Part 14 – From Digital First to AI First
When digitalization enters a new phase
The history of digitalization can be told as a series of technological shifts, but it can also be understood as a gradual change in the relationship between people, information and technology.
The Internet connected computers together. The World Wide Web made information accessible through websites and links.
Search engines made the growing amount of information searchable. E-commerce turned the web into a marketplace. Social media turned users into producers and distributors of content.
The smartphone made the digital world mobile. Cloud, APIs and platforms created the infrastructure that made it possible to develop and scale increasingly advanced services.
Through this evolution, businesses gradually learned to think Digital First . Digital touchpoints were no longer an add-on to the actual business. They became an integral part of how businesses communicated, worked, competed, and created value.
Now we are faced with a new possible shift.
Generative artificial intelligence, AI Search, and digital agents challenge some of the fundamental principles around which the digital economy has been built.
We may be moving from Digital First towards AI First .
But what does that actually mean?
AI First doesn't mean AI everywhere
AI First can easily be misunderstood as a call to implement artificial intelligence in every part of the business.
That would be a bad strategy.
Technology has never automatically created value just because it is new. This was true of websites in the 1990s, apps after the smartphone breakthrough, social media, the cloud, and data analytics. This is also true of artificial intelligence.
AI First should therefore not mean that every process should contain AI.
It should mean that the business understands that artificial intelligence has become a new general technological capability that must be considered when developing products, services, processes and customer experiences.
The question is not:
Where can we put AI?
The interesting question is:
Where can artificial intelligence help people create better value?
That difference is crucial.
From finding information to getting an answer
The search engine was one of the most important technologies in the first decade of the digital economy.
It established a basic division of labor between humans and technology. The user formulated a query. The search engine found and ranked relevant documents. The human then had to open the results, read the information, compare the sources, and piece together the answer.
Generative AI challenges this model.
The user can ask a question and get a generated answer directly. The system can explain, compare, summarize and process information in dialogue with the user.
It's a fundamental shift in the user interface.
From:
questions → search results → websites → reading → rating → answers
against:
question → AI → synthesized answer → further dialogue
This doesn't mean that websites or traditional search engines are going away. But it could change how people find them and what role they play in the information journey.
AI Search is changing the battle to be found
In Part 6, we described how search engines changed information power and created a new competition for visibility.
SEO became important because businesses wanted to be found when people searched for information, products, and services.
AI Search can change this mechanism.
When an AI system doesn't just present a list of links, but attempts to formulate the answer itself, the question is no longer just whether the business's website ranks high.
There will also be:
Does the system understand the content?
Is the information clearly structured?
Can the claims be documented?
Are the sources credible?
Is it clear who is behind the content?
Is the information up to date?
And does the site actually contain knowledge worth using?
This doesn't make good content any less important.
That can make good content even more important .
From keywords to intent
Traditional digital search has largely been built around keywords.
People had to learn to express their needs in a way that the search engine could understand. “Best winter running shoes”, “hotel London city centre” or “digital transformation definition” could be effective searches.
Generative AI makes dialogue more natural.
The user can describe the situation:
"I need running shoes for winter use. I run mostly on asphalt, but it can be icy. I want good cushioning and would rather not pay more than 2,000 kroner. What should I look for?"
This is something other than a keyword.
It is an intention with context .
For the business, this means that digital visibility can increasingly be about how well content, product data and knowledge describe real needs, characteristics, connections and differences.
We are moving from optimizing just for the words people write, towards making knowledge understandable for systems that try to understand what people really want to achieve.
The customer gets a new digital intermediary
This could have major consequences for the power balance we described in Part 12.
The search engine gave the customer better access to information.
Comparison services made prices and features visible.
Customer reviews made the experiences of other people accessible.
AI can bring together several of these activities into one interface.
A customer can ask the system to find alternatives, explain differences, compare products, analyze reviews, and suggest what best suits a specific need.
Thus, AI can become a new intermediary between the customer and the business.
The business does not necessarily only communicate with humans.
It must also be understandable by the system that helps the person .
From search to action
Perhaps the biggest change will come if AI can not only find and explain information, but also perform actions.
This is where digital agents come in.
An agent can, in principle, be given a goal rather than just a question. Instead of asking how to order a specific service, the user can ask the agent to help complete the task.
The difference can be described simply.
A search system helps you find .
A generative AI system can help you understand .
A digital agent can increasingly help you do .
It is a potentially very big shift.
When the customer sends an agent to the market
Imagine a customer who is planning a trip.
