Competitive Moating in AI
In a tech-driven business world, the tech side becomes a moat only when it translates into a brand, distribution, and operational advantage.
That means the tech side becomes the instrument to gain market shares via brand, distribution, and a vertical infrastructure able to sustain a larger and larger scaling advantage.
If we were to translate business competition into a sport made of “competitive moating,” that can be all translated in this graphic below.
For a tech moat to become a lasting advantage, it must be translated via efficiency, branding, and distribution into locked-in market shares of the future market. That’s the bet.
In AI Moats: Part One, I’ve explained the process of mapping moats out.
Now, let’s start from there to see how these temporary tech advantages are translated into business moats.
Mapping The Moats Out
As a reminder, these are the key elements to look out for when building a strategic moat.
Core Layer: Speed & Agility (Green Circle)
Represents low barriers to entry and rapid prototyping.
AI apps can be built and tested in under 24 hours using available AI models and APIs.
Key elements:
Rapid Prototyping (24h cycles) → Fast development cycles.
Rapid Distribution → Ability to quickly reach users.
Vertical Infrastructure → Ensures early scalability.
Network Effects → More users enhance the AI system.
Middle Layer: Operational Advantage (Orange Circle)
Represents cost efficiency, infrastructure leverage, and capital deployment.
AI model competition ensures lower operational costs.
Key elements:
Cost Efficiency → Decreasing API costs makes AI development cheaper.
Model Flexibility → The ability to integrate multiple AI models.
Capital Deployment → AI startups require efficient funding strategies.
Outer Layer: Strategic Moat (Purple Circle)
Represents long-term defensibility through differentiation.
AI apps achieve a lasting advantage by focusing on:
Model Flexibility → Leveraging multiple AI models optimally.
Brand Strength → Creating a recognizable, differentiated AI product.
Network Effects → Continuous improvement as more users join.
Vertical Depth → Deep specialization in a specific domain.
This map is not static but dynamic and is the direction you want to look at.
Let’s go back not to translating these into a lasting advantage.
Translating Tech Edge Into A Lasting Advantage
The key take here is that technical capabilities (Temporary Tech Moats) transform into Market Power through strategic value delivery (Translation). This process is essential for companies to sustain a competitive advantage.
A Tech Moat represents technical capabilities—unique innovations, proprietary algorithms, or AI advancements.
However, having strong technology alone is insufficient; it must be effectively translated into market impact.
That translation bridges between technical strength and market dominance. This process relies on three core components:
Efficiency – How well does the technology improve cost, speed, or performance? And are we building a vertical infrastructure to sustain that advantage and make our final product cheaper and better as it scales?
Distribution – How widely and effectively does the technology reach users?
Brand – How does the company position itself in the market and build recognition?
Successful translation of a tech moat results in Market Power through:
Market Share – Gaining and retaining users/customers.
Recognition – Establishing credibility and differentiation.
Authority – Becoming the industry leader in a particular domain.
Even the most advanced technology risks becoming irrelevant or commoditized without effective translation.
Companies that master this framework turn technological innovation into sustainable competitive advantage and long-term market leadership.
