Is AI just another tool, or is it rewriting the very foundations of strategy? I argue it’s the latter in my new chapter, “Unbounding Rationality: Why AI is a Fundamental Issue for Strategy,” invited to a forthcoming book on strategy’s fundamental issues edited by Jay Barney and Todd Zenger.
For decades, our field has been built on the assumption of bounded rationality—the idea that human cognitive limits shape everything. But what happens when technology begins to systematically relax those limits? My chapter explores how AI will alter both the process of strategy (how it’s done) and its content (what creates advantage). Here are some of the core ideas.
For Practitioners:
- The race to the new frontier IS the strategy. In an era of technological discontinuity, the complex journey of integrating AI to reach a new productivity frontier is itself a primary source of competitive advantage.
- Advantage comes from invention, not just adoption. Like the Internet in 1995, durable advantage will be built not by those who simply use AI, but by those who first imagine and build novel AI-enabled business models.
- Strategy processes can now “boil the ocean.” AI enables a shift from local, incremental search to a more global exploration of the strategic landscape, allowing firms to generate and evaluate thousands of options.
- Human-AI collaboration is a new core competency. The future strategist’s role is to orchestrate AI systems, ask the right questions, interpret outputs, and lead the organization through change.
For Scholars:
- A renaissance for strategy process research. AI allows us to move beyond conceptual frameworks. We can now build, simulate, and test our classic theories of strategy process as computational models.
- A shift toward a more verifiable science. To advance, our field needs clear performance metrics. This means focusing on foresight and developing verifiable benchmarks, like a “Strategy Turing Test,” to measure and improve our models.
- A direct challenge to our foundational assumptions. AI’s ability to relax cognitive constraints forces a re-examination of bounded rationality and its implications for theories of the firm, heterogeneity, and advantage.
- A need to broaden our definition of scholarly contribution. To build the intellectual infrastructure for this new era, we must recognize the creation of benchmarks, curated datasets, and computational models as first-order contributions.
The core argument: AI doesn’t just automate existing strategy work; it enables fundamentally new ways of creating and capturing value. This is a critical moment for our field, and I believe that engaging directly with this shift is essential for our continued relevance.
I welcome your thoughts and discussion. Read the full chapter: “Unbounding Rationality: Why AI is a Fundamental Issue for Strategy”
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