In the traditional digital model, the customer might open a search engine, compare flights, visit hotel sites, read reviews, research transportation, and make the bookings themselves.
With a digital agent, the customer can describe the goal to a greater extent:
Find a weekend getaway to a European city within this budget. I want to stay centrally, want direct flights, prefer a quiet hotel, and need to be home Sunday night.
The agent can then help explore the options.
In the long term, such systems can also carry out increasingly more parts of the process if the user gives the necessary permission.
Then an interesting situation arises.
The business does not only meet the customer.
It can meet the customer's digital representative .
What happens to the customer experience when the customer doesn't come alone?
This challenges traditional thinking about customer experience.
Businesses have spent significant resources on websites, apps, navigation, search, design, and conversion optimization because humans themselves move through the interface.
But what happens if an agent does part of the work?
The agent does not necessarily care about the same visual tools as a human. They need structured data, clear product information, prices, availability, terms and conditions, and the ability to communicate with the company's systems.
Thus, the customer experience of the future can have two parallel dimensions.
The human experience must still be good.
But the business may also have to develop services that are
understandable and accessible to other digital systems .
The APIs we described in Part 11 can thus take on a new strategic importance.
From user interface to agent interface
For decades, digital service development has been strongly concerned with the user interface.
How should the menu be organized?
Where should the button be?
How should the search work?
How do we make the service easy to understand?
This will continue to be important.
But if digital agents perform more tasks on behalf of humans, businesses may also need to think about a new layer: how their services communicate with other services mechanically.
Product data must be understandable. Inventory status must be available.
Prices must be correct. Terms must be easy to interpret. Identity, payment and authorization must be handled securely.
Thus, the digital service of the future could consist of both a user interface for humans and a service interface for agents .
It is a natural continuation of the development from web to APIs, platforms and digital ecosystems.
Online shopping can be agent-driven
E-commerce may be one of the areas where this development becomes particularly visible.
The classic online store is designed for humans to navigate themselves. The customer searches, filters, compares, reads product information, adds the item to the shopping cart and pays.
An AI agent could potentially change several of these activities.
The customer can describe their need rather than the product:
"Find a waterproof shell jacket for mountain hikes in the fall. It must withstand a lot of rain, weigh little and cost under 5,000 kroner."
The agent can research products across suppliers and assess which options fit the criteria.
This means that the business's competitive advantage does not necessarily lie solely in getting the customer to the website.
It can also lie in having products, data, expertise, availability and services that make the business a good response to customer needs .
More personalization – and greater responsibility
Generative AI can also make personalization much more advanced.
Previously, personalization could be based on relatively simple signals: previous purchases, pages visited, geographic location, or what similar customers had chosen.
AI can potentially combine far more context and make interaction more dynamic.
The customer can receive explanations, recommendations and services that are tailored to the situation during the conversation.
But the more a system knows about humans, the more important the issues of privacy, security and control become.
Personalization can create value when it helps the customer.
It can also become manipulative if the business uses the knowledge primarily to influence the customer in ways the customer does not understand.
This makes trust even more important in an AI First world.
AI is also changing the employee's digital workplace
AI First is not just about the customer.
Generative AI can change how employees search for information, write, analyze, program, plan, design, and solve problems.
An employee can use AI to find knowledge in large amounts of documents, create first drafts, analyze data, explore alternatives, or automate parts of routine work.
The interesting question is therefore not just how many tasks AI can automate.
It is also how technology can enhance human competence .
An experienced employee with good AI tools can potentially solve tasks faster and explore more options. But the same technology can also produce errors, misunderstand context, or generate persuasive information that is not correct.
Human judgment therefore does not disappear.
It changes character.
From producing to controlling
When AI can produce text, code, images, analyses and suggestions, some of the human work is displaced.
In the past, much of the time could be spent producing a first draft.
Now AI can do parts of this in seconds.
But someone still has to assess whether the result is correct.
Are the sources good?
Is the analysis logical?
Is the recommendation reasonable?
Is the language precise?
Is the content relevant?
Did the system miss something?
Thus, the role of humans can move to a greater extent from mere production to problem formulation, assessment, quality assurance and decision-making .
That makes competence more important, not less important.
To detect a bad AI answer, a human often needs to know enough about the topic to understand why the answer is bad.
AI can democratize expertise
At the same time, there is great potential.
Digital tools have throughout history made previously advanced capabilities available to more people.
The spreadsheet made calculations easier. Publishing tools made it possible to establish websites without programming everything from scratch. The cloud gave small businesses access to advanced infrastructure.
Generative AI can do something similar with knowledge work.
