#105- AI Systems of Execution
What is the future of SaaS?
Welcome to the 105th edition of Siddharth’s Newsletter. In the past years, software platforms mainly built as "systems of record" (SoR) were used to store data for businesses, help track and store information, and understand past events. But now, as industries change to be more fast and customer-driven, these passive systems can no longer keep up. AI is what has changed this, shifting business software from SoRs to "systems of execution" (SoE). In these new systems, data is not just stored, it is used in real-time to produce real results.
As businesses face more complex and faster challenges, they must not only store data but act on it quickly and smart. AI helps in this by moving from just keeping data to using it for tasks that can be executed quickly. This shift is the future: systems that not only keep data but use it to shape decisions and actions in business.
System of Record
A "system of record" (SoR) has always been a tool to store data for a business. Systems like CRM or ERP were built to track information—customer interactions, finances, inventory, and employee records. These SoRs kept things like audit trails and compliance reports in order.
While they helped keep data in order, these systems stayed passive. They stored the information but did not use it. SoRs were great for managing historical data, but they could not help with analyzing it or giving suggestions for what to do next. As businesses became faster and more dynamic, SoRs’ passive nature became a problem. Companies were stuck using old data to make fast decisions.
AI turns data into decisions
AI bridges the gap between raw data and decision-making. It allows systems to analyze large amounts of data, spot patterns, and make automated decisions. Now companies don’t just have data, they have actionable insights. AI integrates deep learning, natural language processing, and automation to let systems analyze and take action on data in real time.
Speed and adaptability are key in today’s business world, and AI shines here. It allows businesses to quickly analyze thousands of interactions, predict trends, or adjust supply chains as needed. AI lets companies not only keep up but stay ahead of changes. World’s moving fast and AI helps businesses switch from slow, outdated data processes to a more agile approach.
System of Execution
A "system of execution" (SoE) goes beyond just storing data—it uses that data to make proactive decisions and take actions. In an SoE, AI does not only do recordkeeping it processes, learns, and creates insights that guide operations. AI makes it forward looking to help make decisions.
Good SoEs have AI-driven suggestions, predictive analytics, adaptive workflows, and ability to execute. SoEs allow businesses to act on the most current opportunities with data-based actions. These systems keep learning, improving, and optimizing how they execute tasks. SoRs are passive, but SoEs are active. SoRs are file cabinets, useful for storing info but not much else. SoEs, on the other hand, are like a team of experts who use data to make things happen.
AI in Action
Let’s see how AI can enable SoEs. I will take examples of companies I’ve invested in the past and how they can turn into execution agents.
Debt collection- AI has the ability to change how debt collections work. Traditional methods like call centers or mass email blasts used to be common, but they were ineffective. AI now predicts the best time to contact a debtor, personalizes the message, and adapts based on responses. This makes the process more efficient, improves collections, and reduces the effort needed from humans. The system does not just record debt, it acts on it with smart strategies. The best systems of execution will have 2-3x higher collection efficiency than traditional counterparts.
Lead Generation- We are tired of traditional lead gen. But AI has turned lead gen into a much more useful process. Instead of only providing contact information, AI SoEs can find prospects, qualify them, and follow up automatically with the predetermined data and workflows provided. Now businesses can get high-quality leads every day, without wasting time sifting through data. AI does the heavy lifting of finding and engaging leads, improving conversion with strategies built on data. Customers can just focus on selling!
Recruiting- Recruitment saw its boom and bust in the last 5 years in India. We saw companies mushrooming during the hiring boom and the market almost vanished overnight. Most customers complained about quality of data, and effectiveness of the tools. Today, AI has the potential to change recruiting from just scanning resumes or parsing to a more complex system that looks at candidates more deeply and ranks them based on how they fit the job. AI systems analyze resumes, do simulations, and even interview candidates over the phone, all to find the best 10-15 candidates for a role. Automating not just the screening but also the evaluation process helps companies hire faster, find better candidates, and improve their hiring methods to be more effective and fair.
Why move to a system of execution?
Efficiency Gains- One of the first things companies will see when they move to an SoE powered by AI is a big improvement in how well they run. By letting AI take over decision-making and actions, human workers can focus on more important tasks. At the same time, AI deals with repetitive jobs, saving time. This reduces costs and also makes everything faster, letting businesses respond to things quicker than their competitors.
Edge- AI-powered SoEs help companies react to market changes quicker, spot new trends before they grow too big, and keep improving business results all the time. This gives companies a strong edge in industries where acting fast and adjusting is very important. In a world where moving quickly is often what separates success and failure, using AI is no longer just a choice, it is a must have.
Scale- Regular business operations have limits when it comes to growth. There is only so much people and resources can do. AI doesn’t face these limits. In fact, AI can grow with your business without needing to add more staff or resources as it starts freeing their time. As data increases, AI just keeps working as well, or even better, making sure the company can expand without the usual problems.
But there will be teething issues…
Integration with legacy systems- Many enterprises run on SAP, Oracle or other legacy systems. Switching from an SoR to an SoE will require some amount of integration with existing infrastructure. Businesses with legacy systems may struggle when they try to fit in AI tools that need real-time data and complex processes. This needs a lot of planning, and sometimes, businesses will need to make big changes to their infrastructure.
Data- The age old adage of garbage in, garbage out will always hold true. Businesses lose between 15 to 25% of annual revenues trying to fix data errors resulting from poor data quality. For AI to make the right decisions and give useful insights, the data it uses needs to be clean and high-quality. Bad data management, inconsistent data, or bias in the data can lead to wrong decisions and poor strategies. Making sure the data going into an AI-driven SoE is reliable is very important for its success.
Over reliance on AI- While AI can improve business processes a lot, it’s important not to let it take over everything. AI systems aren’t perfect today, and in areas like recruitment or finance, depending too much on AI without human involvement can cause problems. A fintech company was under government scanner for failure of infrastructure when unsolicited calls went to customers at 2 am. Human judgment is still needed in some areas of business strategy to make sure AI is a tool, not a replacement.
What is the next frontier?
AI will continue to evolve, and the next step is creating connected ecosystems where different AI systems work together. These ecosystems will not just automate single tasks but interact across different parts of the business, from sales to marketing to operations. AI will optimize processes in real-time and create a more integrated business model.
So what about humans? As AI systems take over execution, humans will shift from managing tasks to making strategic decisions. They will focus on setting goals, ensuring ethical practices, and providing oversight to prevent AI errors. It won’t be humans vs. AI, it will be humans with AI to achieve better results.
This move from a system of record to a system of execution is a going to be a massive, disruptive change for businesses. AI will no longer just about storing, sorting or analyzing data. AI will be all about decision making and speed of execution. Companies that embrace this shift will widen the gap between good and great companies.
The real question is not if your business should use AI, but if it is ready to use AI.