Strategy in an Era of Abundant ExpertiseHow to thrive when AI makes knowledge and know-how cheaper and easier to access - HBR

Artificial intelligence is fundamentally transforming how businesses operate by altering the cost and availability of expertise. At its core, a business is a bundle of specialized knowledge and skills organized to solve specific problems. AI is reshaping this dynamic by making expertise more accessible and reducing costs, forcing companies to rethink their competitive advantages. This blog explores how AI is redefining expertise, restructuring businesses, and creating new opportunities for innovation and efficiency.

The Changing Nature of Expertise

Traditionally, expertise has been a key differentiator for companies. Businesses thrive by developing deep knowledge in specific areas—Toyota in lean manufacturing, Walmart in distribution, and Nvidia in GPU design. However, the landscape is changing as AI democratizes access to expertise. With AI-powered tools, companies can acquire and apply knowledge faster and more efficiently than ever before.

A striking example of how expertise evolves can be seen in the fall of Nokia. Once the global leader in mobile phones, Nokia’s strength lay in its expertise in hardware and manufacturing. However, when software ecosystems became the new competitive edge in the smartphone era, Apple and Samsung leveraged iOS and Android to dominate the market, leaving Nokia behind. This highlights how failing to adapt expertise to evolving business needs can lead to downfall.

Two Forces Driving Change

The transformation of expertise is driven by two key forces:

1. The rapid expansion of global expertise: The volume of specialized knowledge is growing exponentially, making it harder for any individual or company to stay at the forefront.

2. The falling cost of accessing expertise: AI reduces the barriers to acquiring specialized knowledge, enabling even small businesses to compete with established players.

Consider how AI is revolutionizing biotech. AI-powered drug discovery is analyzing biological targets, designing molecules, and predicting drug interactions. The number of academic papers referencing AI in biotech has skyrocketed from under 200 in 2001 to over 45,000 in 2021. No single scientist or company can keep up with this explosion of knowledge without AI assistance.

Similarly, AI is disrupting content creation. Platforms like Instagram and TikTok provide sophisticated editing tools, allowing amateurs to produce professional-quality content with ease. Large brands and independent creators alike use these tools to reach global audiences, showing how AI lowers the barriers to entry in various industries.

Reevaluating Business Structures

Economist Ronald Coase argued in his 1937 paper "The Nature of the Firm" that companies grow by balancing internal and external costs. Historically, firms expanded their in-house expertise to remain competitive. However, with AI making expertise widely accessible, companies are shifting towards outsourcing non-core functions.

This trend has been amplified by cloud computing and digital platforms. Businesses now rely on external providers for core services—Shopify for e-commerce, Google for advertising, Stripe for payments, and Amazon for logistics. This allows companies to focus on their unique strengths while leveraging AI-powered platforms for other tasks.

AI's Role in Business Transformation

We are still in the early stages of the AI revolution, but its impact is already significant. AI assistants and copilots are being integrated into various business processes, enhancing productivity and efficiency. Examples include:

• GitHub Copilot for coding assistance.

• ServiceNow Now Assist for workflow optimization.

• Salesforce Agentforce for automating customer interactions.

The cost of accessing AI expertise is also dropping dramatically. OpenAI’s GPT-4 model, for instance, has seen its usage costs decline by over 99% in the past 18 months. As AI becomes more advanced and affordable, companies will rely more on AI-driven expertise to streamline operations.

AI’s Impact on Business Operations

1. Cost and Time Savings

AI-driven automation is optimizing business processes, leading to significant cost and time savings. Unlike traditional outsourcing, which requires offloading entire processes, AI allows companies to delegate individual tasks while retaining control.

For example, AI-assisted coding has boosted developer productivity by 20% to 55%, enabling them to focus on high-value tasks like debugging and security analysis. Similarly, AI-powered customer service agents resolve 14% more issues per hour, improving efficiency and customer satisfaction.

A standout example is Moderna, which has integrated AI across its operations. The company’s employees have developed over 900 AI assistants to streamline tasks, from clinical trial optimization to regulatory compliance. AI has accelerated processes that once took weeks, allowing employees to focus on strategic initiatives.

2. Workforce Productivity

AI enhances employee performance by bridging knowledge gaps. In a study by BCG and Harvard’s Digital Data Design Institute, consultants using AI completed 12% more tasks and worked 25% faster. Notably, lower-skilled employees saw a 43% performance boost, closing the gap between top performers and the rest of the workforce.

By embedding AI into workflows, businesses can reduce training time, expand the talent pool, and improve overall productivity. AI enables workers to handle complex tasks with greater accuracy, reducing the need for extensive oversight and micromanagement.

3. Strategic Investment in Core Activities

As AI automates routine processes, companies can reallocate resources to areas that drive competitive differentiation. Businesses will need to identify which expertise remains crucial and focus their efforts there while leveraging AI for non-core functions.

A prime example is FocusFuel, a startup specializing in caffeinated gummies. By utilizing AI for market research, supplier sourcing, packaging design, and marketing, FocusFuel launched its operations in a matter of months. The founders focused on understanding customer needs and product innovation—areas where their expertise gave them a competitive edge.

Adopting AI: How Businesses Can Get Started

To successfully integrate AI, companies must take a strategic approach. Key steps include:

1. Prioritizing digital transformation: Businesses need a strong digital foundation, including cloud adoption and data governance, before fully leveraging AI.

2. Starting with small-scale AI implementations: Companies should begin by applying AI to specific business processes, such as marketing, customer service, or software development.

3. Ensuring AI safety and governance: Establishing safeguards against bias, misinformation, and security threats is essential for responsible AI adoption.

4. Training employees in AI skills: Companies should create internal AI learning programs, as seen with Moderna’s AI Academy, to ensure employees can effectively work alongside AI tools.

AI’s Long-Term Implications for Strategy

As AI continues to evolve, businesses must rethink their competitive advantages. Three critical questions arise:

1. Which customer problems will AI solve independently?

   • AI-driven travel apps, for example, are replacing traditional travel agents by offering personalized itinerary planning and booking services.

2. Which expertise must evolve to remain valuable?

   • In healthcare, AI can diagnose conditions based on medical images. However, doctors will need to enhance their human-centric skills—such as empathy and collaboration—to stay relevant.

3. Which assets will differentiate companies in the AI era?

   • Durable advantages such as brand loyalty, customer relationships, and proprietary data will become more critical as AI levels the playing field in technical expertise.

Conclusion: Preparing for an AI-Driven Future

AI is fundamentally reshaping expertise, reducing barriers to entry, and redefining how businesses operate. Companies that embrace AI will gain a "triple product" advantage—enhanced efficiency, a more productive workforce, and strategic focus on core competencies. To remain competitive, businesses must rethink their strategies, invest in AI-driven innovation, and continuously adapt to the evolving landscape of expertise.

This is just the beginning. AI’s rapid development will continue to disrupt industries, creating both challenges and opportunities. Businesses that act now to integrate AI into their operations and strategy will be best positioned to thrive in this new era.

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