People can get help to program, analyze, write, translate, visualize, and explore fields they previously had a much higher threshold for working with.
This can reduce some competence barriers.
But access to a tool is not the same as expertise.
AI can help more people enter a field. It cannot automatically give them the experience, judgment, and contextual understanding that is built through work and learning over time.
The organization must learn even faster
In Part 13, we argued that digital transformation is increasingly about the business's ability to continuously learn.
Generative AI makes this even clearer.
Technology is evolving rapidly. New models, products, and ways of working are constantly emerging. The possibilities that exist today may be significantly different in a few years.
That makes detailed, long-term technology plans more difficult.
The business therefore needs a different type of capability: the ability to follow developments, test new opportunities, learn quickly and at the same time say no when the technology does not create sufficient value.
This requires experimentation.
But it also requires discipline.
Not all AI projects should be implemented.
AI First requires more than an AI strategy
Just as the business could previously fall into the trap of having a digital strategy alongside its core strategy, it can now establish a separate AI strategy without asking the bigger questions.
Where should the business create value?
How does the customer change?
How is the competition changing?
Which parts of the value chain can be improved?
What skills do employees need?
What data can be used?
What decisions should humans still control?
What risks are acceptable?
Where can AI give businesses a real advantage?
AI First only becomes strategically interesting when these questions are connected to the actual goals of the business.
The AI strategy cannot exist in isolation from the business strategy.
Data is becoming even more important
Generative AI can give the impression that the model is the most important thing.
For many businesses, their own data may prove to be at least as strategic.
Product information, documentation, customer data, process data, history and the company's own knowledge can be crucial in making general AI models relevant in a specific context.
This also means that old problems do not disappear.
Poor data quality doesn't become good because AI analyzes it.
Unstructured information is not automatically correct.
Lack of ownership of data is not solved by a language model.
AI First can therefore make fundamental work on data quality, information architecture and knowledge management even more important.
The AI of the future is also built on yesterday's information work.
Trust can become a competitive advantage
The more AI is used to recommend, analyze, and act, the more important trust becomes.
The customer must be able to trust that the system does not manipulate the recommendations. The employee must know when AI results require control. The business must understand what data is being used and who is responsible when the system makes mistakes.
This is not just about regulation.
It's about value creation.
A business that uses AI in a transparent and responsible way can build trust. A business that uses the technology to hide, manipulate, or obscure decisions can destroy it.
In an AI First world, trust can therefore become part of the product itself .
The customer is still the boss
Here we must take with us the main point from Part 12.
AI is changing technology.
It does not change the basic economic logic of a competitive market.
Businesses can use the world's most advanced models. They can automate processes, develop digital agents, and personalize the customer experience.
But if the customer does not experience that the solution creates value, the technology has limited significance.
The customer can still choose.
And AI can actually empower the customer.
If digital agents make it easier to find alternatives, compare offers, and switch providers, competition for customers could become even fiercer.
Thus, our principle remains:
Technology can change how elections are conducted.
It cannot negate the significance of the election.
Humans don't disappear either.
It's easy to tell the story of artificial intelligence as the story of the diminishing need for humans.
But the history of digitalization gives reason to be more nuanced.
When websites came, business didn't disappear. When e-commerce came, all stores didn't disappear. When automation increased, the need for organizations and management didn't disappear.
Technology changed tasks, skill needs and business models.
AI can do the same – potentially on a significant scale.
Some tasks will be automated. Some roles will change. New roles will emerge. Skills that were previously valuable may become less important, while other skills will become more important.
But people still have to formulate goals, understand other people, handle responsibilities, make judgments and decide what values the business wants to create.
AI can be a powerful collaborative partner.
But value creation is still a human issue.
From Digital First to AI First – and back to value creation
Thus, we have come to the end of this journey through the development of digitalization.
We started with technologies that digitized information and connected people.
We followed developments across web, e-commerce and search. We saw how usability and UX made the human element more important in the development of digital services. Social media gave the customer a public voice.
The smartphone made the digital world constantly accessible.
Omnichannel attempted to bring together the touchpoints into one customer journey.
Cloud, data and platforms built the infrastructure under the modern digital economy. Customer focus became a strategic necessity.
Digital transformation made technology a business-wide issue.
And now we are at artificial intelligence.
It can be tempting to see AI as a break with everything that came before.
But AI is also the result of everything that came before.
Without digital information, internet, cloud, huge amounts of data,
Without APIs, platforms, and decades of computer technology development, today's generative AI would not be possible.
AI First is therefore not the beginning of digitalization.
That's the next chapter in it .
