The rapid evolution of artificial intelligence (A) has ushered in a new era of product development that operates under a distinct and unforgiving set of rules which do not align with the conventional SaaS business model where digital products benefit from near-zero marginal costs and network effects with scale.
At the heart of this new paradigm lies the brutal economic reality of AI. Unlike traditional software, AI products are built on a foundation of real marginal costs driven by token usage and GPU compute, like what you see in physical products. Simply, the SaaS’ near-zero marginal cost as you grow is replaced by an unpredictable and potentially exorbitant cost of inference. Every prompt is a cost, even as you scale!
My Co-learners, this necessitates an upfront, strategic approach to unit economics and scalable advantages, where profitability must be meticulously designed into the product from its inception. This economic model also dictates a more sophisticated approach to pricing. In today’s class, I will open my ICAN’s intermediate course on managerial accounting, examining marginal cost and how that could help in building pricing models for AI products.
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Join us at Tekedia Mini-MBA:
Tue, March 10 | 7pm-8pm WAT | Executing A Winning AI Product Strategy in Africa – Ndubuisi Ekekwe | Zoom link
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