Agile Strategy Formation: Using AI to Expand the Strategic Horizons of a Business

🧭 Dojo Compass

Module: Finance, Risk Management and Long-Term Resilience

Focus Area: Technology, AI and Future Readiness

Learning Format: Article

Traditional strategy formation has often been a lengthy, resource-intensive exercise, constrained by the availability of information, the difficulty of evaluating unfamiliar opportunities and the challenges of anticipating changing market conditions.

Artificial intelligence creates an opportunity to rethink this process. Companies can increasingly use AI to investigate markets, identify strategic opportunities, generate alternative scenarios and evaluate potential strategies against their particular assets, capabilities and organizational characteristics.

This article explores Agile Strategy Formation: an approach in which strategy becomes a continuous process of exploration, evaluation, experimentation and adaptation, rather than an occasional exercise resulting in a relatively static strategic plan. It examines how AI can help companies expand their strategic horizons, overcome traditional expertise constraints and respond more dynamically to emerging opportunities and threats.

🎯 Key Challenge

Strategy formation has traditionally been one of the most important, but also most challenging, responsibilities of business management.

A company must understand its environment, anticipate developments, identify opportunities, assess threats and determine how best to deploy its resources to achieve its objectives.

Although these principles remain unchanged, the process through which companies develop strategy has historically suffered from several significant limitations.

First, information was difficult and expensive to obtain.

Developing a meaningful understanding of an industry, market or potential business opportunity often required substantial research, specialist consultants, industry contacts and considerable management time.

Information was frequently fragmented across different sources, difficult to compare and sometimes unavailable altogether. Consequently, management teams often had to make strategic decisions based on incomplete information and a relatively limited understanding of the alternatives.

Second, evaluating unfamiliar opportunities was difficult.

A company might identify an attractive opportunity in an industry outside its existing area of expertise. However, understanding the commercial dynamics, competitive landscape, technologies, regulatory environment and operational requirements of that industry could be difficult.

This created what might be described as an expertise moat. Companies were often reluctant to enter unfamiliar sectors because the cost and complexity of acquiring the necessary knowledge and expertise created a substantial barrier to entry.

Third, generating and evaluating alternative scenarios was time-consuming.

Strategic decisions frequently involve multiple variables and uncertain outcomes. Management must consider alternative market developments, competitive responses, technological changes, regulatory developments and economic conditions.

Developing meaningful scenarios and evaluating their implications can require substantial analytical resources. As a result, companies may examine only a relatively small number of strategic alternatives, potentially overlooking attractive opportunities.

Fourth, identifying opportunities that fit the particular characteristics of a company was difficult.

Two companies operating in the same industry may have very different strategic opportunities because of differences in their assets, resources, capabilities, relationships, organizational cultures and management experience.

The challenge is not simply to identify an attractive market or business opportunity. It is to determine whether that opportunity can be pursued successfully by the particular company.

This requires an understanding of the company’s unique characteristics and how they might be deployed, combined or developed to create competitive advantage.

Finally, traditional strategy formation was often too static.

Many companies develop strategic plans annually or every few years. Although these plans may be reviewed periodically, the underlying process is often relatively inflexible.

Markets, technologies, competitors and customer expectations can change considerably between strategic planning exercises. A company may therefore continue pursuing a strategy based on assumptions that are no longer valid, or fail to recognize opportunities that have emerged since the strategy was originally developed.

The fundamental challenge is that traditional strategy formation has often been too slow, too constrained by existing knowledge and too dependent on periodic assessments of an increasingly dynamic business environment.

Artificial intelligence provides an opportunity to address these limitations and fundamentally improve how companies develop and manage strategy.

🥋 Dojo Solution

The Dojo solution is to adopt an Agile Strategy Formation process that uses AI to make strategy development more dynamic, exploratory, evidence-based and responsive to changing circumstances.

Rather than treating strategy as a document produced at a particular point in time, companies should view it as an ongoing process through which strategic opportunities are continuously identified, evaluated, tested and refined.

AI can support this process in several important ways.

1. Move from periodic research to continuous strategic intelligence

AI can substantially improve a company’s ability to retrieve, organize, compare and synthesize information from different sources.

This includes information about:

• Industry developments and emerging markets.
• Competitors, suppliers and customers.
• New technologies and business models.
• Regulatory and political developments.
• Economic conditions and market trends.
• Customer preferences and changing demand.
• Potential partners, acquisitions and investment opportunities.