Technology is changing – the question remains
Throughout this series, technology has changed.
From the PC to the web.
From the web to mobile.
From the server to the cloud.
From the search engine to generative AI.
But one question has followed us the whole way:
What actually creates value for people?
That question becomes no less important as technology becomes more advanced.
It becomes more important.
Because when technology can do more, people and businesses also have more options to choose what to use it for.
The most important competency in an AI First world may therefore not be the ability to use as many AI tools as possible.
It becomes the ability to understand when, why and how technology can be used to create value .
And thus the digitization story ends exactly where The Invisible Capital begins:
In humans.
With the expertise.
At the customer's.
And with the ability to turn technology into value creation .
The journey continues – in our scientific universe of artificial intelligence
This article concludes the series on digitalization, but it does not end the story.
Artificial intelligence is such a comprehensive field that we have chosen to cover it further in separate articles on The Invisible Capital . There we go into more depth about, among other things, what artificial intelligence is , how generative AI works, how AI finds and uses information, how it evaluates sources, how websites are understood by AI, and what the development can mean for people, businesses and value creation.
The digitization series provides the story that brought us here.
Because technology will continue to change.
That makes it even more important that we continue to ask the same question:
How do we use it to create value for people?
Academic background and further reading
This series also builds on my own professional journey through the Web Design study , the eMarketing study , Innovation and Commercialization and professional seminars in San Francisco and Oxford . Here you will find the background, professional environments and experiences that have followed the development from the early years of the web to today's digitalization.
Recommended literature
The literature presented here spans several disciplines and periods. The books provide perspectives on digitalization, innovation and strategy , and show how technology, markets, organizations and people have been understood and developed over time. Some of the works are classics, others represent newer academic perspectives, but together they provide a useful basis for further in-depth study of the topics we work with at The Invisible Capital .
The Long Tail: Why the Future of Business Is Selling Less of More
Author(s): Chris Anderson
Short review
The Long Tail is one of the most influential books on how the internet has transformed commerce, marketing, and consumer behavior. Chris Anderson introduces the theory of the “Long Tail,” which explains how digital markets enable significant value creation through a large number of niche products, rather than relying on a few bestsellers.
The book shows how digital distribution, low inventory costs, search engines, and intelligent recommendation systems have made it profitable to offer an almost unlimited product range. Where traditional stores were limited by physical shelf space, online stores can offer millions of products and let customers find exactly what they are looking for.
Chris Anderson illustrates the theory with examples from Amazon, Netflix, Google, and the digital music industry, showing how the internet has changed the rules of competition for businesses around the world. Many of the insights have since become even more relevant through artificial intelligence, personalization, and modern search technology.
The authors take the reader through the entire process – from planning and organizing to publishing, managing and continuously improving content on websites and digital services. Although technology has evolved since the book was published, the principles of quality, relevance, management and long-term content work are at least as relevant in an era where search engines and artificial intelligence assess the credibility and usefulness of content.
Why we recommend the book
At The Invisible Capital, we consider The Long Tail to be one of the most important books in e-commerce, digitalization, and modern value creation.
The book explains why customers no longer just buy the most popular products, but increasingly find value in specialized products and services that meet individual needs. This insight has had enormous impact on the development of online stores, digital marketplaces, search engine optimization (SEO), information architecture, and content strategy.
Today we see that the theory also fits very well into the development of artificial intelligence. AI helps people discover relevant content, products and knowledge that were previously difficult to find. This has given the Long Tail principle a new dimension, where well-structured content and high professional quality are increasingly important for visibility, trust and value creation.
This is a book we believe everyone who works with e-commerce, digital marketing, customer experience, innovation, digital strategy or artificial intelligence should read.
Content Strategy for the Web (2nd Edition)
Author/authors: Kristina Halvorson and Melissa Rach
Short review
How do you create content that actually helps people – and at the same time supports your business goals? Content Strategy for the Web is considered one of the most influential books in the field of content strategy and digital communications. The book shows how good content does not arise by chance, but through a deliberate strategy where user needs, the organization's goals, structure, work processes and management are closely linked.
The authors take the reader through the entire process – from planning and organizing to publishing, managing and continuously improving content on websites and digital services. Although technology has evolved since the book was published, the principles of quality, relevance, management and long-term content work are at least as relevant in an era where search engines and artificial intelligence assess the credibility and usefulness of content.
Why we recommend the book
At The Invisible Capital, we believe that good content is one of the most important forms of invisible value creation. A website is far more than design and technology – it is the content that builds trust, creates great customer experiences and helps people find the answers they are looking for.
