AI is automating tasks that used to take hours for humans to do. It’s pushing some costs down and it’s making some teams more productive.

Don’t make the mistake, however, of thinking that using AI to do things more productively is enough to ensure your business has a competitive edge and succeeds.

If you strip away all the hype, you can look at AI as just the latest in a long line of technologies that help companies do things faster. What’s unique, though, is how quickly it has been adopted. It only took two years for about 40 per cent of US adults to begin using AI, which is twice as fast as the Internet, according to Harvard.

Rapid adoption is good news for the AI companies, but for you it means that your competitors are also benefitting from any productivity boosts you can obtain by using off-the-shelf AI to improve basic business tasks.

When all competitors improve their productivity in much the same way and at the same rate, productivity alone doesn’t give anyone a great advantage. Yes, AI is very good at helping you operate more efficiently. You can improve your logistics. You can create content. You can turn your data into insights.

The limitation is that your competitors can access the same AI tools and make the same improvements. Everyone gets more productive, but no one gets ahead. Business consultants call this the ‘Red Queen Effect’. Just like the Red Queen in the book, Through the Looking-Glass, you have to run as fast as you can just to stay in place.

To add further pressure, your customers may demand more results or lower costs because they also know that AI is making it cheaper for you to deliver your products and services. And because you’re using AI in the same ways as your competitors, you’re starting to look more and more like them. You stand apart even less.

Also Read: I built an AI that keeps receipts. The mistakes became the useful part

Thus, the picture is of a company that is working more productively. Yet, it is failing in its most important job, which is beating the competition.

How do we, then, use AI to help us achieve a real advantage over our competitors? If the answer is not in the realm of productivity, where is it?

Use AI to extend your strategic advantage

As valuable as efficiency is, it takes strategy to win. By strategy, I mean the way you differentiate yourself. It determines where you focus your energy and make your investments.

Also Read: The end of the universal a-player: Dynamic talent matching in the AI-driven supply chain

Let’s look at how this plays out in practice with some well-known companies. For example, Apple’s strategy is to make premium products combining both hardware and software. That provides a seamless user experience and keeps customers coming back.

Apple’s AI strategy thus should involve integrating the new technology directly into its hardware and software products. The result is to give consumers new tools within the Apple ecosystem, like writing tools and a better Siri, that reinforce Apple’s premium reputation and customer loyalty.

Here’s another example. Netflix competes on the depth of its library of bingeable content and its ability to suggest something you actually want to watch whenever you log in. Reinforcing those strategic advantages could mean using AI to improve the content suggestion engine and make it possible to create new hits more cheaply and quickly. That builds on Netflix’s two existing competitive advantages.

Competing companies that also produce phones and computers, or stream content, were already falling behind Apple and Netflix in these areas. By making their AI investments here, the two companies make it even harder for competitors to catch up.

Apple and Netflix reveal that the strategy for making effective use of artificial intelligence is to combine it with your business’s existing unique assets. These can include your domain expertise, proprietary data, and customer relationships. Off-the-shelf AI is available to everyone, but your unique assets constitute your moat. By using AI to extend them, you widen and deepen your moat.

One simple way to test your AI strategy is to ask yourself, if my competitors bought the same AI tools now, would I still have an advantage? If not, you probably don’t have a competitive AI strategy.

Strategy really isn’t that difficult to understand, but few companies so far have figured out how AI can help them implement their strategy and win in their markets. But this is exactly how you must invest in AI, to augment your business’s strategic advantages.

Don’t use AI just to run faster in place. Use it to extend the moat around your business by improving on the things your business already does better than anyone else.

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