Incumbents sit at a dangerous intersection. They have distribution, customers, workflows, and brand trust — but they also have structural inertia. AI removes the value of horizontal features and pushes everything toward workflow-native integration.
The dilemma is simple:
Move fast or become a feature.
If incumbents fail to embed AI directly into their workflows, they will be embedded within someone else’s platform. The threat is existential because:
AI capability parity means superior features no longer differentiate
Workflow continuity beats standalone AI tools
Users choose “good enough where I already work” over “better somewhere else”
Bundling is a market-shaping weapon: it redefines the customer’s expectation of what’s included.
The Outcome
Standalone tools lose differentiation
AI becomes a hygiene factor within incumbent ecosystems
Price elasticity for external tools collapses
The Risk
Cannibalization of premium products — but this is still preferable to being disrupted by external AI.
Bundling is a controlled burn: sacrificing some margin to burn down competitors’ entire category.
Source: BusinessEngineer.ai
Strategy 3: Vertical Integration
Control Model → Application Stack
Vertical integration is the full-stack defensive play — the most expensive and the most powerful. It ensures incumbents neither rely on external platforms nor expose themselves to extraction.
Only the strongest incumbents can execute this strategy.
The Risk
Organizational sclerosis — large companies move slowly. Full-stack builds require disciplined, parallelized execution and often the acquisition of specialist teams.
Source: BusinessEngineer.ai
The Incumbent Imperative
Every incumbent must confront the same binary decision:
Will you embed AI into your workflows, or will AI platforms embed you into theirs?
This determines whether the company becomes:
a Super-Incumbent or
a feature inside someone else’s ecosystem
Those who integrate quickly gain speed and defensibility. Those who delay get eaten alive by platform defaults.
Strategic Insight
AI removes feature differentiation and forces every company into a distribution war. Incumbents win by embedding, bundling, or vertically integrating — each strategy reinforcing their control over workflows, users, and data.
The companies that survive will:
move faster than their own org charts
buy capabilities they cannot build
use bundling as a competitive weapon
integrate AI until it becomes invisible
collapse workflows into augmented experiences
Those who cannot execute will become components inside someone else’s stack.
This is the incumbent playbook. Source: BusinessEngineer.ai
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
