If you invest in a business improvement attainable by everyone else, you have not created a competitive advantage. At most, you have ensured you don’t fall behind and unlocked the capacity to deploy to work on more meaningful innovations.
A timely example is AI-driven efficiency: using LLMs in your day-to-day work is not a defensible competitive advantage because it’s accessible to everyone else; at this point, it’s just something you have to do so you don’t fall behind the competition. (Another example is access to economies of scale.)
Meaningful improvements are hard to replicate (e.g., because they require knowledge accumulated through the years) or do not make sense outside of your business (e.g., they are intrinsically tied to your culture/how you operate).
To continue with our AI example, a more defensible type of efficiency would be fine-tuning your model or harness based on your proprietary data and practices.
More generally, since every competitor has access to the same models, AI raises the baseline for everyone without giving anyone an edge. In functions a company doesn’t compete on, that’s fine, because necessities converge on the standard answer anyway. Where the company does compete, the edge still has to come from an original insight.
References
- Good Strategy/Bad Strategy
- Wardley Mapping (e.g., Exploring the Map (opens in new tab))