation started to happening more than 10 years ago these two kids uh college kids from from Yo decided to create twitch and what they learned is people were going online to watch other people play games the same way I did when I was a kid going to my friend's house to learn to educate myself figure out what games I wanted to play people started doing that online and twitch grew dramatically and it had Now 60 70 million people that are paying not to play a game because you go to Twitch to watch somebody

else play a game so people are paying for this privilege what twitch realize and build a business around it is instead of saying let's create a a video game developer let's like rent game these games everything let's just create a portal which people can watch other people play games that was decoupling they looked at all the value chain and they chose one activity and say we're going to do this better why because if you go if you do it the old way you have to go find friends you have to go across the street go

to their houses and then their moms are telling them you got to go home and then on the weekends they're traveling you can't do it and now with twitch you can do it 247 for all the games you want and if somebody's playing a game that is not playing well you switched to another Channel another another so it became a much better experience right this is decoupling decoupling is the act of looking at the customer value chain figuring out where customers are unhappy in this case viewing somebody playing a game and build a business around

that single activity and then you're going to get capture a lot of customers very quickly and then you grow and you start offering more and more services right and then twitch started offering more subscription uh tips for you to play if you want to be a professional gamer you can do it through twitch and it branched out into more and more activities but they started out looking at a very niche market just like PayPal very Niche online payments for small amounts right twitch just watch other people play games that is the process of decoupling the

way that you looked at things was so unique and what really stood out to me is like it's not about the tech and the tech has never been easier to do and you know know I I have videos on how you can make a software now in under an hour using tools like bolt. new using like replit so now that the technology barrier has never been lower anyone and and their their mom can now become you know a software Builder so now that the barrier to entry with tech has been so much lower compared to

ever in the human history it's about finding the problems to solve and I think not many people know how to do that very well so for the people who are looking to get into the software space how do you suggest that they find uh those problems to solve so that you know they can go out and create these softwares now with AI to actually make some money or disrupt certain markets that's a great that's that's a very good question well put sometimes we think that the barriers to entry are unbelievably low now with technology as

you saying you're correct but you know even even five 10 years ago they weren't as high as we imagined just to give you two examples so one is um I visited Facebook before its IPO I saw Mark Zuckerberg in his flipflops you know famously like programming standing up well when I visited Facebook and I asked them you know how are you planning to disrupt the social media Market because there were other social media companies they never talked about their unique disruptive Technologies they talked about kind of the customer experience you know what what was not

good yet what they felt could be better and even Netflix and you think Netflix is a tech company they got to have proprietary technology but even at the time when Netflix moved from sending DVDs by mail which any one of us you and I could have done this we could have bought DVDs build a warehouse and send it by mail and then Netflix moved to become to do online streaming they didn't have proprietary Technologies when they did that right they didn't have like servers and kind of software that can do that they build it over

time to improve so what I teach my students is don't think that you need this amazing new technology to become a successful entrepreneur start as you say with kind of run-of-the-mill Technology you can improve adapt but that's not going to be your differentiation that's not going to be the factor that will as people call it emote very very hard to get emote out of Hardware or software nowadays finding the right problem going back to your question so you the approach that I've come to realize is first if you want to find a right problem you

find customers that have that problem right and how do you you go about doing that so back to the customer value chain what what I do and I help entrepreneurs that I'm advising in startups and big companies to try to find Innovation opportunities is we first map out the customer value chain we try to understand end to end what customers are trying to do so that means that you should get out of your head of what am I trying to do I'm trying to find a business opportunity I'm trying to make money I'm trying to

find a new market of prod forget about that for a moment focus on look think about a customer map out all the activities in the customers's value chain what do they have to go to do from becoming aware that they have a problem all the way to using and disposing if it's a physical product or cancelling if it's like a subscription right online map those activities identify which ones are value creating activities which ones are value eroding activities and which ones are value cap in activities why is that important because based on my research there's

only three avenues for disruption you can either create more value creating activities for customers in the sense for example back to Twitch it's watching somebody amazing playing the game you can either eliminate value eroding activities back to PayPal I don't need to go to the BR to the bank or go on a website and fill out a bunch of information to transfer money through wire transfers is very very easy or kind of reduce value capturing activities essentially making it cheaper and now fortnite and many of the free to-play games have done that and figure out

other ways to monetize and once you do that you want to get a sense of where in the customers value chain are customers most unsatisfying and one tool that we generally do use is we do you know either surveys or go to online reviews and capture that information by activity in the customer value chain and we've done that with many in Industries so we've identified what I call weak links which is activities that a big enough group of customers are unhappy with their current providers I'm unhappy with my bank in this regard I'm unhappy with