AI can also help companies investigate subjects outside their existing areas of expertise, identify relevant information and develop an initial understanding of unfamiliar industries.

Importantly, this does not mean that every company needs to continuously monitor everything happening in the world.

Rather, companies should identify the developments most likely to affect their business and use AI to establish a more responsive strategic intelligence capability.

For example, an AI-assisted system could monitor developments in a company’s principal markets, identify significant changes and periodically produce assessments of their potential strategic implications.

This allows management to devote more attention to evaluating developments and making decisions, rather than spending disproportionate amounts of time collecting and organizing information.

2. Use AI to expand the company’s strategic horizons

One of the most interesting opportunities created by AI is its ability to help companies investigate opportunities beyond their existing areas of expertise.

Historically, companies have often been constrained by what they already know how to do.

A manufacturing company might understand manufacturing but have little knowledge of software. A software company might understand technology but have limited experience in financial services. An agricultural business might understand farming but have little familiarity with advanced data analytics or financial products.

AI can help reduce these knowledge barriers.

A company can use AI to investigate an unfamiliar sector, understand its structure, identify important capabilities, examine commercial opportunities and explore how its existing resources might be applied.

This does not mean that AI automatically provides the expertise necessary to operate successfully in a new industry. Rather, it can make the process of acquiring knowledge, identifying requirements and evaluating opportunities substantially more accessible.

It can also help identify expertise that can be accessed externally through partnerships, acquisitions, recruitment or specialist service providers.

This creates an opportunity for companies to consider a much broader range of strategic alternatives.

3. Identify opportunities based on the company’s unique characteristics

Not every attractive market represents an attractive opportunity for every company.

A business may identify a rapidly growing market but lack the resources, relationships, capabilities or competitive positioning necessary to succeed.

Conversely, a relatively modest opportunity may be particularly attractive to a company because it can leverage assets or capabilities that competitors do not possess.

AI can help management evaluate opportunities against the particular characteristics of the organization.

These might include:

• Physical and intangible assets.
• Technical and operational capabilities.
• Intellectual property and proprietary knowledge.
• Customer and supplier relationships.
• Distribution channels and market access.
• Financial resources and investment capacity.
• Management experience and industry knowledge.
• Organizational culture and decision-making processes.
• Brand reputation and competitive positioning.
• Existing infrastructure and operational capacity.

This leads to an important strategic concept: the Strategic Opportunity Frontier.

The Strategic Opportunity Frontier represents the range of business opportunities that a company could realistically pursue, taking into account its existing assets, capabilities, resources and organizational characteristics, together with capabilities and resources it could reasonably develop, acquire or access externally.

AI can help management explore this frontier by identifying potential applications of existing assets, combinations of capabilities and opportunities to leverage organizational strengths in unfamiliar markets.

For example, a company might discover that its existing customer relationships, technical infrastructure and data capabilities could be combined to enter a new service market, even though it has never previously operated in that sector.

The objective is not simply to find new markets. It is to discover opportunities where the particular characteristics of the company create an advantage.

4. Generate and evaluate alternative strategic scenarios

AI can help companies develop a much broader range of strategic alternatives and examine their potential implications.

Rather than evaluating only a small number of management-generated options, companies can use AI to systematically explore different possibilities.

For example, a company might ask AI to develop scenarios involving:

• Expansion into new geographical markets.
• Development of complementary products or services.
• Entry into adjacent or unfamiliar industries.
• Acquisition of particular capabilities or businesses.
• Formation of strategic partnerships.
• Changes in the company’s commercial model.
• Adoption of new technologies.
• Withdrawal from declining markets or activities.

These alternatives can then be evaluated against different assumptions regarding market growth, competition, costs, investment requirements, regulatory conditions and other relevant variables.

AI can also help identify combinations of opportunities that might not otherwise be apparent.

For example, a company might discover that combining an existing product with a new technology and a different distribution channel creates an attractive business opportunity that none of those elements would produce independently.

The important point is that AI can help management move beyond evaluating a limited number of obvious alternatives and explore a wider strategic possibility space.

However, generated scenarios should not be confused with reliable forecasts. Their assumptions, underlying evidence and financial implications must be examined and tested.

5. Evaluate strategic fit and feasibility

Generating strategic ideas is relatively easy. Determining which ones are worth pursuing is much harder.

An attractive opportunity must be evaluated not only in terms of its potential market and financial returns, but also its compatibility with the company’s resources, capabilities and objectives.

