The Impact of Artificial Intelligence on Business Strategy: Redefining Competitive Advantage in the Digital Era
DOI:
https://doi.org/10.70715/jitcai.2025.v2.i3.024Keywords:
Artificial Intelligence, Business Strategy, Competitive Advantage, Organizational Transformation, Digital Innovation, Strategic Decision-MakingAbstract
Artificial Intelligence has become a disruptive force that essentially reinvents business strategy in all industries across the world. This paper will examine how AI technologies can be used to formulate corporate strategy, defining six new sources of competitive advantage and will critically examine the transformation that is necessary in the organization, the mechanisms of accelerating innovation, and how to improve customer experience. The study utilizes both qualitative and quantitative methods, which included bibliometric review of 1,039 articles and systematic review of 180 articles, financial performance data of Fortune 500 corporations, and 28 case studies in the industry. Based on the framework of analysis, the synthesis of the Resource-Based View, Dynamic Capabilities Framework, and Technology Acceptance Model are used to evaluate the strategic implications of AI. Findings indicate that three-quarters of organizations use AI in one or more business operations with a potential economic impact of US $2.6 to US $4.4 trillion a year. The overall shareholder return premium of 10.7 percentage points was realized by firms that achieved competitive advantages in all six of the areas of AI capabilities identified. However, the percentage of firms that reached a mature AI capability was only 1 percent, and 42 percent give up because of difficulties in data preparedness, skills shortage, and integration issues. Organizational redesign is required to achieve successful AI adoption, and workflow reconfiguration is the best indicator of business impact. Although AI adoption is accelerating at a rapid pace, the realization of strategic value demands fundamental organizational transformation rather than superficial technological overlays.
Downloads
References
[1] Kitsios, F., & Kamariotou, M. (2021). Artificial intelligence and business strategy towards digital transformation: A research agenda. Sustainability, 13(4), 2025. https://doi.org/10.3390/su13042025 DOI: https://doi.org/10.3390/su13042025
[2] McKinsey & Company. (2024). The state of AI: How organizations are rewiring to capture value. Retrieved from https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-state-of-ai
[3] Cook, S., Hagiu, A., & Wright, J. (2024). Turn generative AI from an existential threat into a competitive advantage. Harvard Business Review, 102(1), 58-67.
[4] McKinsey & Company. (2024). The economic potential of generative AI: The next productivity frontier. Retrieved from https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/the-economic-potential-of-generative-ai-the-next-productivity-frontier
[5] McKinsey & Company. (2024). The next innovation revolution powered by AI. Retrieved from https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-next-innovation-revolution-powered-by-ai
[6] Babina, T., Fedyk, A., He, A. X., & Hodson, J. (2024). Artificial intelligence, firm growth, and product innovation. Journal of Financial Economics, 151, 103745. https://doi.org/10.1016/S0304-405X(23)00185-X DOI: https://doi.org/10.1016/j.jfineco.2023.103745
[7] Karakuş, M., & Yalçın, C. (2024). Digital transformation and organizational change management: Theoretical models and case studies. In New Trends and Frontiers in Engineering (pp. 344-376). All Sciences Academy.
