Why Customer Workflows Are Becoming The Moat In The AI Era

In today's AI era, customer workflows are emerging as a crucial strategic asset for companies. Consider an insurance firm that tests two AI assistants, both capable of handling customer inquiries but only one can fully integrate with the insurer's systems to process policy renewals, approvals, and exception escalations. While a more advanced model may appear in the future, integrating the first assistant into the company's processes would necessitate significant operational changes.

This scenario illustrates the growing importance of owning the environment where AI performs useful work, a phenomenon I refer to as a potential AI moat.

Recent acquisitions and partnerships highlight three key implications for founders, investors, and boards. First, workflow access provides strategic value. Schneider Electric's acquisition of PTC for approximately $22.6 billion underscores this point, as it grants Schneider access to software used in designing, manufacturing, and servicing physical products, thereby positioning itself within customers' decision-making processes throughout a product's lifecycle.

Similarly, the Synopsys-OpenAI partnership demonstrates how combining cutting-edge AI with established chip-design tools and expertise, supported by licensing and revenue sharing, can yield strategic benefits.

For founders, these transactions signal the importance of building a foothold within a specific customer workflow. Established businesses can capitalize on their existing workflow access to gain a competitive edge. Companies that can seamlessly connect with internal systems, adhere to permissions, manage exceptions, and reliably complete tasks are better positioned to retain customers and expand their offerings.

However, integration alone is insufficient to secure a lasting moat. Customers must rely on the product, recognize its value, and be willing to endure the operational risks and costs associated with replacing it.

Investors should scrutinize how much recurring work flows through a platform, which processes depend on it, and the challenges associated with switching to an alternative solution. Companies can strategically acquire their way into desired workflows. ServiceNow's acquisition of Moveworks, which combines an AI assistant and enterprise search technology with established workflow automation, exemplifies this approach.

With 5.5 million employee users and a significant customer base already utilizing both companies' technologies, the strategic objective is to integrate employee requests directly with the systems and processes that address them across various functions. This acquisition creates a clear corporate development agenda: identify the customer workflows the company aims to enter, assess the barriers, and determine whether an acquisition or partnership can expedite entry.

To illustrate the potential of this strategy, consider the case of ElevenLabs, which reports handling over 15 million conversations weekly, including refunds, insurance renewals, and healthcare bookings. The operational adoption of their AI agents is a critical factor in establishing a durable competitive advantage. Once a product is embedded within a customer's workflow, follows permissions, handles exceptions, and consistently delivers results, replacing it becomes a complex and costly endeavor.

This operational integration creates retention advantages and opens the door to expanding the product's reach into additional workflows.

As AI capabilities continue to evolve, acquiring the right position within customer operations could prove to be a powerful avenue for sustained growth. Itay Sagie, a strategic adviser to tech companies, investors, CEOs, and boards specializing in strategy, growth, and M&A, emphasizes that identifying the right position within customer operations could become a key driver of durable growth in the AI era.