Last week, we launched the latest product from my company Outpace — an AI coach named Pacey who has been trained by product experts to help you be more successful.
I want to invite you to give it a try, and tell you the story of how Outpace shifted our strategic focus. In hindsight, these strategic choices make neat little business cases. In the moment, they are messy, non-obvious, and require a dizzying mix of skepticism and exuberance.
In 2021, we started Outpace with a mission that remains as relevant today:
Outpace’s mission is to bring the superpower of personalized coaching & development to every ambitious professional.
People love working with a coach — 94% of coachees say they would work with their coach again. The problem is not demand, its supply. Great coaches are scarce and expensive. We started Outpace to change that.
In The Product Strategy Stack, I discuss how mission and strategy are related, but two distinctly different concepts. Two companies, like Tinder and Bumble for example, can have a similar missions to bring people together, but very different strategies.
Missions are more durable than strategy — strategy needs to respond to market changes, technology advancement, and competitive pressures. Throughout this year, Outpace’s mission has remained the same but we’ve had to take a tough look at our strategy.
A strategic fork in the road
In the fall of 2022, hype around generative AI was gathering steam. When ChatGPT launched in November, that hype reached a fevered pitch.
The message was clear: “Every startup needs an AI strategy or risks irrelevance and death.”
We were intrigued. At the time, we had been experimenting with using generative AI to help coaches more efficiently respond to their clients.
We were also skeptical. Coaching is a deeply human endeavor. An AI-driven experience could fall short in many ways. We didn’t want to jump on the bandwagon with an AI experience that didn’t really work.
We needed to be clear about the decision at hand and how we’d make that decision. We defined two questions that needed to be answered:
- Can generative AI take the place of a human coach?
- If so, is building an AI coach a better opportunity than building a marketplace for human coaches?
Gathering conviction
The fork in the road came at a difficult time. We were a couple months away from launching our live coaching product, and we needed to figure out where to focus. We realized we had to do two things at the same time:
- First, we needed to pressure test our current business model. This meant we needed to launch our product and understand how quickly we could scale a coaching marketplace. This was especially critical given the headwinds of the current economic climate.
- Second, we needed to learn more about what’s possible with AI. Coaching is the most nuanced and human of use cases. How good is generative AI really?
To pressure test the market, we set an ambitious goal to launch ASAP and hit a six-figured ARR within six weeks of launching our product.
To learn what’s possible with AI, we spent months experimenting and discovering. We began using AI tools in our product work, prototyping an AI-led experience, and benchmarking the quality of Outpace's AI coach vs. top human coaches.
Can AI coach?
Large language models (LLMs) are interesting because they are not tightly defined systems. Their capabilities are vast and not fully known. Working with LLMs is a process of discovery, especially as context windows get larger.
In a very rough sense, you can think of LLMs as a brain with short-term working memory and long-term memory. The long-term memory is primarily filled by training the model — an expensive and time consuming process. The long-term memory can also be shaped by fine-tuning a pre-trained model. Fine tuning is a lighter weight process, but not truly dynamic.
That’s where context windows come in. The context window is the LLM’s working memory — it contains a record of past interactions and prompts that can include personality traits, rules, expertise, and step-by-step processes. As LLMs have gotten more powerful, the size of that working memory has gotten much larger.
Increasingly, this means that LLMs can adapt without the model having to be retrained. Sal Kahn dives into this topic in his TED talk about how Khan Academy is using generative AI to build Khanmigo, an AI tutor that adapts to student’s learning needs and responds appropriately. Remarkably, Khanmigo can walk a student through how to solve a math problem (without giving away the answer!) even though it hasn’t been trained on the underlying math — because its working memory has been seeded with the right approach.
In order to create an AI coach, we need to define the right approach. Good human coaches deliver on three things:
- They have coachiness. Eww, starting with the hard one. WTF is coachiness? Coachiness is a rare combination of empathy, emotional intelligence, and candor necessary to create a relationship that is both safe and challenging.