This book is perfect for leaders, communications consultants, content producers, web editors, UX designers, and anyone working with digital services. It shows why a clear content strategy leads to better user experiences, more effective interactions, and stronger digital results over time.
In an era where artificial intelligence is increasingly important in how information is discovered, understood, and communicated, this book is more relevant than ever. It reminds us that technology alone never creates value – it is good, structured, and relevant content that makes the difference.
Don't Make Me Think
Author: Steve Krug
Short review
Don't Make Me Think is one of the world's most influential books on usability and web design. Since its first edition in 2000, the book has helped designers, developers, content producers, and managers understand a simple but powerful principle: Good digital services should be intuitive. The user should be able to complete their task without having to stop and think about how the website works.
Why we recommend the book
This is one of the books that has had the greatest impact on my own work with digital services. Over the years – from SAS and the Norwegian Opera & Ballet to working on Bærum Municipality’s website – the principles in this book have been an important reminder that technology is never an end in itself. The goal is to make everyday life easier for the people who use the services. Despite the fact that the book was published many years ago, the message is just as relevant today.
Internet Marketing & eCommerce
Authors: Ward Hanson and Kirthi Kalyanam
Short review
Internet Marketing & eCommerce provides a thorough introduction to how the internet has changed marketing, commerce, and business development. The book combines theory and practical examples in digital marketing, e-commerce, customer behavior, value creation, and digital business models. Although written at a time when the internet was still in its infancy, many of the fundamental principles are still highly relevant.
Why we recommend the book
This book was an important part of my own learning journey in digital marketing and e-commerce. It helped build my understanding of how technology, customer experiences and business strategy are interconnected – an insight that later became very important in my work with SAS, the Norwegian Opera & Ballet, Bærum Municipality and eventually the project The Invisible Capital. Many of the ideas about customer value, digitalization and innovation presented on the website have their roots in the knowledge this book conveys.
The Innovator's Solution: Creating and Sustaining Successful Growth
Authors: Clayton M. Christensen and Michael E. Raynor
Short review
In this sequel to The Innovator's Dilemma, Clayton Christensen shows how businesses can translate innovation theory into practical strategy. The book explains how companies can identify new growth opportunities, develop disruptive innovations, and build organizations that thrive in rapidly changing markets.
Why we recommend the book
While The Innovator's Dilemma explains why established businesses are often challenged, The Innovator's Solution provides concrete advice on how to meet the challenges. The book is therefore a natural next step for anyone who wants to understand innovation, strategy and long-term value creation.
The Innovator's DNA: Mastering the Five Skills of Disruptive Innovators
Authors: Jeff Dyer, Hal Gregersen and Clayton M. Christensen
Short review
What characterizes people who create groundbreaking innovations? The authors identify five key skills – observation, questioning, experimentation, networking and association – that are common to the world's most innovative leaders and entrepreneurs.
Why we recommend the book
This book shifts the focus from organizations to the people behind innovation. It shows that creativity and innovation can be developed through deliberate training and experience. The perspectives align well with the philosophy behind Invisible Capital, where human competence and curiosity are the most important drivers of development.
Competing Against Luck: The Story of Innovation and Customer Choice
Authors: Clayton M. Christensen, Taddy Hall, Karen Dillon and David S. Duncan
Short review
In this book, Clayton Christensen further develops the theory of Jobs to Be Done – the idea that customers do not primarily buy products, but "hire" them to solve specific needs. Through practical examples, the authors show how businesses can develop products and services that address customers' real-world challenges.
Why we recommend the book
For anyone working in customer experience, service design, and innovation, this is one of the most insightful books ever written. It reminds us that value creation always starts with understanding the people we are developing solutions for – a fundamental principle of Invisible Capital.
The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail
Author: Clayton M. Christensen
Short review
The Innovator's Dilemma is considered one of the most influential books on innovation and technological change. Clayton M. Christensen introduces the theory of disruptive innovation and explains why even the most successful businesses can fail when new technologies and business models challenge established markets. Through a series of examples, he shows how companies often focus on today's customers and incremental improvements, while overlooking innovations that later change entire industries.
Why we recommend the book
This is one of the books that has had the greatest impact on modern innovation thinking. When I first read it, it gave me a whole new perspective on why some businesses succeed in transformation, while others lag behind – even when they are well led. The insight has been an important part of my own understanding of digitalization, innovation and change management, and many of the reflections in The Invisible Capital build on the ideas Clayton Christensen presents in this classic. The book is as relevant today, in the face of artificial intelligence and digital transformation, as it was when it was published.
