AI-enabled services framework
Eleven criteria across three groups — market structure & demand, delivery economics, and defensibility — for reading whether an AI-enabled services business will be a good one. Click any criterion for the strong and weak signal to score it against, or switch to table view to scan a whole section at once.
Criteria 01–05
How splintered is supply, and how weak is lock-in to any single incumbent?
Strong signal
Thousands of sub-scale providers; no vendor holds >5% share; switching is routine; no leading brand name and/or category isn’t yet defined
Weak signal
Oligopoly with entrenched multi-year contracts and deep workflow integration
Even if they see it coming, can incumbents build or buy AI, or are they structurally blocked?
Strong signal
Billable-hour, commission, or offshore-labor models incumbents can't cannibalize
Weak signal
Tech-forward incumbents with capital and incentive to adopt AI quickly
How essential is the service, and how expensive is a mistake, independent of spend share?
Strong signal
Non-discretionary work where errors trigger penalties, stranded goods, or liability
Weak signal
Discretionary, deferrable work that gets cut in downturns; errors are cheap
If AI cuts the price 80%, does volume grow more than 5x, or does the market simply shrink?
Strong signal
Large latent demand currently un-served at human price points
Weak signal
Fixed unit volume; efficiency gains become a pure price war
Is the legacy practitioner base aging or shrinking, leaving customers already underserved?
Strong signal
Retiring workforce, thin training pipeline; buyers actively shopping for alternatives
Weak signal
Abundant, cheap labor supply keeps the status quo comfortable
Criteria 06–08
What fraction of delivery cost is labor AI can actually do, and where is the irreducible human floor (liability, physical work, relationships)?
Strong signal
70%+ of COGS is process work (document review, reconciliation, data entry); human layer is thin and supervisory, with a path from ~35% to 70%+ gross margin
Weak signal
Delivery requires physical presence, bespoke judgment, or relationship work that caps automation well below half of COGS
Can correctness be objectively measured, and how costly is a mistake? Together these set the depth of autonomous operation.
Strong signal
Output is binary or testable (a vulnerability reproduces or it doesn't); errors are cheap and caught early. Trust compounds fast
Weak signal
Quality is subjective or errors surface late and expensively, forcing human review loops that cap margin and slow scaling
Does the market's pricing convention let you decouple price from cost, or does AI efficiency get competed away?
Strong signal
Outcome-based pricing norms (% of collections, per-finding, bps on premium). Customer never sees your cost structure
Weak signal
Hourly or headcount-based pricing where efficiency gains are visible and quickly passed through to price
Criteria 09–11
Is the work recurring (contractual), re-occurring (predictably repeated), or genuinely one-off?
Strong signal
Always-on operational work (billing cycles, managed services, ongoing administration) with natural contract structures and high logo retention
Weak signal
Episodic, project-based engagements requiring constant resale; revenue resets to zero each period
Does delivering the service generate proprietary data that makes the Nth engagement measurably better?
Strong signal
Each engagement compounds a dataset no competitor can replicate (loss histories, negotiated market terms, building-level operating patterns)
Weak signal
Engagements are independent; defensibility reverts to relationships and switching costs as foundation models commoditize capability
Is licensing a moat once crossed, or does regulation mandate a human in the loop, capping automation depth permanently?
Strong signal
License is hard to obtain but one licensed human can supervise unlimited AI throughput, which slows every follower equally
Weak signal
Per-transaction human sign-off required by statute, a structural ceiling no model improvement removes; or no regulation at all, inviting unlimited entry
The complete framework: eleven criteria across market structure & demand (01–05), delivery economics (06–08), and defensibility (09–11).