Episode 92 Transcript

Banoo Behboodi: Welcome to the Professional Services Pursuit, a podcast featuring expert advice and insights on the professional services industry. Thanks for joining us as always. I'm Banoo and today we have a fantastic guest joining us, David DeWolf. David is the President and CEO of Knownwell, an AI-as-a-Service platform helping professional services organizations retain, delight, and grow their clients. He is also the co-host of AI Knowhow Podcast, where he helps business leaders navigate the rapidly evolving world of AI and turn this game-changing technology into real, viable business solutions.

I'm so excited to have David. Obviously, AI has been a topic that we've done many sessions on, but David as an expert, and in context of the release of the new SPI report, we'll be tackling that and getting David's insights around where he's seeing AI go with professional services. Thank you for joining us, David. This is going to be amazing. I'm really looking forward to our conversation.

David DeWolf: I'm so glad to be here, Banoo. Thank you for having me.

Banoo Behboodi: Of course. Let's get started with you telling us a little bit about your background and just about your company Knownwell and how you got here.

David DeWolf: I'm a serial entrepreneur. I started my first company, gosh, I guess 18 years ago now. I was a leader in the professional development services space, digital engineering and product development space, built that company to thousands of employees, operating in 10 countries around the world. Sold it to private equity a couple of times. I've been there, done that in terms of scaling a professional services business. I know that it can be hard. Everybody talks about how unscalable professional services businesses are. For those of us that have been in it, we know that it takes a lot of Herculean effort. We're leading people and that's a big responsibility. It can be a lot of fun at the same time. I love the professional services space. I've been in it my whole career. My last professional services company was building digital products and SaaS platforms for information, media, and technology companies.

When I stepped down after selling the business, I thought maybe a SaaS platform is next.Sure enough, I happened to step down on January 1st of 2023. If you have followed OpenAI and ChatGPT at all, you know that was six weeks after ChatGPT was released.I had this just fortuitous timing of sitting on the sidelines in “retirement” while ChatGPT was taking off, doing what it was doing in society.It was fascinating to watch.What I saw were three different conversations.The first was about the technology itself.A lot of us that are technologists, we geek out on the technology.That was the time for the LLM and the advancement of the technology itself.Interesting, hundreds of billions of dollars flowing there, but honestly, not my thing.I've always been about applied technology, not necessarily the invention but the innovation. The second conversation tapped into that innovation, and that was about the personal productivity aspects of what this can do for you and me when we're creating content, when we're writing something. Maybe software developers, how are they more efficient and productive with their time? That was interesting, but I became so much more fascinated with the third conversation.

The third conversation was all about questions and fears.How is this going to change the way we operate our businesses? How is this going to change the way we lead? What's this going to do to jobs? What struck me at the time, in the earliest days of AI really becoming democratized, was that these questions were being asked but they weren't being answered.Knownwell started out of that curiosity, seeing companies struggling to figure out how to adopt this in our businesses versus just handing it to our people to use.How is it going to change our operations? Wanting to help them figure out how to navigate that and learn how to do it, we started the company out of curiosity, working with a lot of private equity funds, different portfolio companies of theirs, trying to understand what was going through their minds and how we can help them.Ultimately, just about a month and a half after starting the company, we tripped into a product idea that we got fascinated by.That became that SaaS platform.I wanted to give it a shot at doing something more leveraged than being in the software space.That's how I ended up here, and it's been a lot of fun ever since, growing a business again.

Banoo Behboodi: It sounds amazing. It sounds like retirement is not a word for you. I mean, that's a conclusion.

David DeWolf: In so many ways; we can talk about that forever. I did a fun little personal note. I actually stepped down because I had two kids getting married in 2023, and I had promised my daughter I wouldn't work and have a full-time job until after her wedding. I made it by one week; one day on the other side is when I started Knownwell, so there you go.

Banoo Behboodi: Well, I have three girls that are around that age. I love that. That can be my new target for retirement for their weddings. Anyways, let's get on with it. I think it's to your point, I want to reference the SPI report because it's consistent with a lot of why you dived into creating Knownwell and the SaaS application. Many of the listeners may have listened to our SPI episodes, but if not, they recently released two episodes breaking down the 2025 SPI Maturity Benchmark report, which was published in February.