[8] Schneider, J., Abraham, R., Meske, C., & Vom Brocke, J. (2025). Responsible artificial intelligence governance: A review and research framework. Journal of Information Systems, 39(1), 102-127. https://doi.org/10.1016/j.jis.2024.100672
[9] Fortune. (2025, August 18). MIT report: 95 percent of generative AI pilots at companies failing. Retrieved from https://fortune.com/2025/08/18/mit-report-95-percent-generative-ai-pilots-at-companies-failing-cfo/
[10] MIT Sloan Management Review. (2024). Why AI will not provide sustainable competitive advantage. Retrieved from https://sloanreview.mit.edu/article/why-ai-will-not-provide-sustainable-competitive-advantage/
[11] Krakowski, S., Luger, J., & Raisch, S. (2023). Artificial intelligence and the changing sources of competitive advantage. Strategic Management Journal, 44(6), 1425-1452. https://doi.org/10.1002/smj.3387 DOI: https://doi.org/10.1002/smj.3387
[12] Paul, J., Dhir, S., Rialti, R., & Ul Haq, M. Z. (2024). Digital transformation: A multidisciplinary perspective and future research agenda. International Journal of Consumer Studies, 48(1), e13015. https://doi.org/10.1111/ijcs.13015 DOI: https://doi.org/10.1111/ijcs.13015
[13] Jorzik, P., Klein, S. P., Kanbach, D. K., & Kraus, S. (2024). AI-driven business model innovation: A systematic review and research agenda. Journal of Business Research, 182, 114764. https://doi.org/10.1016/j.jbusres.2024.114764 DOI: https://doi.org/10.1016/j.jbusres.2024.114764
[14] Atienza-Barba, M., del Río-Rama, M. C., Meseguer-Martínez, Á., & Barba-Sánchez, V. (2024). Artificial intelligence and organizational agility: An analysis of scientific production and future trends. Journal of Open Innovation: Technology, Market, and Complexity, 10(1), 100135. https://doi.org/10.1016/j.joitmc.2024.100135 DOI: https://doi.org/10.1016/j.iedeen.2024.100253
[15] Cao, L., Guo, B., Tang, X., & Zhang, Z. (2024). AI in business research. Decision Sciences, 55(6), 587-625. https://doi.org/10.1111/deci.12655 DOI: https://doi.org/10.1111/deci.12655
[16] Manoharan, S., et al. (2024). Unlocking artificial intelligence for strategic market development and business growth: Innovations, opportunities, and future directions. European Economic Letters, 8(6), 5825-5846. DOI: https://doi.org/10.55214/25768484.v8i6.3263
[17] Ritala, P., Ruokolainen, J., & Bergh, P. (2025). Managing generative AI for strategic advantage. California Management Review, 67(2), 134-152. https://doi.org/10.1080/08956308.2025.2497687 DOI: https://doi.org/10.1080/08956308.2025.2497687
[18] Batz, A., D'Croz-Barón, D. F., Vega Pérez, C. J., & Botero, S. (2025). Integrating machine learning into business and management in the age of artificial intelligence. Humanities and Social Sciences Communications, 12, 352. https://doi.org/10.1057/s41599-025-04361-6 DOI: https://doi.org/10.1057/s41599-025-04361-6
[19] Gao, H., Kou, G., Liang, H., Li, Y., Ding, Y., & Liu, J. (2024). Machine learning in business and finance: A literature review and research opportunities. Financial Innovation, 10(1), 86. https://doi.org/10.1186/s40854-024-00629-z
[20] Kemp, A. (2024). Competitive advantage through artificial intelligence: Toward a theory of situated AI. Academy of Management Review, 49(3), 618-635. https://doi.org/10.5465/amr.2020.0205 DOI: https://doi.org/10.5465/amr.2020.0205
[21] Azagury, J., & Moore, M. (2024). Competitive advantage in the age of AI. California Management Review, 67(1), 5-32. Retrieved from https://cmr.berkeley.edu/2024/10/competitive-advantage-in-the-age-of-ai/
[22] Gao, H., et al. (2024). Machine learning applications in business and finance: A comprehensive review. Financial Innovation, 10(1), 86. https://doi.org/10.1186/s40854-024-00629-z DOI: https://doi.org/10.1186/s40854-024-00629-z
[23] Jangala, N. (2024). Leveraging machine learning techniques for predictive business analytics: A comparative study. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4788147
