Positioning in the Age of AI

I am often asked how a company will know that its positioning needs to change. My answer is that there are categories of change that will force you to shift your positioning.

• Your product changes, unlocking new value for existing or potentially new customers.
• Your competitors change, closing the gap or leap-frogging your capabilities in a way that changes what you can claim as differentiating.
• The market changes. This can include regulatory changes (that force buyers to prioritize capabilities differently), economic changes (where companies shift from growth to cost-cutting, or the reverse), unpredictable world crises (Covid, war, weather catastrophes), and huge technology shifts that cause customers to change their priorities (5G, the move to the cloud).

AI technologies and capabilities are changing all three of these at the same time, and companies are scrambling to shift their positioning as a result. In the past two years, every product I have worked on has either been a new, AI-native offering, a product that has been significantly re-architected with and for AI, or a product facing an existential threat from one of those two categories. March 2020, the dawn of the global COVID outbreak, was the last time I saw so many companies abruptly struggling with their positioning. I think the impact of AI on positioning is potentially much more potent.

Here is what I think matters when you are working on positioning right now, in the middle of an AI revolution.

A point of view about the future is no longer optional

If you think navigating the changes happening in tech right now is difficult for your team, imagine what it is like for customers who do not spend all day immersed in technology. Indecision, confusion, fear, and extreme risk avoidance: these are the biggest roadblocks we have to closing B2B deals right now. Customers are confused and wary. What they want from vendors is a vision of the future that makes sense for them and their business. They expect vendors to have opinions on where the tech is headed, on what is strategic and what is not, and on what groundwork they should be laying now to plot a path to the future. If you cannot give them a clear roadmap to get from where they are today to where they want to be, someone else will.

Three years ago, companies were getting away with telling customers that things were changing and they would change too, over time. Today, customers want answers. Is your SaaS product going to be primarily fronted by a chat interface, agents, humans, or some combination of the three? Will your AI-native application replace SaaS applications companies currently use? How and when? Do you believe companies will build custom agents and applications? Who will do the work? Which applications will go first? What does that mean for your install base and their business? What are the upsides of that future? What should customers be doing today to get ready for it? If you do not have a strong opinion on these questions, you risk looking as lost as your prospects feel right now.

Positioning based on a strong hypothesis of how the future will look wins in this market.

Position against your real competition, but plan for future competitors

When the competitive landscape is shifting rapidly, it is natural for companies to become overly fixated on fast-moving, well-funded potential competitors that seem poised to replace a wide swath of in-market products. However, what matters in positioning is not who could compete with you, or who will compete with you in the future. What matters is how prospects are currently building a short list and who you really need to beat to win a deal. The competition you need to position yourself against lives in the heads of your prospects, not on the pages of LinkedIn.

There are nuances here that make holding the line extra tricky at this moment. First, you will need to articulate a vision of where you think the market is headed. If you are a publicly traded company, you will be communicating that vision to the markets. If you are a private company, that vision is what you are pitching to potential investors. However, your marketing and sales teams should not be positioning against fantasy competitors that prospects do not consider, at least not yet.

Ignore your future competition in your positioning, but never in your roadmap

Secondly, even though you are not seeing a particular competitor on short lists yet, if you are convinced they will appear, you need to be building a product that can win in that future match-up. I am seeing this in SaaS businesses that worry some customers will eventually use a vibe-coding tool to replace their packaged software. In many of those cases, customers are not vibe coding at all today, so companies can get away without positioning against those tools. Even so, teams are working hard to ensure that future versions of the product are well-positioned to win against vibe coding. A reminder: it is perfectly fine to position one way today while building toward a different positioning in the future.

Hype the future where you can get away with it, but connect it to today

In technology, when there is not much change happening in a particular industry, we have to be very careful not to over-hype the future. Fixating too much on the future will often delay deals (customers will wait until you have delivered the cool stuff you are talking about) or scare buyers off (this seems like too much change and risk all at once).

The exception occurs during periods of great technological upheaval. We saw this years ago in the shift to the cloud. Many companies that were not yet fully on the cloud, and were certainly not cloud-native, spent a lot of time reassuring prospects that they were planning a move to the cloud and, in some cases, a complete cloud re-architecture. Customers felt reassured that they were not closing off the ability to do things in the cloud if they chose a particular non-cloud technology today.

In times of great upheaval, you can hype the future, but be careful

Today, we are seeing something similar with AI. Two years ago, many non-AI-native companies were quick to bolt on a chatbot or adopt some surface-level AI to reassure prospects that they would not be left behind. Fast forward a couple of years, and that simply is not enough. The market has moved on to agent technology as the next big wave, and traditional software businesses, particularly SaaS businesses, will need to explain how they intend to support a future in which at least some work is done by agents rather than humans. If you are not a fully AI-native company, you will have to, at a minimum, hold a point of view on what the future looks like for software like yours. Increasingly, you will also have to demonstrate how your product works in a world of agents, even if your customers are not exactly ready for agents quite yet.

This means walking a very thin line between hyping what your offerings can do in the future and convincing prospects that there is value in buying today. You will likely need to describe a pathway for customers from today to the future, and be clear about the value to their business at each step along the way. This is hard. Tilt too far into the future and your deals get delayed. Stick too closely to what you have today and you risk looking like a legacy offering with no future.

Do not let your team get distracted from reality

In an environment where technology companies are rewarded for hyping a future that has not happened yet, you need to be very careful that the teams working on positioning do not get caught smoking their competitor's marketing. Product and marketing teams have to keep a very close eye on current market capabilities versus what is still under development.

It has never been more important to understand what customers actually think

When markets are very noisy, it can feel like so much is changing so quickly that marketing and sales teams could never hope to keep up. The reality is that different types of prospects shift their attitudes and purchase behavior in ways that are often faster or slower than we could predict. The best signal we can get on how to shift our positioning as markets move comes from customers themselves. If you are an established business, there has never been a better time to build formal ways to gather feedback from prospects and customers. Here is how some of my clients are doing this:

• Customer advisory boards. Do not be afraid to shake up the membership if the shifting market indicates there is a new type of customer you should be listening to.
• Win/loss analysis. Few companies do it, but those that do often report it working as an early-warning alert that something is changing in the market. Companies tend to obsess over losses, but I have found the wins more relevant to positioning work.
• Executive account assignments. Several larger companies I have worked with run a formal program where anyone with a VP or above title, across every function and not just marketing and sales, is assigned a large account and expected to do monthly calls with them. Those relationships are often valuable for building the kind of trust that lets a customer tell you the real truth about what is happening in their business.

The big principles are not changing, but the little stuff can kill your positioning

Interestingly, the main positioning principles do not change when there is a big shift in technology, as we are seeing with AI. That said, there are enough changes in the nuances of what we need to pay attention to, and what we can get away with, that honing your positioning in this environment will feel extra challenging.