A very interesting listen, I highly recommend it instead of reading the 120 pages or whatever the SPI report is.It digests the information for you.One of the key takeaways, however, is nearly 75% of surveyed organizations support Gen AI, with a strong focus on leveraging it for business growth.SPI research predicts this support will only grow as the benefits become clearer and as clients begin to expect AI capabilities from partners.They also concluded the report by saying one of the biggest opportunities for 2025 is going to be AI, and one of the biggest risks is for any professional services organizations that fail to implement or use AI in furtherment of their business.With that, can you tell us what are some of the key trends you're seeing at Knownwell?

David DeWolf: It's really interesting. I love this report because it teases out the reality of what I saw on the ground as I was starting Knownwell. We were launching in 2023, and I would say from the middle of '23 through the middle of '24, we saw support. Support doesn't mean you're driving and being successful. It means, yes, we want to do it, but that's the attitude we saw.

We observed almost 100% of folks, and we've done over 500 customer reviews. In hundreds of conversations, we found over and over that companies believe AI is going to revolutionize the way their business operates, but they had no idea how to get started because they didn't have a vision for the future.I would say that is one of the big trends that we’re just starting to come out of.If your listeners aren't attuned to it and haven't developed a vision for what business will look like in the future, it's essential because if you are stuck and don't know where to move first, it's hard to get out of the gates. Developing that vision and grounding yourself in what the business operating model of the future looks like is a really important thing to grapple with for companies.

We're starting to see people realize it, and in the earliest days, we noticed those three conversations. One was about personal productivity. Personal productivity will see an uplift in the efficiency that exists within businesses because across all different skill sets and domains, we'll have 7% increases here, 20% increases there, 3% increases there, in terms of actually doing our work.If you look at the actual data, Banoo, the knowledge worker in an average week spends over 85% of their time orchestrating the business and the operations of the business.It's coordinating with other work streams and taking all these individual pieces of work being done and bringing them together to produce a result. That is what operations is. Business leaders need an idea of what that is going to look like in the future to be able to begin executing it.

One of the gaps we saw was that professional service organizations specifically lacked that vision because they haven't been served well by software historically. The professional services space is a relationship-driven business. In a relationship-driven business, we lack transactional data, and the fuel of software in the past has been transactional data. We have been left to manage what we do have. In that world, we're not as up to speed on some of the different technologies and the vision of how data and analytics and now artificial intelligence can reshape.That is one of the big trends that we are seeing in professional services: organizations being able to start to grapple with that for the first time.

Banoo Behboodi: To your point, one of the things that was highlighted in the SPI report, generally in terms of trend, was how we had a lot of the key KPIs of the metrics that they measure in terms of revenue growth. Utilization had taken actually a dive even over a five-year trend. 2024 was one of the lower ones amongst the five-year. Very, very important to assess that because what you're suggesting is AI is going to be one of the ways that they can basically target the very high-value resources to focus on areas that are high value for the customers and drive value for the customer and drive revenue up. Turn around those KPIs.

David DeWolf: I think that's exactly right, and Banoo, if you think about it, one of the challenges we've had goes back to this lack of transactional data. It also goes back to our inability as an industry to digitize our own businesses. Many professional services firms have spent years digitizing other businesses, but we've really struggled with ourselves because we're so reliant on relationships, on knowledge work, all of these things that require inference, not just computation.

Guess what AI is great at? It's great at inference. I think what you're going to see is the acceleration of digitization of our businesses because we can actually digitize inference and that gut feel that we get as operators, as partners of a services firm.As an account manager knows, if you're sitting in those conversations, you start to connect these collected dots and put them together to have this judgment call. AI can do that. It's no longer just a math equation that computers can perform.That’s going to really help us, whether it is in delivering our service or operating our business, make more of these judgment calls in an automated way.

Banoo Behboodi: Obviously, I'm with Kantata, and we're a vertical SaaS for professional services. That has become a total area of focus for us in terms of using AI assist and softer information. We have this utility or application called Pulse. It is a surveying tool that can be used throughout your project to get sentiment.

Take the power of getting softer attributes like customer sentiment and the project team sentiment built into the project performance.Providing that insight into the project manager and identifying risk early basically delivers information right into the hands of the project manager so that ahead of time they can be proactive in responding to that.

