AI just flipped the script on scaling
We are witnessing a fundamental inversion of the business laws of gravity, and most founders haven't realized the ground is shifting beneath their feet.
AI empowers services and devalues software products.
Think about it. We are witnessing a fundamental inversion of the business laws of gravity, and most founders haven't realized the ground is shifting beneath their feet.
For the last two decades, the Silicon Valley playbook was gospel: Services are bad. Products are good. Investors hated agencies and consulting firms because their growth was linear. They loved SaaS because its growth was exponential.
But what stood true a few years ago is no longer true now.
Headcount vs. Code
Before AI, the dichotomy was clear.
If you wanted to scale a service-based business, you needed to hire people. This meant recruiting, training, retaining, and dealing with the inevitable human friction. You had to constantly refine and measure processes just to maintain the quality of value you provided while trying to grow.
Services were easy to get going, but incredibly hard to scale.
On the other hand, product development has always been notoriously hard. You needed capital, expensive engineering talent, and a massive tolerance for risk. But once you built a good product and found Product-Market Fit? Scaling was practically frictionless. Serving 100 users cost almost the same as serving 10,000.
Now, the tables have flipped.
Services Unchained
Service-based businesses are suddenly vastly easier to scale. The bottleneck of human capital is dissolving.
You no longer need to hire armies of junior analysts, copywriters, or researchers to take on more clients. Instead, you need to integrate agentic workflows in such a way to facilitate your growth.
Imagine a marketing agency. In 2022, doubling your client base meant doubling your account managers and creators. Today, a lean team of three senior strategists can handle the workload of fifty by leveraging AI agents to do the heavy lifting, from market research and data analysis to drafting copy and generating assets.
Your service business can finally achieve software-like margins. Growth is decoupled from headcount.
The Rise of "Vibe-Coding"
While services are experiencing a renaissance, software products are inherently less valuable than they were 24 months ago.
Building software used to be a moat. The sheer difficulty of writing code kept competitors at bay. But if I can literally vibe-code your software over a weekend using advanced AI tools, why would I need to pay a monthly subscription for it?
We are entering an era of hyper-commoditization for standard SaaS. If anyone can prompt a custom CRM, a project management tool, or an analytics dashboard into existence, how do you stand out?
Positioning just got exponentially harder for product-based companies. You are no longer competing against other development teams; you are competing against your own users' ability to generate bespoke solutions on the fly. And honestly, I think it will get worse as time goes by.
Where Do We Go From Here?
No one can tell for sure exactly what the landscape will look like in five years. But what we do know is that we are witnessing the biggest paradigm shift of our lifetime.
If you are building right now, you need to adjust your lens:
For Service Founders: Stop acting like a traditional agency. Start acting like a systems architect. Productize your services not by selling generic packages, but by building proprietary, agent-driven workflows that allow you to deliver premium, bespoke value at scale with near-zero marginal cost.
For Product Founders: Features are no longer a moat. Your code is not your competitive advantage. To survive, you must pivot to things AI cannot easily replicate: hard proprietary data, deep integrations into legacy offline systems, highly complex B2B workflows, or an undeniable community and brand.
The old playbooks are dead. The founders who recognize that the tables have flipped are the ones who will capture the value in the next decade.
Adapt accordingly.
