Article
AI Economics and the Incumbent’s Dilemma
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Overview
Challenges
AI-native challengers continue to threaten established players in the technology industry. With innovative business models and advanced capabilities, these AI-centric companies are reshaping the competitive landscape by dis-intermediating incumbents and necessitating radical transformation for legacy firms to survive.
Summary
The article addresses the seismic changes in the technology sector, highlighting the emergence of AI-native companies that pose a significant threat to traditional incumbents. It contrasts the defensive strategies of legacy firms against the aggressive, disruptive models of new players utilizing AI. The report underscores the need for established businesses to adapt or risk obsolescence in an increasingly competitive landscape.
Included in the full report
Three-way Competitive Landscape:
The tech market now includes stagnant incumbents, struggling SaaS leaders, and disruptive AI-native challengers, each with distinct business models and growth strategies.
Defensive Strategies Falling Short:
Traditional companies are merely augmenting existing offerings with AI features, failing to fundamentally rethink their business models.
Pricing Model Vulnerability:
The reliance on per-user pricing creates inherent conflicts with AI's efficiency, threatening core revenue for incumbents.
Urgent Transformation Required:
Companies must overhaul their architectures and strategies to support an AI-first approach, moving away from legacy systems.
Radical Cannibalization Strategy:
Incumbents must proactively disrupt their own models before being overtaken by agile AI-native firms, fostering innovation from within.
Publication date:
December 10, 2025
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