David DeWolf: You just hit so many key themes there that I think it would be prudent for professional services leaders to pay attention to. The last word you used, proactive; getting that project manager proactive in responding to what's going on, is key and something that AI enables. What does AI do? Because it now has inference, we don't have to set up rules to be alerted responsively when something happens. The AI can tell us before we even know to ask for it. That's powerful.

The other thing you talked about was this soft data.I love that.On the AI Knowhow, we had our 2025 hot takes, and one of my hot takes was, I believe this is the first year that we are on the path to data being dead.What I mean by that is data for so long has been the power of our software and the power of digitization.If you think about what data is, it is a representation of our real world.It's how we've abstracted it so that computers can understand it.Computers can understand the natural information that flows between you and me.We all have been on a video conference where there's an AI bot sitting there and transcribing, summarizing, and creating to-do lists. The computers can understand what's going on and give it to us.

I believe we're going to move away from this hard data and into the soft data you're talking about, this natural information that's already flowing in our businesses. How does software understand it, respond to it, and proactively tell you what you need to know? If you talk to any leader out there, Oracle did a survey just last year on leaders and data. It showed that 93% of leaders will tell you that they have too much data. It's eroding their decision- making.The same amount, 91 % will tell you they don't have the intelligence they need to make good decisions. It's this dichotomy of too much data and being overwhelmed, but needing to know what's important. Computers can do this by reading this soft data and producing intelligence. We no longer need the transactional representation of our life; we can understand what's already going on.

Banoo Behboodi: I'm going to ask you about AI hallucination. As you talk about some of this soft data, what do you see as the risk and mitigation steps to make sure that you're actually being presented with the right information and insight to drive the right action? If you're misguided, that's not going to result in the right action.

David DeWolf: There's two aspects here that I'm a really big believer in. First of all, especially when you're talking about operating a business, dealing with clients, those types of things, I'm a real big believer in the human in the loop. I do not believe that what AI is going to do is replace a bunch of people. I actually believe the opposite. I believe it's going to be the Iron Man suit that we all put on to take us to the next level.

All of your listeners, if they think about their--think about your rockstar consultant that exists in your professional services firm.Those folks are what I call unicorns.They're so hard to find. They're great practitioners, but they also have these consulting skills, incredible IQ and EQ.You put it together, it's so hard to find them and scale them for all professional services businesses. What happens if you take an exceptional practitioner, but then you empower them with an AI consultant that they could put on that vest, and all of a sudden they are informed proactively of the nuance that they may not be picking up, of the sentiment of the customer, of a warning sign here and they can act on it. I really believe that's the world that we're stepping into.

The hallucinations, absolutely they will happen.The reality is, there are a lot of ways.If you get deep into the technology, the more you actually shape and give guardrails, you can actually prevent a lot of the hallucinations.But there's still a risk. If you have a human in the loop that can exercise judgment, then you can not only continually refine and train these models to hallucinate less and less, but you also have a decision maker there that can exercise human judgment to make sure that you're taking the right steps.In my mind, that's actually the way that we not just use it for our best benefit, but also we ensure that AI, it's such a powerful technology.It has the ability to dehumanize us, turn us into robots, or it has the ability to elevate our experience at work and make us even more purposeful and to do what only we can do.I think if we think of it as that Iron Man suit, that vest that we can put on, it can really help take us to the next level.

Banoo Behboodi: It seems like there's one more question in this context for me, and that is part of what we run into, at least within Kantata, is basically the customer’s need to comply with regulations like GDPR, where it constrains the data. It constrains your access to the type of data and how to drive insights broader to that customer, broader to make it more community-based. I love the fact that you're saying it's going to move away from the data, and maybe some of these regulations in that softer sense are not going to matter. I don't know, I'm just curious how it all fits in.

David DeWolf: The regulatory question is an interesting one. About a year ago, I was in a small conversation with Ethan Mollick. Ethan is a professor at Wharton and one of the leading thinkers on AI. He said something fascinating to me or to the group that I think still holds true today. He had found in his research that most people think of AI as a personality versus as a computer.

Once you give it that persona, all of a sudden it becomes so much more scary.He said, the reality is, if you reframe the question about things like security, privacy, regulation, in terms of software in the cloud, which is all this really is, people all of a sudden aren't as scared. They're not as fearful.It is this mental aspect of thinking of this as a persona, as a thing, as opposed to just software that gets us backed into the corner.