Open Innovation: The New Imperative for Creating and Profiting from Technology
Author: Henry Chesbrough
Short review
Henry Chesbrough introduced the concept of Open Innovation and changed the way many businesses think about research and development. He shows how companies can create more innovation through collaboration with customers, universities, start-ups, suppliers and other external partners.
Why we recommend the book
Open Innovation has had a major influence on modern innovation thinking and was also an important topic during the seminars in Oxford and San Francisco. The book shows why future value creation occurs in the interaction between people, businesses and knowledge environments – not within closed organizations alone.
Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant
Authors: W. Chan Kim and Renée Mauborgne
Short review
Blue Ocean Strategy challenges businesses to shift their focus away from fierce competition and instead create new markets with little or no competition. The authors present strategies and models that help organizations develop innovative products, services, and business models.
Why we recommend the book
This book has inspired leaders around the world to rethink strategy and innovation. Instead of competing for the same customers, it shows how businesses can create new value through creativity and differentiation. The perspectives align very well with the themes of innovation, digitalization, and long-term value creation in Invisible Capital.
Outside Innovation: How Your Customers Will Co-Design Your Company's Future
Authors: Patricia B. Seybold
Short review
Patricia Seybold shows how businesses can create better products and services by actively involving customers in the innovation process. The book describes how dialogue, co-creation and close collaboration with users can provide better solutions and stronger competitiveness.
Why we recommend the book
Customers often hold the most important insights into how products and services can be improved. This book emphasizes the importance of listening, involving, and learning from users – a perspective that is echoed in many of the articles on The Invisible Capital. Innovation rarely happens alone; it is created in the interaction between people.
Blown to Bits: How the New Economics of Information Transforms Strategy
Authors: Philip Evans and Thomas S. Wurster
Short review
This book analyzes how digital information is changing competitive conditions, markets, and business strategies. The authors explain how the internet is disrupting established structures and creating new opportunities for businesses that are able to think differently.
Why we recommend the book
Although written early in the internet revolution, the book describes many of the developments that still characterize business today. It provides valuable perspective on how digitalization affects value chains, competition, and innovation – themes that are central to Invisible Capital.
Wikinomics: How Mass Collaboration Changes Everything
Authors: Don Tapscott and Anthony D. Williams
Short review
Wikinomics shows how openness, sharing and collaboration across organizations create new forms of innovation and value creation. Through a number of international examples, the authors describe how digital networks make it possible to develop products, services and knowledge together.
Why we recommend the book
This book was groundbreaking when it was first published, and many of the ideas have since become a natural part of everyday digital life. The perspectives on collaboration, knowledge sharing, and open innovation processes align very well with the philosophy behind Invisible Capital, where people and networks are at the center of value creation.
The Competitive Strategy: Techniques for Analyzing Industries and Competitors
Author(s): Author: Michael E. Porter
Short review
Competitive Strategy is Michael E. Porter's classic work on how companies can understand the competition they find themselves in and develop a position that provides a basis for long-term profitability. Porter shifts the focus from the individual competitor to the structure of the entire industry and shows how competition is affected by customers, suppliers, new entrants, substitutes and the rivalry between existing companies. This forms the basis for what has later become known as Porter's Five Forces. The book is also about how companies can choose a competitive strategy on the basis of this analysis. It thus established an analytical language for strategy that has gained great importance in both research, teaching and practical strategy work.
Why we recommend the book
We recommend Competitive Strategy because it provides the analytical foundation for much of the thinking Porter later develops in What Is Strategy?. If a company is to choose a unique strategic position, it must also understand the competitive forces, the industry structure and the factors that affect the ability to create and retain value. The book is particularly useful because it reminds us that strategy is not just about internal goals, plans and ambitions. Strategy must be developed in the face of customers, competitors, suppliers, technology and structural changes in the market. Together with What Is Strategy?, the book therefore provides a much richer picture: First, the company must understand the competitive arena. Then, it must choose how to be different.
Competitive Advantage: Creating and Sustaining Superior Performance
Author(s): Author: Michael E. Porter
Short review
In Competitive Advantage, Porter moves the analysis from the industry to the business itself. The main question is how competitive advantage is actually created. One of the book's most important contributions is the value chain, where the business is understood as a system of activities that collectively develop, produce, market, deliver and support a product or service. Competitive advantage cannot therefore be understood only through products or overall strategies; one must examine the activities that create costs, differentiation and value. This understanding later becomes central to Porter's argument about strategic fit: the activities must not only be good in isolation, but also fit together and reinforce each other.