AI can help structure this evaluation.

For example, management might assess each opportunity against:

Evaluation dimension	Key questions
Market attractiveness	Is the market growing? Is there sufficient demand?
Competitive positioning	Can the company establish a defensible position?
Strategic fit	Does the opportunity leverage existing assets and capabilities?
Capability requirements	What additional expertise or resources are needed?
Financial attractiveness	What investment is required and what returns are possible?
Execution complexity	How difficult would implementation be?
Risk	What are the principal commercial, operational and regulatory risks?
Organizational fit	Is the opportunity consistent with the company’s culture and DNA?
Strategic flexibility	Can the company enter incrementally or reverse its decision if circumstances change?

AI can assist in developing comparative assessments, identifying weaknesses and highlighting areas where further investigation is required.

Management can then focus on the most promising alternatives rather than attempting to investigate every conceivable opportunity in equal detail.

6. Experiment before committing substantial resources

Agile Strategy Formation should not be understood as simply developing strategies more quickly.

It should also involve testing strategic assumptions before making substantial commitments.

AI can help companies design relatively inexpensive experiments to investigate whether an opportunity is commercially viable.

These might include:

• Testing customer demand through surveys and market research.
• Developing prototypes or minimum viable products.
• Simulating alternative business models.
• Testing pricing assumptions.
• Evaluating potential partnerships.
• Conducting preliminary regulatory and technical assessments.
• Developing financial scenarios under different assumptions.

Companies can use these experiments to gather evidence and progressively refine their strategies.

This is particularly valuable when exploring opportunities outside the company’s traditional areas of expertise.

Rather than committing substantial resources based on an initial strategic hypothesis, the company can investigate, experiment and learn before making larger investments.

7. Make strategy responsive to changing conditions

An agile strategy should not be regarded as a fixed plan that is merely implemented more quickly.

It should be capable of evolving as new information becomes available.

AI can support this by helping management monitor changes in both the external environment and the company’s internal circumstances.

External changes might include new competitors, technological developments, changes in customer demand, regulatory developments or shifts in economic conditions.

Internal changes might include the acquisition of new capabilities, changes in financial resources, operational improvements, new partnerships or the development of proprietary technologies.

These developments can alter the relative attractiveness of different strategic opportunities.

For example, an opportunity that was previously unattractive because the company lacked a particular technical capability might become viable following an acquisition or technological development.

Similarly, a previously attractive market might become less appealing following the entry of a powerful competitor or a change in regulation.

AI can help identify these changes, assess their implications and present management with updated strategic alternatives.

The objective is to make strategy more responsive to reality rather than allowing previously established assumptions to dictate future decisions.

8. Maintain human judgment and strategic accountability

Although AI can substantially improve the strategy formation process, it should not replace management responsibility.

AI-generated recommendations may contain incorrect information, overlook important considerations or reflect assumptions that are inappropriate for a particular company.

Furthermore, certain strategic decisions involve questions that cannot be resolved through data analysis alone.

These include the company’s appetite for risk, desired market position, organizational identity, ethical commitments and long-term ambitions.

Management must ultimately decide what the company should become, which opportunities it should pursue and what resources it is prepared to commit.

AI should therefore be regarded as an increasingly powerful strategic research, analytical and decision-support capability.

The responsibility for strategy remains with management.

🏗️ Putting It into Practice

A company can begin implementing Agile Strategy Formation without completely redesigning its existing strategic planning process.

The following approach provides a practical starting point.

Step 1: Establish a strategic baseline

Develop an AI-accessible profile of the company.

This should include:

• Existing products and services.
• Markets and customer segments.
• Assets and intellectual property.
• Technical and operational capabilities.
• Financial resources and investment capacity.
• Key relationships and distribution channels.
• Organizational strengths and limitations.
• Management objectives and risk appetite.

The objective is to give AI a meaningful understanding of the company and the characteristics that influence its strategic opportunities.

This information should be maintained and updated as the business evolves, with appropriate confidentiality and access controls.

Step 2: Establish a strategic intelligence process

Identify the external developments that could materially affect the company.

These might include industry developments, competitor activities, emerging technologies, customer trends, regulatory changes and new business models.

Use AI to retrieve and synthesize relevant information and prepare periodic assessments of significant developments.

Establish appropriate verification procedures so that strategic assessments are based on reliable information rather than unverified AI-generated claims.

