Strategic Positioning Versus Operational Excellence in AI Adoption: How AI-Driven Cost-Cutting Strategies Backfire

Prashant Singh Yadav

Chapter 7 in The AI Competency Paradox, 2026, pp 139-167 from Springer

Abstract: Abstract This chapter examines why AI-driven cost-cutting strategies consistently underperform compared to AI strategies focused on competitive differentiation. Drawing on Porter’s enduring distinction between operational excellence and strategic positioning (Porter in Harvard Business Review 74(6):61–78, 1996), and Teece’s dynamic capabilities framework (Teece et al. in Strategic Management Journal 18(7):509–533, 1997; Teece in Strategic Management Journal 28(13):1319–1350, 2007), we demonstrate that organizations pursuing AI primarily for efficiency gains fall into competitive convergence traps. The chapter introduces the recognition challenge—how organizations can distinguish between AI applications that offer operational improvements versus those that enable strategic positioning. Through the analysis of organizational failures and successes, we establish the theoretical foundation for understanding when AI creates sustainable competitive advantage versus temporary efficiency gains.

Date: 2026
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DOI: 10.1007/978-3-032-11748-9_7

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