One way for OpenAI to build a moat with developers
OpenAI as an API provider is easy to replace with another service like Google’s, so most developers (and even users) regularly switch LLM providers as new capabilities emerge, and prices change. So far, there doesn’t appear to be any moat for any of these models.
OpenAI should try to establish commercial and network effect moats as aggressively as possible to compensate for this (while of course not giving up on building capability and cost advantage moats).
One could argue they already have this in consumer: many people think of ChatGPT immediately when they think of “AI” and this may persist long term.
To establish this in B2B, OpenAI should try to convert this consumer “mindshare moat” into a B2B moat. I can think of one way to do this.
First, create a “log-in with ChatGPT” SSO service, akin to sign-in with Google, Apple, Facebook, etc.
Second, allow developers to consume their user’s token allowances from their paid ChatGPT plans.
This is a similar model to Apple’s “run the model on-device and you don’t need to pay anything to add AI to your app” strategy. “Use OpenAI for authentication, and you can pass GPT API costs onto the user”.
This would be an intense incentive for developers to build on OpenAI. I think most B2B SaaS apps that wish to add a layer of AI to their products would go down this route, rather than watch their gross margins gradually compress over time.
Your software product today is a tool, and it might already be possible for you or a competitor to build an AI-first product that does the work for your customers without any ongoing effort on their part. If not, it’ll probably be possible soon. Either way, a level of disruption that was not possible a few years ago is now possible in almost every software category.
If you are the CEO or product leader currently stuck in a failing all-in-one strategy: pivot. The good thing about having a broad product is that you should have plenty of insights into what areas have the most opportunity for disruption and innovation. Find an area to double down, and a pathway towards deprecating some of the bloat. You’ll create a much more successful product that way.
Great startup leadership is about saying no to the bad ideas, sure. But mostly, great startup leadership is about saying no to most of the good ideas too. The decisions that make a mediocre startup a generational company are the decisions to not pursue legitimately huge ideas in favour of even better ones.
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