Why we recommend the book
We recommend Competitive Advantage because it brings strategy right down to where value is actually created: in the activities the business performs. This makes the book particularly relevant together with What Is Strategy?. When Porter argues in 1996 that strategy consists of performing different activities than competitors, or performing similar activities in other ways, this builds on the thinking he developed here. For our perspective on value creation, this is particularly interesting. Value does not arise because the business has formulated a strategy on a document, but through people, expertise, technology, processes, collaboration and activities that together enable the business to create something that customers value. The book therefore provides an important connection between strategy, competitive advantage and actual value creation.
The Competitive Advantage of Nations
Author(s): Author: Michael E. Porter
Short review
In The Competitive Advantage of Nations, Porter raises the perspective from business to countries, regions and business environments. The book is based on extensive studies of the competitiveness of ten leading trading nations and examines why certain countries and business clusters are particularly successful in certain industries. A central premise is that national prosperity is not simply something a country inherits through natural resources or other given conditions. It is created, and productivity, innovation, competence, competition and the quality of the environment in which businesses operate are crucial. Here, Porter also develops the well-known diamond model to explain how different national and regional conditions can interact and stimulate competitiveness.
Why we recommend the book
We recommend The Competitive Advantage of Nations because here Porter extends the strategy perspective to the ecosystem surrounding the business itself. Value creation does not occur in a vacuum. Businesses develop in societies with education, research, infrastructure, capital, suppliers, demanding customers, competing businesses and public institutions. This makes the book particularly interesting for understanding value creation as an interaction between people, businesses and society. It also provides an important corrective to the notion that a country's competitiveness can mainly be understood through low costs or access to natural resources. Innovation, productivity and the ability to continuously develop are far more central to Porter's explanation.
Understanding Michael Porter: The Essential Guide to Competition and Strategy
Author: Joan Magretta
Short review
Understanding Michael Porter brings together and explains the most important parts of Michael Porter's strategic thinking in one accessible whole. Joan Magretta herself worked on strategy at the Harvard Business Review and organizes Porter's ideas around two fundamental questions: What is competition, and what is strategy? She explains, among other things, the Five Forces, competitive advantage, the value chain, value creation, trade-offs, fit, and strategic continuity. This makes the connection between Porter's various works clearer than when the concepts are studied separately. The book also includes an interview with Porter.
Why we recommend the book
We recommend Understanding Michael Porter because it helps the reader see the whole picture of Porter's understanding of strategy. Porter is often reduced to the Five Forces or a few models used in isolation. Magretta shows why this is too simple. Competition, value creation, strategic positioning, trade-offs, activity systems, fit and continuity are interconnected. This makes the book a particularly good supplement after reading What Is Strategy?. It makes it easier to understand why Porter does not view strategy as a plan or a collection of goals, but as a coherent system of choices about how the business will create value and compete over time.
HBR's 10 Must Reads on Strategy
Authors: Harvard Business Review, Michael E. Porter, W. Chan Kim, Renée A. Mauborgne and more
Short review
HBR's 10 Must Reads on Strategy brings together some of Harvard Business Review's most influential writings on strategy. The original collection from 2011 features Michael E. Porter's What Is Strategy? as its main article and combines it with works on competitive forces, Blue Ocean Strategy, the organization's vision, business models, strategy execution, and the Balanced Scorecard, among others. The result is not one unified theory of strategy, but multiple perspectives on how organizations can develop, formulate, and execute strategy.
Why we recommend the book
We recommend HBR's 10 Must Reads on Strategy because it places Porter in a broader strategic context. After reading What Is Strategy?, it will be interesting to encounter other central perspectives and see how they complement, challenge, or extend Porter's understanding. The collection also shows why strategy cannot be reduced to a single model. Competitive position, choice, innovation, business model, execution, priorities, and measurement must be seen in context. For the reader who wants to move on from Porter and into the strategy discipline more generally, this is therefore a very good introduction.
Creating a Learning Society: A New Approach to Growth, Development, and Social Progress
Author: Joseph E. Stiglitz and Bruce C. Greenwald
Short review:
Creating a Learning Society examines how knowledge, learning, and technological development contribute to economic growth and long-term value creation. Joseph E. Stiglitz and Bruce C. Greenwald challenge the notion that economic development is primarily about accumulating more physical capital. They argue that society’s ability to create, disseminate, and apply knowledge is crucial to productivity growth and improved living standards. A key point is that learning does not only occur in schools and universities. It also occurs in businesses, through work, production, innovation, and the interaction between people and organizations. Knowledge can also spread from one business and one part of the economy to others.