This is what we have totally found at Knownwell as we've been rolling out our platform. What we are doing is we are taking and synthesizing all of this natural communication that flows between professional service providers and their clients and we are surfacing signals around what is the health of that commercial relationship. What are the strengths, the weaknesses? What do you do to improve this and grow this relationship so it sustains and grows over time?

We have found in that context that could be scary.The reality is we have yet to find a single regulation that gets in the way of actually doing that as long as we have architected our platform in a way that uses all of the modern security and privacy considerations and is baked in and architected from the ground up.I think that frame can really help folks understand if you would do it with.

There are special considerations.Training of models is a unique one.We do not train on any of our customer's information any of our models. That is an important question to ask. Outside of things like that are truly unique to AI, we are really just talking about how many people already email is either in Microsoft 365 or Gmail these days. Everybody's one of the two.That is 98 % of the market.That means everybody's email communications is already in the cloud. By the way, everybody also has plug-ins for cybersecurity that is scanning every single one of those and is determining whether there is a cyber problem or not. We already allow these things. It is just this idea of this AI bot persona that we are freaked out by.

I think we need to just take a step back from that and really look at it for what it really is and be prudent about it and make sure that those folks that we are working with, that have implemented these models and the applications of those models that we are using, are taking security and privacy seriously, just as we would expect any SaaS provider to.

Banoo Behboodi: Oh, I love that perspective. Very helpful. Okay, I am a leader. I am a professional services leader and very excited after listening to you. You started out by explaining one of the first steps would be to define and make sure you are clear on the vision. What would you say that roadmap looks like to success?

David DeWolf: One of the things I love to coach executives on is to separate the operational from the productivity use cases. What we have found over and over again is that the most momentum in terms of leveraging AI to drive a return immediately comes from empowering your people.

Put the basic policies in place that you need to trust your people and empower them to use tools on the ground.You will be shocked by how the individuals in the line, your actual consultants, and your actual employees dealing with your clients will automatically start using and accelerating their own productivity.You will be able to find those individuals that do it really well, then praise that, highlight it, and share it widely within the organization.For the productivity use cases, that works extremely well.Your marketing team writing copy or creating creatives; your consulting team creating decks and proposals, whatever it is, any of that productivity based work.

When it comes to operations and orchestration, this is where you require a top down change management strategy.Anything operational isn't going to work if it's bottoms up because you need a holistic view.This is where the vision comes from.

Our vision is that we believe that every business in the world within a short, probably 7 to 10 years, is going to be operated just like Amazon’s Supply chain operates today, which is it's so close to the market, so close to the customer that it's able to say not only where are the goods warehoused, but how many do I need, how is it routed ? What sale do I need ? It's running the whole business.

Every leader tomorrow is going to have a chief of staff.Every CEO is going to have an AI chief of staff, that is the copilot of management, helping them surface proactively these things they don't even need to know to ask about.

You should be thinking about that.Think about what steps do I need to take ? What do I need to know ? Our hypothesis is the thing you need to know more than anything else is you need to figure out how to digitize, understand, and institutionalize your commercial relationships.

The heart of any business is your commercial relationships.Those customers, the economic relationship you have with them, how they're sustaining, and how they're growing over time, that's the heart of what that brain needs to look like that will ultimately automate your enterprise.

Start thinking about that.How should you be doing that ? What do you need to do to take those steps ? That would be my recommendation for the top down operational approach.

Banoo Behboodi: Great. If you were looking into the future, one year, I am hoping to have you back a year from now, where we sit back and see what has happened in 2025. If you were to predict where we're headed, what would you say and if we were to get together in March 2026, one year from now?

David DeWolf: I think you're going to see a few things over the course of the next year. I think, number one, you're going to start to see more vertical SaaS applications that are applied AI. Right now, if you think of AI, you've got those execution tools and you've got the LLMs that you can interface as a chat. There's not a lot of actual operational software.

I think you're going to see an advent of a new breed of company that starts to rise above and begin to form the earliest signs of the next generation of the platform businesses that will run our businesses in the future. You're going to start to see several of those come out and gain some traction.