my supermarket in that thing I'm unhappy with my telecom provider there are quite a few activities where customers are buy and large unhappy and in my research I shown that disruption most likely happens in the weak links of the customer value chain so it's about identifying this through surveys interviews talking to people being working in the industry and I'm sure if I ask you you know where have you worked before you will see things the say my employer the business that I work for wasn't great at doing this or this other activity those are the

first activities that I would look at to see oh is there a way that I could do this cheaper for the customer faster f for the customer or less e effortful for the customer if I can find a way to do that with a combination of new kind of value proposition new business model and even potentially Technologies then I have a clear shot at really kind of starting to build a disruptive startup that's really good that's really good and so after you find this problem to solve how do you get your word out there to

so that people even know and so this is kind of like two-part question that may not be related you know would this same process work in for small businesses like you know dentists chiropractors kind of like your traditional businesses is there ways to dis disrupt those markets as well so that's a two-part question for there for you sure so so let me give you an example let's let's stop with the tech world the startups let's focus on in a a very downto Earth lowtech business which is car washing yeah you know car wash you know

50 years ago was manual and then came companies that automated the process you go in no no people involved you know you get your car wash but apart from that which is at least like a 30 40y year technology virtually no innovation has happened you get your car wash the same way all the car washes have been undifferentiated pretty much the same thing then a few years ago a major breakthrough happened that caused the companies that adopted this breakthrough to become highly highly profitable compared to not only other car washes but even to other traditional

businesses it became such a lucrative business that VCS and pees started investing in car washes and what was the huge Innovation it was not Tech it was a business model Innovation it was we're going to offer you a subscription for car wash you will pay this much and you can wash your car as many times as you want that caused such a dramatic change because many people say hey I don't want to be paying 15 20 25 bucks I can just pay a flat fee and I'm going to be able to come and bring my

car to wash all the time and you would think well the cost would be so high right but when you look at the data what happened is people buy the subscription and forget about it it becomes you know gym subscription you have it it's important you feel important but how many people are there in the gym they in and out there's a group of people that are and most likely are the ones that live very very close to the car wash but the ones who live a little bit farther away they kind of forget and

their car is clean anyway why am I going to do it and so they go like twice a month but this increased dramatically the value so this business model Innovation and it was based on this premise of understanding that consumers often time they want solutions that is a what I call set it and forget it right set it up and forget about it I just want convenience I want to set it up have a just come in in and out and so that understanding that people didn't want to like should I get my car washed

is it dirty enough should I wait a little bit more should I pay more should I pay less should I pay $50 $20 all these things so that was a huge Innovation that actually changed the market and me made these businesses extremely more valuable by kind of this business model Innovation so you know getting back to your question is understanding identifying a problem kind of validating somehow through consumer Sur surveys reviews talking getting information using it but then like innovating in the business model finding another way in a business model is how do you create

value and for whom and then how do you capture value and from whom so it's a four-part question to really understand your business model but once your your second part of the question how do you get the word out yeah right find this crit how do you get how do you spread the word out so first if you identify people that have a problem you sell the problem you don't sell the solution and that's important so so if we take a step back and think about you know a headache medication you know there's aspirin Tylenol

ibuprofen all these things and if you look at how people solve their headaches they solve it in different ways people will Google I don't know what you Google when you have a headache medication but might you might Google a brand because you're like a leave you already know the brand a Le right and so that's a brand that you goog I would ask GPT I would say I have I I just literally open up my app now and then I turned on the voice and I said I have a headache right now what do you

recommend and then that's the point that I'm trying to get you're searching based on the problem you said I have a headache some people already saying you know I want to find painkiller that's already a solution and some people say ol leave or aspirin or tylenol that's a brand can you see the difference that you're like trying you're trying to find different people one is trying to sell on a brand one is trying to sell on a solution and the other one is BAS one what you do if I had a better solution I would

try to Target you because I'm trying to Target your problem you just described I have a problem and if you identify that that problem is pervasive and the established companies aren't solving it just go and try to figure out who's like raising their hand you know figuratively speaking like you and saying hey I have this problem I have this problem so Target people that have this problem and then bring them in and then offer them a solution and so on and so forth so targeting based on problems is is is often one way to kind

of get around the fact that you don't have this brand this Big Brand I know a lot of people listening will just be just starting out you know and they may be saying well I don't have a thousand people to survey and look for those problems and I just want to get started so for people who you know may not have those like it you know maybe even put yourself in the shoes if you didn't have those resources where would you go to start identifying those problems that you can then perhaps use something like a

