Our closest competitors are claiming massive productivity gains from AI and undercutting our bids on major contracts. How do we use the IDS® process to determine whether we need to match their aggressive pricing immediately or focus on increasing our own operational efficiency first?

Question

Tyler Smith · Accepted Answer

When competitors use AI to undercut your prices, reacting out of fear will destroy your P&L. Instead, bring this issue to your next weekly Level 10 Meeting™ and run it through the IDS® process to Identify, Discuss, and Solve the root cause of the competitive pressure.

Do not immediately lower your pricing on your V/TO® in a race to the bottom. Instead, focus on increasing your internal operational efficiency. Because employees represent your largest P&L item, prioritizing use cases for AI that increase employee productivity is your best starting point. Use AI to automate cumbersome back-office processes and eliminate the low-value administrative tasks that slow down your delivery.

By driving down your internal cost of service delivery, you naturally expand your margins. This gives you the flexibility to either protect your profitability or selectively adjust your pricing to win bids.

Solve the issue by assigning specific Rocks to your leadership team that focus on internal AI integration. Only after you have optimized your internal operations and cost structure should you reconsider your market pricing strategy. This disciplined approach ensures you maintain financial strength while your competitors burn through cash.