- They ask the right questions. A good coaching conversation is based on questions — the right questions help people illuminate blindspots, sharpen thinking, and define next steps.
- They know their stuff. The top coaches are experts who draw upon best practices, powerful ideas & frameworks, and their own experiences to support people beyond just asking questions.
Humane, not human
In a recent study, researchers plucked 200 questions from r/AskDocs, a Reddit forum where registered, verified healthcare professionals answer people's medical questions. They had real doctors and ChatGPT answer those questions, and they asked healthcare experts to evaluate the answers (blindfolded of course!).
The experts evaluated answers on both usefulness and empathy. They were surprised to find that AI generated answers were rated more useful than answers from doctors. Even more surprising: the AI generated answers were rated sevens times higher on empathy.
AI systems aren’t human, but they are humane — sometimes even more so than people. Why? Because empathy & emotional intelligence require time and energy. Doctors, hamstrung by a broken medical system, are in short supply of both. Its no wonder that AI has a better bedside manner.
We thought coachiness would be the hardest thing for an AI coach to get right. With proper training, we found that an AI coach can be unfalteringly supportive, positive, inquisitive, and empathetic.
Coachiness, check.
Prompting engineering for people
“Prompt engineering” is a hot topic, because its focused on harnessing the broad power of LLMs to do things that are unexpected and magical. Good coaches aren’t surprised by this. They know that an incisive coaching conversation starts with a great prompt — a question that helps someone frame their thoughts, see from a new perspective, and push past roadblocks.
Chatbots sit idle, like an Oracle, waiting to be asked questions. This is the opposite of a good coach, and not the right user experience to help people master new skills and put those skills to work.
Luckily, we learned this early at Outpace. We spent a lot of time building the content (and authoring tools) for deep professional development experiences. For example, our Leveling Up as a Product Leader program was designed to be the most comprehensive coaching program for product professionals. It includes sessions on Strategic Decision Making, Product Strategy, Winning the Confidence of Leadership, Influencing Stakeholders, Setting & Achieving Goals, Prioritization & Roadmapping, Building a High Performance Team, Talking to Customers, Making Decisions with Data, and more.
Each session includes hands-on exercises designed to stimulate conversation between a person and their coach. What would an AI version of that experience look like?
It starts with the AI asking the user a question, not the other way around. We use the working memory of the AI to prep it for each conversation— giving it a persona and expertise relevant to the topic at hand.
Now we’re getting somewhere. In addition to coachiness, we were able to prototype an AI coach that knew its stuff and could ask the right questions.
Meet Pacey
Let’s see how it works. AI-powered writing assistants, like Grammarly and Writer, can help ensure your product documentation is clear, concise, and free of errors. But let’s be real, the hardest part of communication as a PM is usually interpersonal communication.
…and the tough part about communication is that there are usually emotions involved. Let’s see how Pacey can help us tackle the most common questions product leaders have when it comes to communication.
As a leader, being able to help people understand complex concepts is key. Frameworks are an excellent tool to help people structure their thinking and avoid getting lost in the details. Here, Pacey doesn’t just whip out any old framework. “Jobs to be Done” is a product framework designed to help a product leader communicate with their team.
So, Pacey can help you on the spot come up with the right framework to lean into for your challenge. Pacey is also effective when it comes to needing a quick sounding board and some guidance for some really big, overwhelming feelings!
And the more you share with Pacey, the more understanding Pacey has of you, to help give you better guidance… just like a real human coach. Your conversation with Pacey is entirely private, so you can share any thoughts and feelings you have without holding back.
Mentors, friends, and even the best human product coaches aren’t always available to help you think through a pressing situation at work on demand. Pacey is there in the moment and responds in seconds.
Pacey is the foundation of a new type of professional development experience that can help you learn new skills and provide the feedback you need to put them into practice. We’re providing a free week of coaching with Pacey for a limited time so you can give it a try.
