Ethan Mollick argues that the 20-40% competitive advantage historic American firms held came from management experimentation. He posits that today's leaders must similarly experiment with AI-driven processes internally, rather than outsourcing strategy to consultants or vendors, to win.
Related Insights
As AI models democratize access to information and analysis, traditional data advantages will disappear. The only durable competitive advantage will be an organization's ability to learn and adapt. The speed of the "breakthrough -> implementation -> behavior change" loop will separate winners from losers.
The true challenge of AI for many businesses isn't mastering the technology. It's shifting the entire organization from a predictable "delivery" mindset to an "innovation" one that is capable of managing rapid experimentation and uncertainty—a muscle many established companies haven't yet built.
Using AI for incremental efficiency gains (10% thinking) is becoming table stakes. True competitive advantage lies in 10X thinking: using AI to fundamentally reimagine your business model, services, and market approach. Companies that only optimize will be outmaneuvered by those that transform.
Most companies use AI for optimization—making existing processes faster and cheaper. The greater opportunity is innovation: using AI to create entirely new forms of value. This "10x thinking" is critical for growth, especially as pure efficiency gains will ultimately lead to a reduced need for human workers.
Competing in the AI era requires a fundamental cultural shift towards experimentation and scientific rigor. According to Intercom's CEO, older companies can't just decide to build an AI feature; they need a complete operational reset to match the speed and learning cycles of AI-native disruptors.
Small firms can outmaneuver large corporations in the AI era by embracing rapid, low-cost experimentation. While enterprises spend millions on specialized PhDs for single use cases, agile companies constantly test new models, learn from failures, and deploy what works to dominate their market.
The business race isn't about humans versus AI, but about your company versus competitors who integrate AI more quickly and effectively. The sustainable competitive advantage comes from shrinking the cycle time from a new AI breakthrough to its implementation within your business processes and culture.
Wharton Professor Ethan Malek argues that firms using AI for efficiency gains by firing staff are misreading the moment. In a technological revolution, the smarter move is to view AI as a capacity gain—using the freed-up human potential to innovate, gain new advantages, and outmaneuver competitors.
The key differentiator for companies succeeding with AI isn't technical prowess but mastery of core behaviors: flexibility, targeted incremental delivery, being data-led, and cross-functional teams. Strong fundamentals are the prerequisite for benefiting from advanced technology.
The most successful companies are those that fundamentally re-architect their culture and workflows around AI. This goes beyond implementing tools; it involves a top-down mandate to prepare the entire organization for future, more powerful AI, as exemplified by AppLovin's aggressive adoption strategy.