AI software tool to build those solutions to really form that software so so the first one is start maybe with a problem that you understand or you had before so for example in my consulting company decoupling doco I had a problem which is my clients that uh came to me they came with a problem that they wanted some Consulting help with that I didn't think it was their real problem I thought it was the symptom of their problem and I needed to dive deeply to understand that so from my business point of view my challenge

was my client doesn't know he his or her real fundamental that the core problem and so I needed to collect data from consumers to kind of show to my client hey your problem is not that that's a symptom of your problem the root cause is something else right so then I said well many companies might have this right because there's a lot of politics involved you have meetings and CMO says the problem is this the CEO says no the problem is that the key problem is this CFO no no no no the problem is something

else so they fight and so I said well how can we create a tool that eliminates the fighting that gets everybody senior Executives in the room we show them one tool that everybody is like points that's the problem that's the one that we need to address so you know and then once I identified said I that was my problem and then I started seeing are there other companies that have this problem then the answer yes oh so I validated this is not just talis's problem many companies have this problem and then I started thinking oh

how what's the easiest way to address this well let me start surveying customers online but then that was expensive because I had to hire hundreds of people thousands of people you know to say please fill out the survey this long survey I had to pay them and then they would fill out the survey based on the customer value chain and they would tell me what you know where they're unhappy so I can find these weak links to tell my client saying these are the weak links but this is long and complicated and expensive so then

I said well can AI help me and so we created Bots that go online and reviews read all of these reviews on online in different websites and gets the information on reviewers and tell the reviewer that is written about it says this brand I bought this I brought a car from this brand the test drive was amazing but the negotiation was awful and then we started getting that and joining with surveys all these reviews to create this map of the customer value chain in the satisfaction in each activity and we got you know hundreds of

thousands of reviews in each industry so now when a client a potential client comes to me in a few days I tell them I say I know some of your biggest problems from the customer's point of view and immediately I show them and they're like wow that's that's clearly a problem we need to address so again just recapping find a problem that you had go check around that other people are having this problem three find the cheapest easiest fastest way that you can try to kind of get an MVP of a solution understand if this

is valuable validate it by showing it to potential clients and then lastly collect the data and use AI very very end of the process use AI to help you get a lot of scale I couldn't do the reviews evaluating the reviews alone we have hundreds of thousands of in the industry and then using AI to get unstructured data to transform it into valid insights to kind of feed into this I love what you said there because so many people get caught up that I have to use AI because it is the hottest thing around but

I love what you just said because you're using AI strategically as a goal in this case is analyzing thousands if not hundreds of thousands of reviews here so you're using it in a way that actually helps you increase productivity you're not using AI for the sake of using AI so that out of the way I just want to say like you know cuz AI is going to disrupt everything from generative AI just humans cannot beat AI in terms of speed and I don't know if you've seen things like flaw computer use that just came out

that can do that last mile now as well so it can actually like navigate your computer um move your mouse around and type in the URLs that it needs to go to whether that's a CRM or a spreadsheet and not only is it Computing the numbers from data analysis or generating text or image it's actually doing that last file of putting that image into a PowerPoint putting those numbers into especially with CRM and that technology is only going to get better like the AI we have today is the worst it's ever going to get so

how should businesses think about how they should change their business models going forward to still be competitive in the age of AI sure well you know that that in itself is another hour of conversation so we're we're g to scratch the surface here a little bit in my company we work with companies in in various different Industries because what I can help them is through customer Centric Innovation as opposed to you know improving you know it's we're not a Consulting uh industry specific Consulting so we come in and we do workshops as well as uh

help identify these opportunities for Innovation but kind of from my experience what what I've seen is 80 about 80% of the companies that we come in they're saying they're either experimenting or launched AI as a chatbot so in their minds it's like AI is a chatbot if you think about it very few companies out there having a better chatbot that competitors is a source of a distinct strategic Advantage very few right the vast majority won't won't do a dent right if you're just trying to learn applications that's fine but they think this is like AI

many managers think AI is like chatbot and I think they're missing the point you know as all Technologies and we talked about it it's about figuring out the value drivers of your business so we have a tool that's called Val value driver mapping you you try to get all of the value drivers that make your company distinct relative to other competitors in your customer's eyes so we do that with many of our clients and we create all of the features right so for example back we talked a little bit about Netflix what makes Netflix distinct

for us relative to all of the other kind of streaming services you know content obviously but the quality of the content is super important the speed of delivery right what Netflix is like has this way that kind of interruption is very so latency is very low so you know quality of the content kind of very Diversified and very unique but there's another one which is kind of the recommendation system because as Netflix started adding more and more stuff we don't know what to watch so the recommendation system was very good so they partnered with us

to figure out a better recommendation system and we've identified that that was a source of a value driver right strategic value driver that Netflix said we want to be better at recommending because if we don't recommend well people often times don't know what to watch they go in they go out they don't watch and after a while they cancel because they saying oh when was the last time I watched the Netflix H three weeks ago I'm Gonna Cancel so we went and say how do you improve a recommendation system and what we did is we