Oh, the Places Pacey’ll Go!
We’re just scratching the surface. We’re working with product experts to expand the library of sessions available in our product leadership program, and we’re building programs for engineering leaders, sales leaders, and rising professionals in every function — and across the full gamut of learning & development needs.
As we grow, we’re gathering data on where Pacey is the most helpful and where it can be better. Already, we’re seeing an 80-90% satisfaction rate for Pacey’s guidance, and that number will improve with reinforcement learning.
And, we couldn’t be more excited about the multimodal capabilities that are being built into new LLMs like GPT-4. Soon, Outpace members will have the ability to upload documents, presentations, and videos during the course of a session — helping them leverage Pacey as their writing coach, leadership coach, productivity coach, speaking coach, and more.
A new strategy…
Meanwhile, we had made progress on our live coaching marketplace, but there were headwinds. Our strategy had been to use a product first approach to do much of the heavy lifting — making human coaches more efficient and passing on lower prices to members. We launched a $599 per month coaching product, much less than the thousands of dollars per month coaches typically charge.
It was sort of working, a situation that traps many startups in a state of limbo. On one hand, we had an AI prototype that was often remarkable in its abilities, and on the other hand we had a marketplace business that was weighed down by the economic climate. We could either push against market forces or be pulled by them.
The road ahead was clear: shift to building the AI native platform for learning & development.
…and a new market
New technology has a way of blurring market lines and sometimes erasing them all together. Initially, Uber framed its opportunity in terms of the taxi market. Today, Uber’s annual revenue is nearly 10x what they estimated the total market size to be in their seed pitch deck.
Professional coaching is a $15B market. Its actually kinda small — not because of demand but because the supply of wonderful coaches is limited. Now, with generative AI, we’ve eliminated the supply constraint entirely, and so we need to rethink our market.
Outpace is no longer a coaching company, we’re a professional development company.
Every year, companies spend $360B+ on professional development (about 3.5% of their payroll), but there are significant problems. Just 4% of CEOs believe they see a clear return on investment from their learning & development spend, and over half of employees are unsatisfied with their company's L&D offerings.
Why? Today, companies have to make a painful trade-off. Courses and workshops are affordable, but they lack personalization and results fade quickly. Professional coaching works exceptionally well, but is often cost prohibitive.
Our goal is to make that trade-off obsolete. We use generative AI and incisive content to deliver learning & development that is highly personalized, effective, and affordable.
We know there will always be a need for human connection and support. Our goal is not to replace the exceptional coaches that impact people’s lives so profoundly. Instead, we’re creating a new way for coaches to spread their expertise — amplified by AI, and we’re bringing personalized guidance to the millions of people who’ve been left out in the past.
Our next chapter
Leah Solivan, one of our investors at Fuel Capital, has a great quote about entrepreneurship:
“Life is like the monkey bars, you have to let go to move forward. Once you make the decision to leap into entrepreneurship, be sure to loosen your grasp on old concepts so you can swing your way to new ones.”
That is true, not just of the decision to startup a company, but of each step along the way. The rapid current of sunk cost and momentum is strong… it’s too easy to stay the course when a better path unfolds. Fundamentally, this is why big companies get disrupted and why startups, despite every odd against them, often prevail.
We navigated an important moment for the company by letting go of old concepts, and embracing new technology. We couldn’t be more excited about the opportunity that lies ahead, but there are challenges still. We’re laser focused on raising our next round of funding so that we can turn the page on the next chapter, and there is much work ahead to lock-in product/market fit and build a durable growth engine.
We’re closer than ever to our mission to bring the superpower of personalized coaching & development to every ambitious professional. Outpace — by leveraging generative AI — has opened the door to a new way of learning that is more personalized, more effective, and more affordable than ever before.
Check it out for yourself and let me know what you think!