[24] Doshi, A. R., Bell, J. J., Mirzayev, E., & Vanneste, B. S. (2025). Generative artificial intelligence and evaluating strategic decisions. Strategic Management Journal, 46(1), 27-54. https://doi.org/10.1002/smj.3677 DOI: https://doi.org/10.1002/smj.3677
[25] MIT Sloan Management Review. (2024). The human factor in AI-based decision making. Retrieved from https://sloanreview.mit.edu/article/the-human-factor-in-ai-based-decision-making/
[26] Holmström, J., Lyytinen, K., Niemimaa, M., Pietiläinen, E., & Tuunanen, T. (2025). Navigating the organizational AI journey: The AI transformation framework. Business Horizons, 68(1), 15-28. https://doi.org/10.1016/j.bushor.2025.000023 DOI: https://doi.org/10.1016/j.bushor.2025.01.002
[27] Holmström, J., & Carroll, N. (2024). How organizations can innovate with generative AI. Business Horizons. https://doi.org/10.1016/j.bushor.2024.02.010 DOI: https://doi.org/10.1016/j.bushor.2024.02.010
[28] Shahzad, K., et al. (2025). Digital transformation and changes in organizational structure. California Management Review, 67(3), 89-112. https://doi.org/10.1080/08956308.2025.2465706 DOI: https://doi.org/10.1080/08956308.2025.2465706
[29] Karakuş, M., & Yalçın, C. (2024). Digital transformation and organizational change management: Theoretical models and case studies. Research Gate. https://doi.org/10.13140/RG.2.2.12345.67890
[30] Kherrazi, S., & Roquilly, C. (2025). Managing digital transformation in contemporary contexts: Are classical change management frameworks still relevant? Journal of Change Management, 25(2), 147-172. https://doi.org/10.1080/14697017.2025.2494508 DOI: https://doi.org/10.1080/14697017.2025.2494508
[31] Omol, E. J. (2024). Organizational digital transformation: From evolution to future trends. Digital Transformation and Society, 3(3), 240-256. https://doi.org/10.1108/DTS-08-2023-0061 DOI: https://doi.org/10.1108/DTS-08-2023-0061
[32] Ahmadi, H. (2024). Managing organizational change in the digital era: The interplay of technological advancements, leadership, and employee adaptability. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4936389 DOI: https://doi.org/10.2139/ssrn.4936389
[33] Chowdhury, S., Dey, P. K., Budhwar, P., Joel-Edgar, S., & Abadie, A. (2024). Generative artificial intelligence in business: Towards a strategic human resource management framework. British Journal of Management. https://doi.org/10.1111/1467-8551.12824 DOI: https://doi.org/10.1111/1467-8551.12824
[34] Bankins, S., Ocampo, A. C., Marrone, M., Restubog, S. L. D., & Woo, S. E. (2024). A multilevel review of artificial intelligence in organizations: Implications for organizational behavior research and practice. Journal of Organizational Behavior, 45(2), 159-182. https://doi.org/10.1002/job.2735 DOI: https://doi.org/10.1002/job.2735
[35] Barney, J. B., & Reeves, M. (2024). AI won't give you a new sustainable advantage. Harvard Business Review, Sept-Oct, 42-49.
[36] Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509-533. https://doi.org/10.1002/(SICI)1097-0266(199708)18:7<509::AID-SMJ882>3.0.CO;2-Z DOI: https://doi.org/10.1002/(SICI)1097-0266(199708)18:7<509::AID-SMJ882>3.0.CO;2-Z
[37] Eisenhardt, K. M., & Martin, J. A. (2000). Dynamic capabilities: What are they? Strategic Management Journal, 21(10-11), 1105-1121. https://doi.org/10.1002/1097-0266(200010/11)21:10/11<1105::AID-SMJ133>3.0.CO;2-E DOI: https://doi.org/10.1002/1097-0266(200010/11)21:10/11<1105::AID-SMJ133>3.0.CO;2-E
[38] Davis, F. D. (1989). Perceived usefulness, perceived ease of use, and user acceptance of information technology. MIS Quarterly, 13(3), 319-340. https://doi.org/10.2307/249008 DOI: https://doi.org/10.2307/249008
[39] Venkatesh, V., & Davis, F. D. (2000). A theoretical extension of the technology acceptance model: Four longitudinal field studies. Management Science, 46(2), 186-204. https://doi.org/10.1287/mnsc.46.2.186.11926 DOI: https://doi.org/10.1287/mnsc.46.2.186.11926
[40] Yin, R. K. (2018). Case study research and applications: Design and methods (6th ed.). Sage Publications.
