By Ramon Rodriguez, GM of Advisory (Market Advisory in AI), Acquire Intelligence

A competitor can cut its cost to serve your customers for months before its price or offer changes. When the new offer finally appears, the race is already over.

At Acquire Intelligence, we spend a lot of time with executive teams on exactly this blind spot: the cost advantage a competitor builds while nothing on the outside looks different. Here’s how it plays out.

Through my advisory work and the Applied AI Australia podcast, I speak with leaders who are redesigning how their services are delivered. They are rebuilding delivery workflows and automating the assembly of information that staff once gathered by hand. Some have already made the change. Others are still testing it, so their customers haven’t seen the result.

None of it shows from the outside. A competitor’s website, price list and proposals can look exactly the same while the cost of serving each account falls. Invoices go through with less manual entry. Customer reports are assembled from approved records instead of being rebuilt by hand. Each account takes fewer hours to deliver.

That lower cost to serve gives the competitor three options. It can hold its price and widen its margin. It can take on more clients with the same team. Or it can cut its fee to a level you can’t match profitably, because your cost to serve hasn’t moved.

You find out when a customer asks you to match the price. By then the competitor has spent months redesigning its workflows, testing the economics and proving the service still meets customer requirements. Buying the same AI software gives you none of that. You start the redesign on the day you need it finished.

The exposure isn’t the technology a competitor buys. It is the gap in cost to serve that opens while nothing looks different. Know what each profitable service costs you to deliver, and how much of that cost a redesign could remove, before a customer asks the question for you.

How Much Can AI Really Cut From Delivery Costs?

Vic.ai, the software supplier, reports that 78% of Countsy’s invoices are processed through its Autopilot without human input, according to its published case study. Countsy’s founder says less manual entry allows its accountants to take on more clients.

For an accounting provider, that creates a choice about how to use its staff. It could serve more clients with the available capacity or spend more time advising existing ones.

A rival matching a lower fee may have no equivalent saving. Its accountants could still be doing the manual entry, leaving it to absorb the price reduction until it redesigns its own delivery.

What Happens When Specialists Pick Off Parts of Your Business?

A specialist might offer routine reporting while leaving you to provide the broader advice. It only needs to win that part of the customer’s spending.

Several specialists could each take a different portion. You could retain most of your revenue while losing enough contribution to make the remaining business much less profitable.

Take a business earning $10 million in annual revenue and $1 million in operating profit. Assume competitors take $500,000 of revenue, the business avoids $200,000 of delivery costs and all other costs remain unchanged.

Revenue falls by 5%, but operating profit falls by 30%. The business still has to cover the salaries and other expenses that did not leave with those customers.

Assess which services contribute profit that would be difficult to replace, then examine how easily a customer could buy them separately. Your largest revenue line may not deserve attention first.

Applied AI Australia Podcast

In “AI Changed the Job. Are You Still Hiring for the Old One?”, I speak with Jo-Anne Ruhl, Vice President and Managing Director of Workday Australia and New Zealand. We cover redesigning work and using the capacity AI releases. Listen on the Applied AI Australia podcast.

Does Cutting Delivery Costs Always Help You Compete?

Whether a specialist can win that spending depends partly on what customers value about your service.

A customer buying a monthly report may care most about receiving accurate figures promptly. Another may pay for the discussion afterwards because they rely on your advice before making a decision.

Cheaper report preparation affects those relationships differently. In the first, a faster or cheaper provider could be attractive. In the second, reducing preparation time could let you spend more time helping the customer.

A long relationship does not tell you which situation you are in. Ask customers what they would miss if they moved, then compare their answers with the service you actually provide.

If customers value your judgement, time spent assembling information can keep you from the advice they are paying for. Reducing that preparation gives you more time for their decisions, provided you deliberately change how you use it.

How Do You Test Your Own Cost-to-Serve Exposure?

Choose one profitable service and ask its owner and finance lead to examine it using delivery records and customer feedback. This is the same first test Acquire Intelligence runs with clients before recommending any delivery redesign.

Establish, evidence to bring

• Profit at risk. Revenue from the service and costs you could avoid if the customer stopped buying it.
• Competing offer. What the customer could buy separately, from whom and on what terms. Mark this unknown where no offer has been identified.
• Delivery costs. Staff time spent preparing, checking, correcting and delivering the service, plus relevant tool costs.
• Reason to stay. Customer feedback explaining what they value and would miss if they changed providers.
• First change. One task to test with AI, the person responsible and the cost, time and quality requirements it must meet.

For a reporting service, the first test might cover assembling information from approved records. Compare the total preparation and review effort with the current process. Confirm that the figures reconcile and that the report still meets the customer’s requirements.

Checking and correction may consume the preparation time saved. If that happens, the test has not established a time benefit. A report that fails its quality checks also needs further work before you extend its use.

You can examine those economics now, even while a competitor’s plans remain unknown.

What Should a Business Do First About Cost-to-Serve Exposure?

Ask the owner of one profitable service to bring you that comparison, including the missing evidence. Decide whether to test one delivery change, such as automating how the information in a report is assembled, or first speak with customers about what they value.

If you want help assessing the exposure and choosing the first move, talk to Acquire Intelligence. Bring the service, what customers pay for and what it takes to deliver.

Until next time, Ramon

Sources

• Vic.ai Countsy case study, figure reported by the supplier.
• “AI Changed the Job. Are You Still Hiring for the Old One?”, Applied AI Australia podcast with Jo-Anne Ruhl

About the author

Ramon has spent his career on the executive side of the table, including running a major P&L at News Corp. He filters every AI initiative through one question: does it increase revenue or reduce costs? If not, it’s noise. Ramon leads Applied AI Australia, now part of Acquire Intelligence, combining executive-level AI advisory with the capability to execute across the enterprise.

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