Many firms mistakenly focus on AI outcomes first. True success, as shown by THL Partners, begins with the unglamorous foundational work of establishing a solid data structure, aggregation, and strategy before building tools or chasing insights.
Resist the urge to apply LLMs to every problem. A better approach is using a 'first principles' decision tree. Evaluate if the task can be solved more simply with data visualization or traditional machine learning before defaulting to a complex, probabilistic, and often overkill GenAI solution.
To move beyond casual use, serious AI practitioners should use and pay for premium versions of multiple models (e.g., ChatGPT, Claude, Gemini). Each model has a different 'persona' and training, providing a diversity of thought in their outputs that is essential for complex tasks and avoiding vendor lock-in.
A proven strategy for monetizing AI within existing products is to develop and launch task-specific 'agents.' These agents, as demonstrated by THL's portfolio companies, are sold as additional SKUs or modules, enhancing the core product's value and creating new, direct revenue streams from AI.
To drive portfolio-wide AI adoption, THL facilitates cross-pollination of ideas between companies in different verticals (e.g., healthcare and tech). It also frames initiatives as gamified 'challenges' rather than top-down directives to foster innovation, secure buy-in, and better navigate change management.
Instead of chasing high-valuation, first-order AI players like GPU makers, THL focuses its investment thesis on second or third-degree beneficiaries. These companies provide critical, capital-light IP or embedded software that endures through tech cycles, offering better long-term value for middle-market investors.
When developing internal AI tools, adopt a 'fail fast' mantra. Many use cases fail not because the idea is bad, but because the underlying models aren't yet capable. It's critical to regularly revisit these failed projects, as rapid advancements in AI can quickly make a previously unfeasible idea viable.