System of Action — Part 3: How Control Points Win

You’re the CEO of an incumbent vertical SaaS Control Point. You’ve scaled locations, gone multi-product. Maybe you’ve even extended through the value chain selling into your customers’ suppliers, employees, or consumers. You’ve done everything right. 

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But now the Native AIs are coming for you. At this point, you may feel like Sarah Connor in The Terminator. Machines from the future, funded by relentless VC dollars, are coming to kill you.   

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"It can't be bargained with. It can't be reasoned with. It doesn't feel pity, or remorse, or fear."  "And it absolutely will not stop... ever, until you are dead." -Kyle Reese, Baby Father of the Rebellion, Terminator

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But, Sarah fights back. She not only survives, but leads a rebellion against the machines. She takes on the threat, gets super-ripped, and emerges as a complete badass. So can you.

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This essay was written for you, Control Point CEO, to help guide you on your Road to AI Badassery. 

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It’s a long one, so here’s a roadmap: We’ll start with a quick speedrun through our perspective on Vertical SaaS and AI. Then we’ll get into the meat of the argument. Steps 1 - 2 lay out organization focus, urgency and fortitude required to make the transition. Steps 3 - 4 cover the specific product management and infrastructure capabilities you need to win. Steps 5 - 8 provide frameworks for which agents to build. 

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And because they’re the two best sci-fi franchises of all time, we’ll use The Terminator and The Matrix as narrative guides to your hero’s journey. I tried to rely on The Terminator alone, but both movies serve as perfect metaphors for what’s ahead, each capturing a different phase of the Control Point journey: surviving the initial attack and then mastering the new reality. So we’ll use both to chart your arc from defense to full-blown rebellion. 

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This time: How Control Points Win. And next time: How Native AIs Win.

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Let’s go!

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The Theoretical Foundation

You can dig into our many preceding essays on vertical SaaS and AI, but the short version is this: Control Points, by virtue of their workflow and data gravity, enjoy an unfair right to sell multiple products to their customers — even to the point of becoming an "operating system" within their vertical. That remains true not only for traditional software products but also for new AI offerings. 

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In 2023, we wrote, if Control Points aren’t asleep at the wheel, they can leverage the hundreds of billions poured into AI infrastructure to launch products that rival Native AI players. We still believe that. But that was nearly three years ago! And if you’re a vertical SaaS Control Point, you’re on the clock.

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Native AI challengers are raising unprecedented amounts of capital, shipping product at blistering speed, and inserting themselves into the workflows and data flows that once defined your moat.

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In Part 1, we laid out the first vector of attack: Hero User tools. Native AIs win when they target the hero doers — the lawyers drafting contracts, the mental health practitioners seeing patients — who have the agency to choose their own software tools. By giving these heroes tools that make their “good work” easier, while automating administrative work, Native AIs will win hearts and minds. And by making these tools easy to try, easy to buy and easy to use, (product-led growth), they will win adoption at alarming speed. These tools may appear flimsy at first, but once they integrate into Control Point workflows and data, then start triggering action, you’ve lost the high ground.

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In Part 2, we showed what happens when there is no Hero user buyer. Native AIs then go after Sticky Jobs: the high priority, high hassle jobs that require communication, collaboration, and coordination. These are often handed to a “Cousin Richie,” — internal staffers, outsourced or offshore agencies, or not done at all. AI is a far better alternative. It works 24/7, in multiple languages and always works towards your goals. By taking over these sticky problems, Native AIs wedge their way to the business owner. And that wedge leads, again, to integration, expansion, and eventual displacement of the incumbent Control Point.

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Parts 1 and 2 are how Native AIs attack. Part 3 is for you, Control Point founder. It’s about how you fight back, and how you win.

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The Road to Control Point Badassery…

We try to open-source our thinking as much as possible to help founders win; however, as investors, we can't give everything away in public. If you're an operator or founder, you can request access to the rest of this piece here or above, giving you case studies on companies that succeeded in which quadrant, how to do the math to figure out your TAM, and more principles for success.