Has Your Competitive Advantage Already Evaporated?
Competition is changing as AI leads to a world of perfect information and perfect competition with AI agents searching, negotiating and recommending products and services at the speed of an automated algorithmic hedge fund trade. Business schools teach the importance of developing a sustainable competitive advantage, or a unique selling point (USP). Venture capital investors want to understand your 'moat(s)'.
Have you considered how long your competitive advantage will last or how quickly your moat may evaporate in the intense heat of AI-driven competition? Have you started to consider how to create new ones in the AI era?
Scale? AI levels the playing field, especially in the information economy and e-commerce.
Intellectual Property? Every business will spin up an army of super-intelligent PhDs.
Technology? Coding is being automated, and software will be unseen.
Talent? AI will outperform your top performers and be orders of magnitude cheaper.
First-mover advantage? Cycles are now measured in days, not years.
The traditional barriers that once protected businesses—capital, expertise, proprietary technology—are collapsing. AI isn't just another wave of disruption; it's an extinction event for companies that fail to adapt.
McKinsey and BCG have already warned that AI is closing competitive gaps faster than any prior technology. Innovation cycles have collapsed from over a century (electricity generation), to decades (cloud computing, mobile and the internet as we know it), to weeks in the AI model market, where new breakthroughs are emerging with head-spinning pace.
DeepSeek R1, a Chinese-developed AI model, recently demonstrated that cutting-edge AI can be built at one-tenth the cost of previous models while matching their capabilities. Meanwhile, open-source AI research is compressing innovation cycles even further—what once took years of R&D is now being replicated in weeks. The AI model arms race is no longer about who gets there first, but who can iterate the fastest.
If AI can build what took you years in weeks, how do you stay ahead? First-mover advantage no longer matters when everyone moves at AI speed.
AI is the Great Equaliser—But New Moats Can Be Built
For decades, businesses relied on durable advantages: scale, intellectual property, know-how built up over years of trading, brand strength, unique technology, or having the best people. AI is now making those advantages irrelevant.
Small teams with AI-powered systems can compete with the largest enterprises. Large enterprises will be able to personalise and compete for the long tail. A company with AI-enhanced decision-making can outperform a traditional firm burdened by legacy processes. And when AI writes code in real time and is guided in natural language, software differentiation evaporates overnight.
A 2024 survey by BCG found that 64% of executives believe AI will "substantially or completely" reshape their industry within five years. But only 14% have an AI strategy in place to respond. That gap between awareness and action is where companies will either seize new opportunities—or be left behind.
But while AI is eliminating traditional moats, it is also creating new ones. The companies that thrive will be those that understand how to build AI-first competitive advantages rather than just defend outdated ones.
One of those new moats is data dominance. AI is only as good as the data it learns from and the context it can access, and businesses that master their data—structuring, vectorising, and applying it to AI-driven insights—will have an advantage that is nearly impossible to replicate. This is more than just having large datasets. It's about turning unstructured data, customer conversations, and behavioural signals into real-time, automated decision-making that your competitors can't match.
For example, Klarna recently eliminated Salesforce and Workday in favour of in-house AI solutions. Their AI is now managing customer interactions, automating HR workflows, and optimising financial operations—all while reducing costs and improving efficiency. This is a glimpse into the future: AI doesn't just optimise processes, it eliminates the need for legacy enterprise software altogether.
Another advantage is AI-enhanced service and engagement. The future of customer experience isn't human or AI—it's a human-machine partnership. Businesses that integrate AI into their customer interactions, not just as an efficiency tool but as a means of creating more personalised, intelligent (and rapid) engagement, will win. AI-powered personalisation at scale will redefine customer expectations.
Amazon, for example, has been using AI for years to drive product recommendations, but the next stage is AI-driven hyper-personalisation—where marketing, sales, and service interactions adapt in real time to each customer's behaviour and preferences. Companies that master this will build stronger relationships with customers, while those still relying on mass-market strategies will find themselves ignored.
AI-driven strategy and innovation will also be a critical advantage. AI doesn't just enhance R&D—it accelerates it beyond human capability. Companies that integrate AI into product development will iterate at unprecedented speed, unlocking solutions that would have been impossible using traditional methods.
Pharmaceutical firms, for example, are now using AI to design new drugs 100 times faster than before. What used to take a decade of research and clinical trials is being accelerated to under a year. The issue for them is that all pharmaceutical firms can do the same, including new entrants. This isn't just about efficiency—it's about shifting the very nature of competition.
The AI-First Business Advantage—Your 'AI OS'
There's a difference between using AI and being built on AI.
Most companies today are experimenting with AI, adding it to their existing workflows. But the real advantage will come from businesses that reimagine their entire model around AI—where AI isn't just a tool, or an automation bolt-on, but the foundation of all operations.
This is the emergence of the AI Operating System (AI OS)—a business model where AI is integrated so deeply that the organisation benefits from continuous capability upgrades.
In an AI-first business:
Cognitive labour—everything from analysis to coding—is automated or augmented, dramatically lowering costs and increasing speed.
Decision-making is enhanced by AI insights, reducing human bias and improving strategic agility.
Innovation happens faster because AI accelerates R&D, removing bottlenecks and unlocking new possibilities.
Organisational upgrades as AI continuously improves itself, meaning companies operating on an AI-first infrastructure will get faster, smarter, and more cost-effective over time—while their competitors struggle with outdated systems.
And critically, AI-first businesses will no longer experience IT transformation cycles that introduce cost, risk, and operational disruption every few years. AI-driven companies won't need to "upgrade" in the traditional sense—because their core infrastructure is always evolving.
Satya Nadella, CEO of Microsoft, recently said that AI is "the ultimate productivity tool", and that businesses building on AI-first architectures will "see the benefits of continuous upgrades, just like software, but across their entire operations." This is a fundamental shift—businesses that embed AI now will experience compounding advantages over time.
From AI Adoption to AI-first Strategy
Adopting AI is no longer a competitive advantage. It's the bare minimum. The real question is: how are you using AI to redefine your business?
The first step is simple: implement AI across every part of your operations. Automate repetitive tasks, enhance decision-making, and integrate AI-driven analytics to stay ahead. Any company that hasn't already done this is already behind.
But AI implementation is not enough. The next step is to become AI-first—to rethink your business model around AI's capabilities rather than just improving existing workflows.
And finally, businesses need to use AI to create entirely new competitive advantages. AI-driven product development. AI-enhanced customer experiences. AI-powered business strategies that adapt in real time. The companies that figure this out will not only win today's market but define the future.
The Only Advantage Left is AI-Driven Execution
Basic AI implementation will not a competitive advantage. It's the baseline just to remain competitive.
Every business will have access to it. Every competitor will use it. Basic AI will be like the spell-check—everyone will have access to it. The only difference will be who executes best, fastest, and most effectively.
This is the last major shift before artificial general intelligence makes low-cost intelligence universally accessible.
The AI arms race has already started. And hesitation is the fastest way to lose.
Thanks for reading.
