Business Cycles are common. Financial cycles , the Internet boom and busts and so does the product development lifecycle.
By now, with the advent of chatGPT and other generative AI capabilities, enterprises — large, medium and small are racing to develop new offerings in the marketplace.
The race is healthy as this drives more competition and allows for a re-evaluation of efficiencies in the organization.
But, what should an enterprise focus on ? How can they remain competitive and will it be able to withstand the changes long enough to continue to be relevant?
If white collar jobs can be eliminated with AI , that means the enterprise value of a knowledge organization decreases. Why? Less staff may mean more margins, but overall humans is our asset if you are not selling patents. In the long run, the collective knowledge of an organization is what drives value.
We have seen this argument play out in the late nineties and early 2000’s. Two professors from the Uniersity of Michigan (C.K. Prahalad) and the London Business School (Gary Hamel) did a lot of thinking on this topic and were widely known for their book — Computing for the Future and was a must read with organizations globally. They helped organization think through long term strategy and being competitive in turbulent markets.
But, the genesis of their idea came about from a 1990 article titled “The Core Competence of the Corporation”, C. K. Prahalad and Gary Hamel, which was later converted into a book.
What is Core Competency and why is it relevant to AI?
Wikipedia describes it as “a harmonized combination of multiple resources and skills that distinguish a firm in the marketplace” and therefore are the foundation of companies’ competitiveness.[2]
The main thought in this article and the relevant books is that corporations need to focus on what they do best which in the long term will lead to development of more profitable offerings in the future. By focusing, you are driving resources and talent in what you do best and disregarding or not paying importance to what you don’t do best.
GE did that in a largest sense possible — they focused on being #1 or #2 company in any market they played in. Startups today have to do that because it is a resource issue.
The latest to do this is GM and Ford. They signed up with Tesla to reuse the same charging stations and infrastructure rather than try to compete with Tesla. They decided to focus on what they do best with their product offerings.
With AI , things start to get a little more complicated. AI is not just changing the business decisions on what to focus and not to focus on. It helps create new products and services , it helps create efficiencies in existing workflows and also helps create new value where there previously wasn’t.
With AI , you have to rethink your product stratagies and roadmaps. The enhancement with AI requires you to see how fast your teams can repurpose your product and have to re-train your sales teams to sell with a new business model possibly. This rethink will confuse the teams. Already, white collar workers are scared of their jobs disappearing and will find objections to why this will not work in their indsutry or workflow.
Security and privacy of data for enterprises will come up often. The need to protect enterprise proprietary datasets within enterprises allows them to build a moat and differentiate. These advancements and changes will confuse all the functional teams. What does AI do for us? Does it help us better ourselves or replace us? Tough questions , lack of answers.
Going back to first principles, do what your core competency is as an org. What is your institutional knowledge and expertise ? Double down on that and build apps and services around them.
Recommendations to Leveraging Core Competencies
Building Core Competencies and investing in AI tools and forging strategic alliances is not enough as we are seeing the rapid pace at which — startups and enterprises alike are attempting to do. You will need to modify the organizational structure to infuse resources across in areas which never needed such. Do you have a AI leader in HR , Accounting , Sales and Support?
The new era of AI will drive unlimited potential for us is my belief. We will start looking at problems differently. We wont use the old hammers we have been accustomed to. Cross-functional thinking will become ever more important.
Lastly, from Prahalad and Hamel’s paper — this is ever more true :
“Stop thinking of business units as sacrosanct. That imprisons resources in units and motivates managers to hide talent as the company pursues hot opportunities. Identify projects and people who embody the firm’s core competencies. This sends a message: Core competencies are corporate — not unit — resources, and those who embody them can be reallocated.”
Conclusion
I am eager to see what breaks apart and what builds again from the ground up? Who transforms and who wins and who focuses on their core competencies? or do we all just wither away when AGI takes over? :)
