Strategy in an Era of Abundant Expertise

Remaining on the frontier of expertise in important areas is critical to any company’s success.   AI is changing the cost and availability of expertise, and that will fundamentally alter how businesses organize and compete.   Technological progress creates two fundamental forces that complicate that challenge.  First, the overall body of expertise in the world is constantly expanding, making it harder to stay at the leading edge in every relevant area.  Second, the cost of accessing expertise is constantly falling.

Since the 1980s several technological innovations have led companies to rely more and more on markets to access expertise far broader and deeper than what could practically exist within a single entity. Those that use third-party business and technology platform services have been able to narrow the scope of their in-house expertise, allowing internal resources to focus on the areas that drive their competitive differentiation.

We are at an early stage in the AI era, and the technology is evolving extremely quickly. Providers are rapidly introducing AI “copilots,” “bots,” and “assistants” into applications to augment employees’ workflows. These tools have been trained on a wide range of data sources and possess expertise in many domains.  Although the quality of expertise embedded in these tools is already relatively high, the amount of it continues to grow swiftly while the cost of accessing it decreases.  Companies that take advantage of AI will benefit from what we call the triple product.  These are:

1. Cost and time savings.  Historically companies have looked to offshoring and outsourcing to reduce costs. However, they found it cost-effective only if they outsourced an entire process. Now, with AI assistants, people can access expertise for individual tasks or steps within it, which allows them to make improvements without having to move the entire process. The ease and low cost of handoffs to AI mean that many processes can now be run far more efficiently. In the future workers at all levels in a company may take on more-supervisory roles, approving actions and managing exceptions as AI agents increasingly handle end-to-end execution.
2. Greater workforce productivity. We argue that today expertise follows a normal distribution pattern within any given population of employees: Some of them are simply more knowledgeable or skillful than others owing to experience or inherent capabilities. As companies adopt AI assistants, those assistants will effectively put at least a base amount of expertise into the hands of every employee who uses them, enabling that person to perform better. We already see a pattern in early deployments of AI assistants: They bring low performers up to levels previously considered average and boost the capabilities of high performers (albeit to a lesser extent).
3. More investment in activities that matter. As AI agents and bots transform business processes and empower workforces, companies will be able to fundamentally rethink how they deploy their resources. Smart ones will identify the handful of processes in which they can provide world-class expertise and capabilities and reallocate resources to deepen the moats around those processes. At the same time, they will reduce employees’ focus on noncore processes by leveraging AI-enabled platforms provided by third parties.

Clearly the companies that are best at continually increasing their triple-product return will have the greatest chance of competitive success. But getting there is hard. It involves meeting digital transformation requirements, aligning teams around a new course of action, helping people across the company change their behavior to maximize the benefits of working with AI, and reallocating budgets.

If companies derive value from providing a differentiated bundle of expertise, how can they continue to be relevant when improvements in AI’s core capabilities make some or all of that expertise more easily available to competitors and customers? What is the basis for value capture in an era of abundant expertise?  We believe that every company will need to reevaluate its strategy in this changing era and will have to ask itself three questions.  Which aspects of the problem we now solve for customers will customers use AI to solve themselves?  Which types of expertise that we currently possess will need to evolve most if we are to remain ahead of AI’s capabilities?  And which assets can we build or augment to enhance our ability to stay competitive as AI advances?