Strategy in an Era of Abundant Expertise

AI is changing the cost and availability of expertise, and that will fundamentally alter how businesses organize and compete. At its most basic level a business can be considered a differentiated bundle of expertise organized to accomplish specific tasks. Expertise—which we define as a combination of deep theoretical knowledge and practical know-how in a specific domain—can take many forms within a business. A doctor’s office requires not only a practitioner’s medical knowledge to make fast and accurate patient diagnoses but also the managerial capabilities to run a practice. A software company requires expertise not only in software engineering but also in marketing, sales, operations, and finance to bring its products to market. Companies create value by applying their expertise efficiently at scale to solve problems for their customers. Typically they possess it in a variety of areas, but most differentiate themselves through their unique proficiency in just a handful of activities that are fundamental to how they create competitive advantage. Toyota’s superior expertise in lean manufacturing has helped it become one of the world’s leading automakers. Walmart has built superior expertise in distribution, Procter & Gamble in consumer marketing, and Nvidia in graphics processing unit (GPU) design.