A lot has changed in the world of AI since we first explored the promise of purpose-built solutions and verticalization (throwback to the original post). Back then, we were bullish on tailored AI solutions addressing specific industry challenges better than one-size-fits-all tools. Fast forward to today, and those ideas feel more relevant than ever—but now, the tools have evolved in ways that are reshaping possibilities.

Generative AI has redefined how businesses tackle inefficiencies, especially in legacy service industries burdened by outdated workflows and offline operations. This post revisits the opportunity, exploring how AI can transform service industries’ biggest inefficiencies, supercharge customer engagement, and turn operational headaches into competitive advantages.

The Legacy Service Bottleneck

Service-based industries like healthcare, home services, insurance – just to name a few – are stuck in the past, hindered by inefficiencies that lead to subpar customer satisfaction and missed growth opportunities.

These challenges boil down to three key issues:

LEGACY SYSTEMS OF RECORD

Decade-old systems are rigid, costly, and hard to integrate. These systems trap data in silos, require specialized expertise to operate, and are rarely equipped for modern demands. Yet, while outdated, businesses hesitate to modernize because the cost, effort, and risk of switching can be prohibitive.

OFFLINE CUSTOMER ENGAGEMENT

Phone calls and in-person interactions dominate many of these industries, resulting in time-intensive processes that don’t scale or capture consistent, actionable data. Without structured insights, businesses struggle to analyze and optimize customer experiences, losing opportunities to improve satisfaction and retention.

MANUAL AND FRAGMENTED PROCESSES

Employees are forced to bridge gaps between disconnected workflows, juggling data entry, customer communication, and operational tasks. This reliance on human effort slows down operations, limits innovation, and exacerbates burnout in industries already strapped for labor.

Together, these pain points leave a data goldmine that remains largely untapped – data that if unlocked, can revolutionize many of the day-to-day operations of these service providers. Consider these examples:

• The insurance industry’s dependence on human experts for non-core and administrative tasks is estimated to result in $85-$160 billion in lost value by 2027
• ~27% of calls to home services businesses aren’t answered, amounting to potentially thousands of missed opportunities.

Generative AI: A Game-Changer

Unlike traditional automation tools limited to predefined, repetitive tasks, Generative AI excels in contextual understanding, processing unstructured data, and delivering adaptive, creative solutions. It’s uniquely suited for industries with complex workflows and bespoke demands, unlocking capabilities that were previously unattainable.

What sets generative AI apart is its ability to integrate seamlessly with legacy systems, sidestepping the prohibitive costs of full-system overhauls. By extracting and transforming siloed data into actionable insights, generative AI delivers significant impact without disrupting operations.

Its impact is perhaps most visible in customer-facing processes. By analyzing historical interactions, generative AI can anticipate needs, craft personalized responses, and streamline interactions in real-time. Whether handling incoming phone calls, scheduling appointments, or managing follow-ups, these tools not only improve response times but also deliver consistent, scalable customer experiences—something legacy systems simply couldn’t achieve.

In the back office, generative AI tackles labor-intensive tasks like document summarization, contract generation, and data pattern analysis, reducing errors and freeing up employees to focus on strategic work.

The result isn’t just faster operations but smarter ones that introduce a layer of cognitive processing automating previously non-automatable tasks.

Not Every Vertical Needs a Solution

Not every industry requires a specialized AI solution. Our belief is that generative AI delivers the highest ROI in verticals where operational complexity intersects with significant customer pain points. Verticals with simple workflows or low volumes of customer engagement may not see significant upside from investing in purpose-built solutions.

To narrow in on the most promising opportunities, we developed a framework that evaluates verticals based on these two overarching factors:

OPERATIONAL COMPLEXITY

Industries with fragmented ecosystems (multiple stakeholders / systems), regulatory hurdles, intricate workflows, or multiple legacy systems of record not only have significant room for efficiency gains, but also mandate tailored AI solutions to deal with the relatively high levels of domain-specific nuances.

CUSTOMER PAIN POINTS

Frequent customer interactions, largely offline engagement channels, high competition and low brand affinity create strong demands from businesses to innovate – both to serve new clients and keep existing ones happy.

When we scored each vertical against these factors, we ended up with the below mapping:

Industries such as home services, physical therapy, dental practices, auto services, and surgical centers emerged as the most ripe for disruption.

Capturing Short-Term Value for Long-Term Defensibility

While the sectors mentioned above show the greatest potential for both margin improvement (resolving inefficiencies) and revenue growth (enhancing customer engagement), any solution must first address the unique constraints of these resource-strapped industries to gain traction. Thin margins and limited budgets means that new tools must be easy to adopt, quick to deliver ROI, and minimally disruptive to workflows.

That’s why we see customer engagement as the ideal entry point, the perfect “wedge.” Tasks like answering calls, scheduling appointments, and responding to routine questions are high-impact areas where AI can immediately drive revenue without requiring significant operational overhaul.

AI-powered voice capabilities are a prime example of this. In home services, every missed call is a missed revenue opportunity. If a provider doesn’t answer right away, potential customers simply move on to the next option in their Google search results – HVAC providers don’t exactly inspire deep loyalty! By automating this critical touchpoint with a high-quality, high-fidelity responsive AI, businesses can ensure they never miss a call, even during off-hours, increasing customer volume without adding headcount.

Starting small – with discrete, high-value use cases, like automated phone answering – creates a ripple effect. As these systems gather data and prove their value internally, they naturally build momentum, opening the door to expand functionality and eventually challenge the entrenched systems of record.

Ultimately, success in these industries depends on more than just solving immediate problems. It’s about embedding solutions deeply enough to become irreplaceable – capturing short-term value while building long-term defensibility.

We’ve already seen a number of companies like Sameday, Arini and Toma adopting this approach particularly in voice capabilities – and we’re on the lookout for more innovators in this space and across the stack.

If you’re building in this area or just want to debate our framework, we’d love to hear from you. Drop me a note at [email protected].