Magazine Summer 2025 Issue Frontiers

Why AI Will Not Provide Sustainable Competitive Advantage

AI will transform economies and lift markets as a whole, but lasting differentiation will be built on human creativity and passion.

David Wingate, Barclay L. Burns, and Jay B. Barney Reading Time: 9 min 

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An MIT SMR initiative exploring how technology is reshaping the practice of management.
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Summary:

Artificial intelligence does not change anything about the fundamental nature of sustained competitive advantage when its use is pervasive. Once AI’s use is ubiquitous, it will transform economies and lift markets as a whole, but it will not uniquely benefit any single company. Businesses seeking to gain an innovation edge over rivals will need to focus their efforts on cultivating creativity among their employees.

Listen to “Why AI Will Not Provide Sustainable Competitive Advantage” (13:24)

There is no question that artificial intelligence will transform the competitive business landscape. AI will streamline business processes, increase worker productivity, redefine premium skill sets, and unlock the potential of data. There is also no question that AI will make relentless progress and become more capable at a dizzying pace.

But AI will also become more ubiquitous. Algorithms and training data are being commoditized; hardware competition is fierce; talent is plentiful; open-source models reliably erode corporate offerings. AI will become increasingly economical to deploy, and competition will demand that companies do so. While it is impossible to predict exactly how AI will transform our economy, one thing is clear: Every company will want it, and there is essentially no reason why they will not be able to get it.

It is tempting for a company to believe that it will somehow benefit from AI while others will not, but history teaches a different lesson: Every serious technical advance ultimately becomes equally accessible to every company. Personal computers, the internet, semiconductor fabs, blockchain technology, genetic sequencing — these technologies are no longer competitive advantages for any organization.

AI is similar, and its increasing ubiquity should cause us to rethink our assumptions about how it will — and will not — change competitive dynamics. It is easy to paint a picture of a glistening, AI-driven future and the untold riches it harbors, ripe for the taking; it is just as easy to believe that companies that invest heavily in AI technology or move first will reap the lion’s share of potential profits.

But all such narratives obscure a critical point: While there will doubtless be transitory competitive advantages in embracing AI, AI does not change the fundamentals of what makes for a sustainable competitive advantage.

How can AI be the centerpiece of a sustained competitive advantage when everyone has it? We argue that it simply cannot. The value that AI unlocks will be unlocked for all. The advantages AI confers will be conferred on all. By definition, if everyone has access to the same technology — even if it is new and valuable — it may move the market as a whole but will not uniquely advantage anyone.

Far from being a source of differentiation, artificial intelligence will be a source of homogenization.

Topics

Frontiers

An MIT SMR initiative exploring how technology is reshaping the practice of management.
More in this series

About the Authors

David Wingate is an associate professor of machine learning and AI in the Department of Computer Science at Brigham Young University. Barclay L. Burns is assistant dean for applied AI in the Smith School of Engineering and Technology at Utah Valley University and a fellow at the University of Cambridge Judge Business School. Jay B. Barney is a presidential professor of strategic management and the Pierre Lassonde Chair of Social Entrepreneurship in the Eccles School of Business at the University of Utah.

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Comments (2)
Daniel Forrester
AI Is No Moat: "Humans as the Loop" Is the Game 
Bravo to the leaders who wrote this article.  So well written and clear.  And grounded in history.  This is the anti hype article.  As I read it, I thought of the moment in June 2023 when, OpenAI’s Sam Altman was asked whether a small team with $10 million could build a large language model to compete with his company. His response was simultaneously cocky and calculated: “Look, the way this works is we’re going to tell you it’s totally hopeless to compete with us on training foundation models. You shouldn’t try, and it’s your job to try anyway.”

Barely two years later, that statement collided with reality. DeepSeek, a Chinese AI startup, built a competitive model on a modest budget—an “impressive” achievement by Altman’s own later admission. So much for hopeless. This is exactly what the authors are talking about. 

This is a lesson leaders must not forget: technology—no matter how cutting-edge—always trends toward enablement, and eventually commoditization (as the authors say so clearing in this article). The real competitive advantage is not any one tool itself, but how a company uniquely applies it in service of others (always was and always will be).

When I advise leadership teams, I ask them to name their “unfair advantage” or their "core competency"—of what truly sets them apart and makes them special. The best responses never start with AI. They speak of anticipating customer needs, building and sustaining trust through value exchanged over time, and solving problems from the customer’s perspective with empathy for their needs and not internal silos.   They also speak about how they curate and assemble knowledge (not simply data) in service of the value exchange. Human knowledge has no limits or upper bounds on it despite the idea that we are all doomed when AGI arrives.  

AI can accelerate time to value (and it already is and its amazing). But it can’t define what value means in a given context as value is in the eyes of humans not machines. Perceived value is a human insight. Moats are not built in model weights—they’re constructed day by day, through credibility, reliability, quality, and imagination to keep adapting in service of solving customer problems. Trust isn’t automated. It’s earned. Its also precious and fleeting as customer needs and wants and markets change. 

I describe it this way: “Humans as the loop.” AI may process signals at scale, but humans interpret the meaning. AI can help identify patterns (in amazing ways), but humans build the narrative (story telling) and earn relationships that make change stick. AI will jump-start a new product, but it doesn’t replace a ten-year client relationship—or a hundred-year legacy of service to a community-- where "value" was the center of gravity.

Yes there are jobs that will go as there was during the industrial revolution but the creativity of mankind will create new waves of jobs that we don't even have names for yet. The lesson is clear: the future belongs not to those who just hype the machine and push aside the human, but to those who know where to place it—inside the human enabled loop of trust, judgment, and service. 
Daniel Forrester, Madison NJ
Fernando Zambroti
Very well put. The race to gain competitive advantage through AI alone is already turning into a catch-up game, driven more by the fear of being left behind than by true differentiation.

I’m a strong believer that long-term competitive advantage - the kind that can reshape markets - comes from transformative innovation rooted in the core of the business model. It’s fueled by a clear strategy, a sense of purpose, and the big ‘why’ behind the company’s existence. Achieving this requires the right mix of creativity, technology, the courage to challenge the status quo, and the ability to clearly articulate that value to the market.