I also think you're going to see a major shift away from data engineering and data warehouses and data lakes in the modern data stack, and you're going to see more and more companies looking at the natural information flows that exist within business and starting to process those, versus looking for discrete data points that are an abstraction of the world that we live in.

You're going to start to see more and more companies not just looking at their internal operational use cases to leverage AI, but you're also going to be looking at what are the use cases that drive our growth, that manage our clients, that change our product.How do we digitize ? Especially in the professional services space, we've never really figured out how to digitize our core offerings. How do we begin to do that and how does it shift our business models?

I think you're going to see the earliest steps in that domain as well.

Banoo Behboodi: When we started out, you mentioned about how Knownwell came to be. I do want to ask you how you think Knownwell can help our listeners. What are the customers you target or the problems that you target to solve for customers so that they have that reference?

David DeWolf: Oh, I appreciate that. The theme that we heard over and over in boardrooms that really piqued our interest was that professional service companies kept saying that not only were they experiencing churn, but they called it, quote, "surprise churn." This is what really struck us.

What we realized was that in professional services, we have such a challenge replicating knowledge.We depend on hero consultants.Whether it's for the work or knowing our customers and institutionalizing that so that we have a common view of these commercial relationships is really hard. It is essential to driving a disciplined operating machine.

If you don't know what the health of your commercial relationships are, and I would argue you don't, even if you use an NPS survey, even if you use customer satisfaction.Those are all three months stale.Those are six months stale.They're anecdotal. If you know based on the continual information flows that flow through the business every single day and you can analyze those and create a health score, understand the strengths and weaknesses of every relationship, and have very acute recommendations based on an AI consultant telling you what to do to strengthen those, then you can take your business to the next level.

You can start to operate as some of the more transactional businesses have historically.Keep that relational aspect for a differentiation purpose, but for an operating purpose, leverage that data.That's what we're doing.We're actually providing that commercial intelligence so that you know exactly where every single one of your client relationships stands, who is at risk, what you should be doing about it, and you can take action to improve both your retention and your growth over time.

We all know that your existing customer base, 80 % of a professional services firm’s revenue, comes from today's clients, not net new business. We're focused on that and helping companies improve their net revenue retention.

Banoo Behboodi: I love that. That's fantastic. It's similar to when I referenced Pulse and where Kantata, the product that we have where we're building sentiment in terms of driving that insight into how projects are progressing. I think that it's critical. I really appreciate your time. I've so enjoyed this conversation. I want to end us with one of my personal questions. Tell us about a mentor that has been effective and why they were effective in your life.

David DeWolf: I've been fortunate to have several mentors over my career. But I'll tell you, I'll pick out one who gave me a very interesting piece of advice that's very relevant to our discussion just now. This mentor was Mike Daniels. Many people may know Mike. Mike actually was the chairman of a competitor of mine when I was running 3Pillar, but was still just an awesome mentor. He would have lunch with me. He was running a company called Global Logic when I was running 3Pillar. They were version one of the product development space and we came in and tried to reinvent it. Mike was just so gracious with his time. I'll never forget one time we were talking and I was sharing with him some of the struggles of scaling as an entrepreneur.

Mike said to me, "David, everybody will tell the entrepreneur that they really have to learn to delegate and to scale." He said, "Don't forget one thing as you're doing that.Don't forget that the client is where everything is at and never lose contact with your clients. Stay close to your clients." I think about that often at Knownwell because what we're building is helping our executives and all line leaders to stay close to the client.We've got to know our clients.We got to serve our clients.We've got to delight our clients if we're going to have successful businesses.

Banoo Behboodi: I love that. With that note, David, thank you. Thank you for spending the time with us. We appreciate you.

David DeWolf: Banoo, it was so much fun. Thanks for having me.

Banoo Behboodi: Of course, as always, thank you listeners for joining us. We really appreciate your time. If you have any questions or suggestions, please feel free to reach out at podcast@kantata.com. We're happy to get back to you. Thanks. Have a great day.

Brent Trimble: If you enjoyed this podcast, let us know by giving the show a five-star review on your favorite podcast platform and leaving a comment. If you haven't already subscribed to the show, you could do so anywhere you get podcasts on any podcast app. To learn more about the power of Kantata’s purpose-built technology, go to kantata.com. Thanks again for listening.