Pricing Based on Value, Not Costs

The AI-First Transformation Playbook: How Intercom Pivoted to Fin

Owen McCabe's journey transforming Intercom from a plateauing SaaS business to a rapidly growing AI-first company offers critical insights for leaders navigating AI disruption. His approach demonstrates how established companies can successfully reinvent themselves in the face of technological disruption.

The Warning Signs That Demand Action

• Intercom was experiencing five consecutive quarters of declining net new ARR
• Growth had slowed to low single digits, approaching zero net new ARR
• The business had become bloated with an unfocused strategy trying to serve too many customer segments
• Their pricing was complex, confusing, and widely disliked by customers

The Transformation Strategy

1. Recognize the existential threat and opportunity

• "You don't have a choice. AI is gonna disrupt in the most aggressive violent ways. If you're not in it, you're about to get kicked out of all of it."
• Six weeks after ChatGPT's release, Intercom had a working prototype of what became Fin
• Existing AI talent within the company quickly recognized the potential to disrupt customer service

2. Make decisive, founder-led decisions

• "We need to become a wartime company. If we don't fight for this, we are dead."
• Shifted from consensus-driven decision making to a more authoritarian, top-down approach
• "Greatness is created when you find a CEO who's willing to make brave hard decisions and own the results."
• Stopped trying to please everyone and followed founder intuition instead

3. Narrow strategic focus ruthlessly

• Cut costs aggressively and canceled projects that weren't aligned with the new vision
• Picked a single lane (customer service) despite having $80M ARR from other products
• Allocated nearly $100M to invest in AI development
• Rewrote company values to create a "sharp knife to cut out the parts of the company that wouldn't be effective"

4. Rebuild the culture for speed and execution

• Implemented quarterly performance processes with hard metrics against both goals and values
• Created a formula that automatically identified underperformers
• Accepted significant turnover (approximately 40% of employees)
• Hired for the new reality: people comfortable with high pace, high standards, and founder-led culture

5. Align pricing with customer value, not costs

• Moved to outcome-based pricing: 99¢ per resolved customer ticket
• Initially lost money on each transaction (costing $1.20 to deliver 99¢ of service)
• Trusted that costs would decrease over time as AI technology improved
• Focused on the value delivered rather than internal costs: "Cost is our problem"
• Simplified pricing dramatically after years of complex, widely criticized pricing models

Results of the Transformation

• Fin (Intercom's AI agent) is growing at over 300% annually
• Reached mid-eight figures in ARR for Fin alone
• On track to reach $100M ARR with Fin in less than three quarters
• Transformed from low single-digit growth to being in the top 15th percentile of all public software companies
• Projected to become the fastest-growing public software company by next year

Lessons for Leaders Navigating AI Disruption

• Bring in specialized talent: "We would be nothing if we didn't have actual AI scientists and leaders"
• Embrace youth: "AI is kind of a young man's game... learning to empower and enable them and learn from them is a really big deal"
• Accept the work required: Young AI companies are "literally working twelve hours a day, literally 365 days a year"
• Use AI internally: New AI-native companies are using AI for their own operations, giving them significant productivity advantages
• Be willing to cannibalize your existing business: The alternative is someone else disrupting you

The Mindset Shift Required

• "If founders of previous generation companies are not willing to roll up their sleeves and get into it and work as hard as the kids, hire a kid."
• "You can be a chairperson... have a lot of fun, you can mentor the kid."
• Accept that AI will make many things "worth zero" while creating new opportunities
• Recognize that AI can actually deliver more personal, consistent service than humans in many cases