Incumbent companies are slowed by the need to retrofit AI into existing processes and tribal knowledge. AI-native startups, however, can build their entire operational model around agent-based, prompt-driven workflows from day one, creating a structural advantage that is difficult for larger companies to copy.

Focusing on AI for cost savings yields incremental gains. The transformative value comes from rethinking entire workflows to drive top-line growth. This is achieved by either delivering a service much faster or by expanding a high-touch service to a vastly larger audience ("do more").

Previous technology shifts like mobile or client-server were often pushed by technologists onto a hesitant market. In contrast, the current AI trend is being pulled by customers who are actively demanding AI features in their products, creating unprecedented pressure on companies to integrate them quickly.

In the current market, AI companies see explosive growth through two primary vectors: attaching to the massive AI compute spend or directly replacing human labor. Companies merely using AI to improve an existing product without hitting one of these drivers risk being discounted as they lack a clear, exponential growth narrative.

AI tools drastically reduce the time and expertise needed to enter new domains. This allows startups to pivot their entire company quickly to capitalize on shifting investor sentiment and market narratives, making them more agile in a hype-driven environment where narrative alignment attracts capital.

Unlike mobile or internet shifts that created openings for startups, AI is an "accelerating technology." Large companies can integrate it quickly, closing the competitive window for new entrants much faster than in previous platform shifts. The moat is no longer product execution but customer insight.

The narrative of AI destroying jobs misses a key point: AI allows companies to 'hire software for a dollar' for tasks that were never economical to assign to humans. This will unlock new services and expand the economy, creating demand in areas that previously didn't exist.

Incumbents face the innovator's dilemma; they can't afford to scrap existing infrastructure for AI. Startups can build "AI-native" from a clean sheet, creating a fundamental advantage that legacy players can't replicate by just bolting on features.

While AI-driven efficiency is an obvious first step, it often results in workforce reduction if company growth is flat. True differentiation and sustainable advantage come from using AI for innovation—creating new products, markets, and business models to fuel growth.