Harvard Business Review LogoJuly 30, 2026valmas/Getty ImagesNew technologies, like AI, deliver productivity growth by changing the ratio of inputs to outputs in one of three ways: 1) Reducing input costs (i.e. “Same with less”); 2) GrowingOver the past year or so, unbridled AI exuberance in the boardroom has given way to chastened sobriety. To justify the growing cost of data scientists, software, and tokens, executives around the world are locked in a race to transition AI from promise to productivity.
AI and the Looming Competition for Margin
New technologies, like AI, deliver productivity growth by changing the ratio of inputs to outputs in one of three ways: 1) Reducing input costs (i.e. “Same with less”); 2) Growing outputs with the same inputs (i.e. “More with same”) or 3) Creating an entirely new business model. While each approach may offer temporary advantages, ultimately the end result is the same: eroding margin. Economically transformative technologies are inherently deflationary, making consumers the real winners.
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