Connected companies are better positioned to win in the AI-powered economy

Tesla is a boundless company. We believe the Boundless Company is the logical evolution of the Connected Company for the digital-first, decentralized-everything world. In this new world, successful companies must continuously scale their capabilities and reach in multiple dimensions to survive and thrive. 

I have written before about how -- based on my interviews with analyst firm, ARK Invest -- Tesla is three to four years ahead of its autonomous vehicle competitors. One of the main reasons for Tesla's dominance is that the company has the most data about its customers. Tesla can provide better insights to insurance companies and also deliver its own services. 

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A boundless company has a different business operating model -- the boundless operating model. Businesses need a new operating model to compete in an AI-powered economy. The traditional operating model is based on the idea that a company is a thing, an entity, or a structure. Boundless organizations are differentiated in their responsiveness to current and future customer needs, market conditions, and associated decision-making and action-taking processes. 

In our book, Boundless, we introduce the Boundless Operating Model, our update to other contemporary sense-and-respond or situational awareness models, as a guide to help organizations design and develop the necessary processes and capabilities for amplifying and accelerating their responsiveness. 

Our model places action and reaction in its context, local or global, and it works at the individual, team, and company levels. The outcome of these considerations is the Boundless Operating Model. The boundless company operates differently, so it requires a new approach to designing its operating model -- and here's why.

First, boundless companies operate as a part of markets, ecosystems, and communities, not apart from them. The idea of a company going it alone is no longer tenable. Identity is not defined in terms of isolation and exclusion but in terms of connectedness and inclusion. From an operating model perspective, we want to show that a boundless company is connected to a larger ecosystem and that everything it does happens within the context of that ecosystem. 

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Second, the traditional sense and respond models focus on sensing immediate and/or local conditions, what is sometimes described as situational awareness. This awareness is critical to effective decision-making processes, but situational awareness alone isn't enough today. Companies must be horizonally aware as well. Horizonal awareness means being connected to the larger world beyond the immediate here and now. Companies need to be able to see 'further down the road' in the same way that an autonomous car can be aware of conditions anywhere along its journey and can take active steps to anticipate and avoid problems, all because of its global as well as local connectedness.

Third, the boundless systems are self-similar at various levels (also known as fractal). Individual resources within a boundless company are themselves boundless and have the same responsibility as the company to be responsive to customer requirements and market conditions. Responses must also be attuned to requirements and conditions and prepared for future changes. And just like the company, when individual employees and teams take action, they do so in the world, not in a vacuum. 

The Boundless Operating Model, or SUDA, is an evolution of other situational awareness or sense-and-respond models designed to reflect dynamically changing conditions, unlike, for instance, the PDCA or Deming Cycle which was designed for continuous improvement in stable conditions or relatively controlled environments. So, how does Tesla represent this SUDA operating model? It's all about movement -- the movement of data that leads to information, insights, knowledge, wisdom, and ultimately better outcomes and experiences.

Tesla (the company), the car (Tesla's hardware product), the FSD (Tesla's software product), and the driver (Tesla's customer) are all connected. They all share data and that data goes both ways -- from the 'car+driver' to the 'company+training system' and back in the form of improvements to the hardware and software. The AI is not developed solely by the company in isolation from its customers. The technology is developed, tested, improved, updated, and distributed in real time, thanks to the constant flow of data.

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FSD is not about AI being used to improve business processes (although we assume Tesla does use AI internally to do that task). FSD is AI being used to transform the customer experience and the entire industry-experience complex of transportation. This is system-level innovation, not task- or activity-level innovation, like automating email generation.

So what can other companies learn from this example? The learning is that companies need to think of their products and their customers in the same way. 

Traditional companies must ask themselves, 'What is my hardware product, and what is my software product?' They must use software in all interactions between themselves, their products/services, and their customers, regardless of their industry. They need to push themselves hard to do this work to reimagine their products/services as software. And they need to 'datafy' everything, so that every interaction is software and generates data, and all this information goes back to the company for continuous improvement, upgrades, and distribution back to the customer. 

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Trust must be the core value for all companies competing in an AI-powered economy. Customer data is not your product. All use of customer data must be based on consent and a full understanding of how data is used to improve the overall customer experience. 

Companies also need to ask, 'What is my intelligence?' They need to build the ability to sense and respond to all the data coming in. They must use AI-based platforms, acting like decentralized nervous or fly-by-wire systems that provide SUDA capabilities, our operating loop. The platforms must sense every direct and indirect customer interaction. CRM platforms that connect marketing, sales, service, and commerce functions are part of this approach. But the products and services also need to be part of this cycle as they are key touchpoints and portals for the relationship to grow and be fostered.

Now, obviously, this approach means different things from industry to industry. But 15 years ago, this approach would have been considered science fiction in the auto industry -- and in some parts of that industry, it still is.

Another way to ask these questions -- especially but not exclusively in B2C -- is from the customer's perspective first. What does my customer have to do now that they shouldn't have to? In what ways is my customer forced into being a machine operator (like a car driver)? How can I give my customer their freedom? How can I give them superpowers? And how can I extend accessibility to these powers to more people? The most successful product of all time globally, the smartphone, has been the one that gives more individuals more freedom or more powers, which is arguably the same thing. 

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From a Boundless perspective, companies must ask what they can do to give their customers more autonomy, mobility, and connectedness (exactly what the smartphone provides). In our book, we draw a direct link between these three boundless principles and the three universal psychological needs of autonomy, connectedness, and competence (which we relate to Mobility + Autonomy). 

Ultimately, the most important business capability in an AI-powered economy is to deliver value at the speed of need. To deliver personalized, intelligent, and relevant value as fast as needed, the company, its products and services, and its customers must have access to shared data in a trusted and value-driven model, guided by core values of trust and shared success. 

This article was co-authored by Henry King, business innovation and transformation strategy leader and co-author of Boundless: A New Mindset for Unlimited Business Success. 

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