Most AI Strategies are fighting the last battle and not the current one

Written by MD & Co-founder of Arkane Group – Rebecca Macpherson

Recently a pattern has emerged that organisations are trying to treat Artificial Intelligence like a second coming of the internet transformation. They are beginning to apply the playbook of winners of the internet age, and it won’t save them now.

The winners asked: “How can we connect everything?” Amazon connected buyers and sellers at unprecedented scale. Netflix connected content to consumers without physical media. The playbook has become clear after the fact: build digital channels, create network effects, achieve scale through connectivity. This made sense because the internet was fundamentally about information flow and connectivity.

AI is different and so the question isn’t “How can we connect?” It seems like it will be “What becomes possible when the cost of intelligence is negligible?” Which will bring with it a completely different playbook.

Two Paths with Two Radically Different Outcomes

As I started writing this post, I began to research the winners and losers of the internet age to understand their strategies rather than their playbooks. These are two examples that had strategies that clearly stood out:

John Deere: From Equipment Manufacturer to Intelligence Company

John Deere could have just added digital features to their tractors. Better GPS. Smarter sensors. Predictive maintenance alerts. Classic retrofitting.

They still sell tractors, but now each machine generates 5GB of data daily, turning equipment sales into recurring software revenue and building a network effect across farms and right through supply chains.

They implemented:

• Subscription-based software services that optimise every aspect of farm management

• Data monetisation through aggregated farming insights that benefit the entire agricultural ecosystem

• Autonomous farming systems that fundamentally redefine the nature of farming itself

• 
  

They were able to completely rethink their offering to their customers.

Trader Joe’s: The Power of Saying No

While competitors were building digital shopping apps and growing their product ranges, Trader Joe’s made a contrarian bet. They recognised that their competitive advantage of expert customer service and a curated product range would become more valuable as digital technology proliferated.

The results speak for themselves:

• $16.5 billion revenue with the highest sales per square foot among U.S. grocers

• 80% private label products requiring human taste-making and curation

• Built customer loyalty from high-quality in-person service

• 
  

Crucially, they use technology throughout their business including sophisticated data analytics internally for inventory and pricing. They are not anti-technology, they just have not replaced their customer interface with it.

They didn’t reject technology out of stubbornness but instead doubled down on their strengths in a digital world. They understood that uniquely human experiences would become premium offerings.

Adapting your competitive advantage to the AI age

Learning from these two organisations and the other winners of the internet age, a takeaway for organisations is that they must decide on how they will develop their competitive advantage in the AI age and not ignore the changes that are coming. The most likely path for winners of the AI age is to develop a hybrid of the below two capabilities across their strategy:

AI-Native Capability

This means redesigning your business model around the unique properties of AI:

• Synthetic expertise at scale

• Autonomous value creation

• Moving from personalisation to individualisation

And is about thinking through what your business looks like when intelligence costs are approaching zero, rather than just achieving 20% efficiency gains by automating processes.

Strengthen Your Uniquely Human Capability

This means identifying what becomes more valuable as AI proliferates and building your moat there:

• Genuine human connections

• Curation and taste-making

• Experiences that require presence

• Proprietary intelligence

• Trust-based relationships

  
  

And about making a clear strategic choice to build your competitive advantage on. Don’t confuse this with just ignoring the changes that are coming.

Why is a decision required?

The temptation is to ignore the changes that are happening, roll out AI productivity tools internally or try to retrofit AI into your current product while not rethinking your strategy. I understand the appeal as it shows progress, and it checks the AI box.

But if you look at the internet transformation era, very few legacy businesses successfully transformed around internet-native principles. For every winner, there are a hundred organisations who thought adding a website was “digital transformation.”

Adding to this complexity is that the adoption timeline for the internet was 10 years and with the current rates of adoption with AI it seems the window for competitive advantage will be compressed.

The companies that survived made clear choices and didn’t hedge.

What Do You Need to Figure This Out?

If we look at this practically then to be able to decide what path to follow you need the following:

• A group of people capable of first principle thinking rather than pattern matching to previous tech waves or the way you do business now

• Leaders across the organisation who are willing to engage with this question and with a baseline understanding of AI. This cannot be delegated to the CTO/CDO

• One person with true expertise in AI technology and its potential impact

• The ability to ask whether current advantages will survive AI and question your current business model

A Practical Starting Point

Instead of immediately jumping to implementation, I recommend a different approach:

Set up a day with your leadership team to answer three questions:

1. “If we were starting our business today, with AI as a given, what would we build?”

2. “What do we do now that becomes more valuable in the AI age?”

3. “What happens to our industry when intelligence costs zero?”

The answers should be uncomfortable. Comfortable answers mean you’re not thinking radically enough about what AI makes possible.

Every week, new businesses are starting with these questions. They’re not asking how to do what you do better. And they might be asking why anyone does what you do at all.