actually asked people to turn on their webcam with their consent and we got a sample of people watching movies and shows and then we identified where people were like most expressive using an AI expression tool that figure out are you smiling laughing are you like making faces that means that you're engaged and we got all of these Snippets of content we packed them up together very tightly and now when you go to Netflix and you kind of hover over one of these kind of a movie or a show it doesn't start from the beginning it

doesn't just show you the first few minutes or seconds of the show it it shows you a random part of the content but one that was like engaging number one and emblematic of what you'll likely feel if you go and watch that show from the beginning that we showed in an academic paper that we published in the Journal of marketing that actually increases engagement increases likelihood of people watching therefore reduces the churn and all of this increased in viewers over time goes directly to the bottom line it's not really that expensive so again kind of

seeing how this process works helps you understand value driver mapping is super critical what all of the value drivers that make your company better than competitors in the eyes of the customer and once you identify those that's part number one then out of those those are the candidates for you to apply AI AI is like a electric motor that value driver helps so let me put a fast growing motor on it and then you'll unlock all of this distinct value for your customers that's the way that we approach in a two-step process that's awesome that's

awesome but all of these changes don't happen in vacuum and usually in companies you need a lot of buyin and there's a lot of fear among the general employees around AI because there's a fear that it'll replace them or take away their job so how do Executives and business owners lead in the age of AI especially with a team that try to sabotage their efforts and that was a that's a thing that I'm seeing a lot today as well that's a very thorny issue in reality I I've see two things that are happening and these

two scenarios will dictate whether AI will be successfully implemented or not one is a group of employees that are doing a variety of tasks and when they adopt AI they really try and are supported they free up their time to do other activities that are higher value creating activities right so this is the classical case of not having to write emails summarize research do analyst reports a bunch of things that AI gen AI tool can summarize documents much better create content create reports much better and then you have to be in the business of managing

an AI and that's the type of work that I do I always think about AI as my kind of you know 247 intern I have to work with the AI to get what I want but if I dedicate enough time and patience and I tell it when it's wrong and I I I I also say please and thank you it's been shown that being nicer to the AI agents actually improve the outcome why I have no clue but you know we're see that it works so I treat it as an as an intern that once

they do some of this nitty-gritty work that they can do better it unlocks it frees up my time to do other things and that increases my productivity when that happens you should educate the employees saying this is what's happening we're trying to get you to to save time this so you can use up more time to be more productive in the value added activities in which only you can do now there are other employees other Professionals in which the activities that AI can do better and faster are 80 90% of it you know think of

low like low skilled copy editing or creating images you know editing documents things like that those cases the reality is AI tools will do a huge portion of that and then there's a problem okay now that you freed up the employe waste time by 80 90% what are they going to do with that time now as a company executive you can say I don't know I'm not in the business of trying to answer that question I'm going to fire them and some some companies that's the executives are doing that they're firing a lot of people

that were like in telemarketing or in journalism or in copy editing in advertising agencies but I think the intelligent smart executive will say now I'm freeing up my employees time to do other things and I have a lot of other jobs or ideas or concepts or innovation attempts that I don't have time or we don't have enough people to do let me get those people towards working on these opportunities right and I even tell my students like don't ever go to a job particularly early on in your career a job is a problem solver because

you solve the problem like you're basically your boss is like thank you for solving that problem it's amazing like try to go for where your boss is saying I see a huge opportunity here I'm going to put you to work an opportunity as opposed to P put you to work on a problem that I have right now yes we all have to solve problems but if your boss is constantly just putting you to work to solve his or her problems you know you're not going to go much far in that organization you know you're valuable

when your boss is putting you into opportunities so it's part of our jobs as managers of people that are being displaced by AI to help them find saying there are a lot of opportunities I'm not just using this as a cost cutting tool right and even even for the employees it's about being proactive and seeing like okay so this is not going to go away so what's my new value proposition to my employer and you know you're probably the best people to identify these opportunities because you're the person on the ground you you see what's

actually happening whereas sometimes the managers are two or three steps removed and they don't see the actual problems being H uh being you know uh that's happening and so you're probably the best ones to drive drive forward a lot of these AI Innovations or other opportunities that are presented so s yeah yeah so just as we wrap up here any last advice for business Executives or St Founders in regards to AI that we haven't touched on today yeah no um always think about um I I like to think about AI as three big buckets generative

AI creates content predictive AI evaluates a future state of the world estimates it and then automation AI which actually executes takes humans away from the decision process by executing what you talked about Claude and AI agents so always think about kind of what's our geni strategy what is our predictive AI strategy and what is our automation strategy and think that ultimately you're trying to use these Technologies to kind of save money time cost and effort in doing them and then kind of freeing up your human capital to do the things that AI cannot do that's

perfect I think that summed it up perfectly well thank you so much for coming on board today I really appreciate your time and expertise and this has been a very fascinating conversation so I really appreciate you being here today my pleasure I enjoyed it too thank you so much