No Company ‘Can Just Coast’ in the A.I. Era, Warns Microsoft CEO Satya Nadella

No corporation, big or small, can avoid the challenges of adapting to A.I., according to Microsoft CEO Satya Nadella. Larger corporations will be forced to integrate the technology to ward off newcomers, while smaller players must contend with barriers to achieving scale. “It’s going to be a very competitively intense world,” said Nadella during an interview with BlackRock CEO Larry Fink at the World Economic Forum in Davos, Switzerland, today (Jan. 20). “Neither side, whether you’re a new entrant or an incumbent, can just coast.”

In some ways, it may be easier for newer, smaller competitors to accommodate A.I.’s pervasiveness, since they can build their organizations with the technology in mind from the outset. Bigger and more established rivals, meanwhile, will be forced to navigate sweeping organizational change. “Unless your rate of change keeps up with what is possible, you’re going to get schooled by someone small being able to achieve scale because of these tools,” said Nadella.

For now, large companies appear to have the edge. Across corporations with annual revenues exceeding $15 billion, nearly three-quarters of leaders said their organizations are using A.I. on an enterprise-wide basis, compared with just 22 percent of executives at companies with revenues of between $1 billion and $4.9 billion, according to a recent study from Forbes Research. But the disruptive effects of adopting A.I. also grow as companies scale. Most leaders at smaller firms predicted that fewer than 2 percent of roles would be eliminated by the technology over the next few years, compared with 45 percent of executives at larger corporations.

It isn’t just companies that A.I. will help equalize, but countries as well. The quality of software developers, startups and large-scale organizations does not vary dramatically from nation to nation, according to Nadella.

“It’s fascinating—you can show up in Jakarta, you can show up in Istanbul, you can show up in Mexico City. It’s not that different than showing up even in say Seattle or San Francisco,” Nadella said.

The growing accessibility of A.I. has fueled its global spread. Still, Western countries—and in particular the U.S.—retain “more of an energy” when it comes to embracing the technology, said Nadella.

As A.I. continues to integrate across societies and economies, the size of a corporation—and the country in which it’s located—will matter less and less. What will matter more, Nadella suggested, is how much control companies maintain over A.I. systems that incorporate their proprietary knowledge.

If companies fail to embed that data, they risk “leaking” enterprise value to outside model developers, Nadella noted, describing this as an emerging competitive concern.

“The topic that’s least talked about, but I feel will be most talked about in this calendar year, will be the sovereignty of a firm,” said Nadella. “It’s sort of fascinating that nobody’s talking about that.”