The AI Pricing Dilemma: Where Client Value and Firm Profitability Intersect
When you replace your engine (junior lawyers billing hours) with an electric motor (gen AI), your service department isn't making money like it used to.
July 22, 2024 at 03:27 PM
11 minute read
The original version of this story was published on The American Lawyer
Editor's note: This is part two of a series on generative AI's potential disruptions to talent management. The first part can be accessed here.
Since their introduction to the broader market, electric vehicles (EVs) have made quite an impression on automobile consumers in the developed world. As new manufacturers entered the market, incumbents clamored to create a competing product to capture their share of this new growth segment. However, auto dealers started noticing something troubling as more units were sold—EVs only need a fraction of the maintenance and service of gas-burning cars. This creates a big sinkhole in dealership profits as their service departments slowed down and began eroding revenues and profits. A McKinsey study estimated that EV service and maintenance is 40% less than their combustion engine counterparts. The lesson here is that while it's important to respond to shifts in demand, doing so can have unforeseen consequences.
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