Business Technology Artificial Intelligence

Competing in the Age of AI (Summary)

by Marco Iansiti and Karim R. Lakhani

How can a company make a loan decision in one second with zero human input? Ant Financial (now Ant Group) developed a “3-1-0” model: 3 minutes to apply online, 1 second for approval, and 0 humans involved. This wasn't achieved by simply giving bankers better software; it was done by completely rebuilding the firm around a data-driven 'AI factory' that operates at a scale and speed traditional companies can't comprehend.

AI Destroys the Old Rules of Scale and Scope

Traditionally, businesses had to choose between offering a standardized product to many (scale) or a customized product to a few (scope). AI-powered firms can offer highly personalized experiences to millions of users simultaneously, breaking this fundamental trade-off.

Netflix doesn't just offer one library to 200+ million subscribers. Its recommendation engine creates a unique, personalized 'storefront' for every single user, simultaneously achieving massive scale and deep, individual-level customization.

Your Operating Model Is Your Strategy

In the age of AI, competitive advantage comes less from a clever market position and more from a superior operating model. The ability to ingest massive amounts of data, learn from it, and scale the resulting insights across the organization is the new defensible moat.

Amazon’s dominance isn’t just about selling things online; it's about its unparalleled logistics and fulfillment network. This is an operational system built on data and algorithms that predict demand, route packages, and optimize every step from click to delivery, a feat of operational excellence that competitors cannot easily replicate.

Firms Are Colliding Across Industries

As companies build powerful AI platforms, they can easily leverage their core data and analytical capabilities to enter and disrupt seemingly unrelated industries. This leads to a 'collision' where traditional industry boundaries dissolve.

Google began with search, but its core AI factory allowed it to expand into mapping (Maps), mobile operating systems (Android), autonomous vehicles (Waymo), and even healthcare (Verily). Its operational model, not its industry, defines its competitive landscape.

The Network is the Core of the Business

Modern AI-driven firms are defined by their ability to foster and learn from network effects. More users create more data, which makes the AI smarter, which attracts more users—a virtuous cycle that creates winner-take-all dynamics.

TikTok's 'For You' page is a powerful example. Every swipe, like, and share from its billion-plus users is data that feeds its algorithm, making its content recommendations increasingly addictive and personalized, which in turn keeps users engaged and attracts new ones.

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