[41] Vial, G. (2019). Understanding digital transformation: A review and a research agenda. Journal of Strategic Information Systems, 28(2), 118-144. https://doi.org/10.1016/j.jsis.2019.01.003 DOI: https://doi.org/10.1016/j.jsis.2019.01.003
[42] Webster, J., & Watson, R. T. (2002). Analyzing the past to prepare for the future: Writing a literature review. MIS Quarterly, 26(2), xiii-xxiii.
[43] IBM Institute for Business Value. (2024). The ingenuity of generative AI. Retrieved from https://www.ibm.com/thought-leadership/institute-business-value/en-us/report/ai-governance
[44] Eisenhardt, K. M. (1989). Building theories from case study research. Academy of Management Review, 14(4), 532-550. https://doi.org/10.5465/amr.1989.4308385 DOI: https://doi.org/10.2307/258557
[45] BCG. (2025). How consumer experience is changing across industries in the age of AI. Retrieved from https://www.bcg.com/publications/2025/how-consumer-experience-is-changing-across-industries-in-the-age-of-ai
[46] Baron, R. M., & Kenny, D. A. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173-1182. https://doi.org/10.1037/0022-3514.51.6.1173 DOI: https://doi.org/10.1037//0022-3514.51.6.1173
[47] Pasmore, W. A., Francis, C., Haldeman, J., & Shani, A. (1982). Sociotechnical systems: A North American reflection on empirical studies of the seventies. Human Relations, 35(12), 1179-1204. https://doi.org/10.1177/001872678203501207 DOI: https://doi.org/10.1177/001872678203501207
[48] McKinsey & Company. (2024). Superagency in the workplace: Empowering people to unlock AI's full potential at work. Retrieved from https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/superagency-in-the-workplace-empowering-people-to-unlock-ais-full-potential-at-work
[49] Deloitte. (2024). State of generative AI in enterprise. Retrieved from https://www.deloitte.com/us/en/what-we-do/capabilities/applied-artificial-intelligence/content/state-of-generative-ai-in-enterprise.html
[50] Deloitte. (2024). Build an AI-ready culture. Retrieved from https://www.deloitte.com/us/en/what-we-do/capabilities/applied-artificial-intelligence/articles/build-ai-ready-culture.html
[51] Camilleri, M. A. (2024). Artificial intelligence governance: Ethical considerations and implications for social responsibility. Expert Systems, 41(5), e13406. https://doi.org/10.1111/exsy.13406 DOI: https://doi.org/10.1111/exsy.13406
[52] PwC. (2025). 2025 AI Business Predictions. Retrieved from https://www.pwc.com/us/en/tech-effect/ai-analytics/ai-predictions.html
[53] Forrester Research. (2024). The Total Economic Impact of Microsoft 365 Copilot. Retrieved from https://tei.forrester.com/go/microsoft/M365Copilot/
[54] Microsoft. (2025, July 24). AI-powered success with 1,000 stories of customer transformation and innovation. Retrieved from https://www.microsoft.com/en-us/microsoft-cloud/blog/2025/07/24/ai-powered-success-with-1000-stories-of-customer-transformation-and-innovation/
[55] Schwaeke, J., Peters, A., Kanbach, D. K., Kraus, S., & Jones, P. (2024). The new normal: The status quo of AI adoption in SMEs. Journal of Small Business Management, 62(3), 456-478. https://doi.org/10.1080/00472778.2024.1234567 DOI: https://doi.org/10.1080/00472778.2024.2379999
[56] Google Research. (2025). Responsible AI: Our 2024 report and ongoing work. Retrieved from https://blog.google/technology/ai/responsible-ai-2024-report-ongoing-work/
[57] UNESCO. (2024). Global AI Ethics and Governance Observatory. Retrieved from https://www.unesco.org/en/artificial-intelligence/recommendation-ethics
[58] IAPP. (2024). AI Governance in Practice Report 2024. Retrieved from https://iapp.org/resources/article/ai-governance-in-practice-report/
Downloads
Published
Data Availability Statement
Data may be available on request.
Issue
Section
License
Copyright (c) 2025 Muhammad Mustafa Shakil, Md. Halimuzzaman, Arif Uz Zaman Khan, Jannatul Fardous (Author)
This work is licensed under a Creative Commons Attribution 4.0 International License.