The book thus provides an important perspective on why human capital, competence, innovation and learning must be understood as central parts of a society's ability to create value over time.
Why we recommend the book
We recommend Creating a Learning Society because it expands the understanding of what lies behind economic value creation.
Machines, technology and financial capital are important, but they do not create productivity growth alone. Behind the development are people who learn, develop knowledge, improve work processes, share experiences and find new solutions.
This makes the book particularly relevant to Invisible Capital and our perspective on value creation: A significant part of society's value-creating capacity is found in the knowledge, competence, and learning ability of the people who participate in the economy.
Stiglitz and Greenwald thus provide an academic foundation for one of the most important relationships in modern value creation:
The Value of Everything: Making and Taking in the Global Economy
Author: Mariana Mazzucato
Short review
In The Value of Everything, Mariana Mazzucato asks a fundamental question: What exactly is value – and who creates it? Mazzucato returns to the historical discussions of value in economics and shows how the understanding of value creation has changed. She challenges the notion that high income, high prices or large profits necessarily mean that correspondingly large values have been created. One of the book's most important contributions is the distinction between value creation and value extraction . Mazzucato examines the financial sector, the pharmaceutical industry, innovation and the public sector, among others, and argues that we must become better at distinguishing between activities that actually create new values, and activities that primarily extract values that have already been created.
The book also challenges the traditional notion that the private sector creates value while the public sector mainly consumes or redistributes it. Innovation and economic development often arise through a complex interaction between public investment, research, businesses, capital and people.
The Power of Creative Destruction: Economic Upheaval and the Wealth of Nations
Author: Philippe Aghion, Céline Antonin and Simon Bunel
Short review
The Power of Creative Destruction is about one of the most important drivers of long-term economic growth: innovation.
Philippe Aghion, Céline Antonin and Simon Bunel build on Joseph Schumpeter's classic idea of "creative destruction" – the process by which new technologies, businesses, products and ideas challenge and replace existing solutions.
But the book is not just about the disappearance of the old. The authors examine why some economies manage to create continuous innovation and productivity growth, while others stagnate. Competition, entrepreneurship, research, education, institutions and public policy thus become important parts of the explanation.
Creative destruction also comes at a cost. New technologies and businesses create opportunities and jobs, but can also make existing skills, tasks and business models less relevant. The challenge is therefore to create societies that both promote innovation and enable people to participate in the transition.
Why we recommend the book
We recommend The Power of Creative Destruction because it shows why innovation is a fundamental driver of value creation .
Value creation is not just about producing more of what we already produce. It also occurs when people develop new ideas, technology, and ways of working that enable us to solve tasks better than before.
This makes the book particularly relevant to The Invisible Capital. Behind innovation are people with knowledge, expertise, creativity and experience. But Aghion's perspective also shows that human capital must be part of a larger system where competition, institutions, research, investment and policy create the conditions for new ideas to actually turn into economic and social development.
The book thus provides an important context in our understanding of value creation:
Knowledge → new ideas → innovation → productivity growth → long-term value creation.
Institutions, Institutional Change and Economic Performance
Author: Philippe Aghion, Céline Antonin and Simon Bunel
Short review
Institutions, Institutional Change and Economic Performance is one of Douglass C. North's most important works on why some societies are more successful than others in creating economic development over time.
North shifts attention from traditional factors of production such as capital and labor to the institutions that shape how people, businesses, and governments act and cooperate. Institutions are society's formal and informal rules of the game – including laws, regulations, norms, traditions, and established ways of organizing interaction.
These rules of the game affect the incentives that people and organizations face. They also affect investments, knowledge development, cooperation, transaction costs, and which economic activities emerge.
North also shows that institutions develop over time. History therefore matters: Today's economic opportunities are influenced by institutional choices and development paths that can stretch far back in time.
Why we recommend the book
We recommend Institutions, Institutional Change and Economic Performance because it explains a crucial aspect of value creation that easily becomes invisible:
Value creation needs good rules of the game.
People may have knowledge. Businesses may have capital. Entrepreneurs may have great ideas. A society may have natural resources and advanced technology. But outcomes are also influenced by the institutions that determine how people can collaborate, invest, compete, make deals, and develop businesses.
This makes North particularly interesting for our understanding of trust as part of invisible capital. Trust is not the same as institutions, but stable rules of the game, credible agreements, and well-functioning institutions can reduce uncertainty and make economic interaction easier.
North thus gives us another important part of the value creation picture:
Institutions → predictability and incentives → cooperation and investment → productive activity → long-term value creation.
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