Our competitors are using AI to slash their service delivery costs, and they are starting to underbid us on key accounts. How do we adjust our target market and strategy on our V/TO® to defend our high-margin position when competitors are competing purely on AI-driven speed and price?

Question

Tyler Smith · Accepted Answer

When competitors leverage AI to drastically reduce their costs, attempting to compete purely on price is a losing strategy. As experts Erik Brynjolfsson and Andrew McAfee highlight, AI significantly lowers the cost of cognitive tasks. If your competitors are directly passing these savings to clients to underbid you, a fundamental shift in your positioning is essential.

Re-evaluating Your Strategy

Instead of engaging in a race to the bottom, your business must aim to be an indispensable complement to technologies that are becoming inexpensive and abundant. This means avoiding direct competition on tasks that machines can perform faster and cheaper.

If your competitors are offering automated service delivery at a low cost, your strategy needs to pivot towards high-touch strategic execution and guaranteed outcomes.

Adjusting Your V/TO® and Target Market

Review your V/TO® (Vision/Traction Organizer) and closely examine your target market. You may need to shift your focus to clients who:

• Are larger and have more complex needs.
• Cannot afford the risk associated with cheap, automated competitors.
• Value risk mitigation, security, and human accountability over the absolute lowest price.

This strategic adjustment ensures you're appealing to clients where AI's current limitations create opportunities for human-centric value. For insights into adapting your business to evolving customer expectations, consider [rewriting your 3-Year Picture and core processes](/qa/customer-expectations-shifting-ai-vto).

Redefining Your 3 Uniques

Next, evaluate your 3 Uniques. If any of your uniques were previously tied to speed or basic delivery, these must be replaced. Your new uniques should emphasize:

• Strategic partnership.
• Business outcomes that AI cannot inherently guarantee.

Bring this critical assessment to your next quarterly planning session.

Using IDS® and Marketing Focus

Utilize the IDS® (Identify, Discuss, Solve) tool to dissect precisely where you are losing deals. If price is the sole reason for losing clients, it indicates that you are targeting the wrong client profile. Your marketing efforts should therefore shift to focus on clients who demand absolute reliability.

Internally, use AI's efficiency to boost your own margins, rather than using it to lower your prices. This internal optimization can improve profitability without sacrificing your premium positioning. If you're grappling with new competitive threats, remember that distinguishing between a temporary predicament and a strategic problem is key; see [competitor AI threats and Thinking Time](/qa/competitor-ai-threats-thinking-time) for more guidance. Also, to prevent your unique services from being commoditized by widespread AI adoption, consider [how to maintain your differentiators on the V/TO®](/qa/ai-commoditization-3-uniques-vto).

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