Step 3: Explore the Strategic Opportunity Frontier

Ask AI to examine the company’s existing assets, capabilities, resources and relationships and identify potential opportunities to deploy them in new ways.

Importantly, do not restrict the exercise to the company’s existing industry.

Explore opportunities in adjacent markets as well as more distant sectors where the company’s capabilities might have unexpected applications.

Ask AI to identify what additional resources, expertise, partnerships or investments would be required to pursue each opportunity.

Step 4: Generate and prioritize strategic alternatives

Ask AI to develop a range of potential strategies and evaluate them against agreed criteria.

For example:

• Market attractiveness.
• Strategic fit.
• Financial potential.
• Investment requirements.
• Execution complexity.
• Risk.
• Time to market.
• Potential competitive advantage.

Identify the most promising alternatives and the assumptions that require further investigation.

Step 5: Develop scenarios and test assumptions

For the most attractive opportunities, develop alternative scenarios based on different market conditions and assumptions.

Ask AI to identify what could go wrong, what could make the opportunity more attractive and which developments would materially change the strategic assessment.

Design relatively inexpensive experiments to test the most important assumptions.

Step 6: Establish strategic review cycles

Introduce regular strategy reviews rather than relying exclusively on annual planning exercises.

For example, management might conduct a quarterly strategic review supported by more frequent AI-generated intelligence reports.

These reviews should consider:

• Significant external developments.
• Changes in the company’s resources and capabilities.
• Progress against strategic objectives.
• New opportunities and threats.
• Performance of existing strategic initiatives.
• Whether assumptions underlying existing strategies remain valid.
• Whether alternative strategies should be explored.

The frequency should reflect the pace of change in the company’s particular industry.

Step 7: Convert strategic decisions into action

Once management selects a strategic opportunity, develop an implementation plan.

Identify the necessary resources, responsibilities, milestones, financial commitments and performance indicators.

AI can assist in developing and monitoring these plans, identifying implementation challenges and assessing whether actual results are consistent with expectations.

Where appropriate, management should establish decision points at which an initiative is expanded, modified, suspended or abandoned.

Step 8: Make the process continuous

Capture lessons from strategic experiments, implementation activities and changing market conditions.

Update the company’s strategic profile and use new information to refine future opportunity assessments.

Over time, the company should develop a more sophisticated understanding of its Strategic Opportunity Frontier and its ability to pursue opportunities beyond its traditional business boundaries.

The objective is to establish a repeatable organizational process through which strategy continuously evolves as the company learns and circumstances change.

📌 Key Takeaways

• Traditional strategy formation has often been constrained by information scarcity, expertise requirements, analytical complexity and lengthy planning cycles.
• AI can make strategic research, information synthesis and scenario development substantially faster and more accessible.
• Companies can use AI to investigate opportunities outside their existing industries and areas of expertise.
• The Strategic Opportunity Frontier represents the range of opportunities a company could realistically pursue based on its existing and potentially accessible assets, capabilities and resources.
• Strategic opportunities should be evaluated according to the particular characteristics, strengths and DNA of the company, rather than market attractiveness alone.
• AI can help generate alternative strategies, examine scenarios, identify risks and test strategic assumptions.
• Companies should experiment and gather evidence before committing substantial resources to unfamiliar opportunities.
• Strategy should become a continuous process of exploration, evaluation and adaptation rather than an occasional planning exercise.
• AI can improve strategic analysis and decision support, but management must retain responsibility for strategic choices and execution.
• The competitive advantage will increasingly belong to companies that can identify, evaluate and pursue opportunities more quickly and intelligently than their competitors.

🌿 Reflection

For much of business history, companies have been constrained by what they know, what they can do and the resources required to acquire new capabilities.

These constraints have helped define the boundaries of their strategic ambitions.

AI is beginning to change this equation.

A company can now investigate unfamiliar industries, understand new technologies, explore alternative business models and evaluate opportunities that might previously have been considered too complicated or expensive to pursue.

But this raises a more fundamental question.

If the boundaries of knowledge and expertise become less restrictive, what should determine the boundaries of a company’s strategic ambition?

Perhaps the most important strategic question is no longer simply what business a company is currently in, but what businesses it could successfully enter by leveraging its particular combination of assets, capabilities, relationships and organizational DNA.

The companies that learn to explore this question continuously may discover opportunities that would otherwise remain invisible.

⚔️ Dojo Mission

The Strategic Opportunity Frontier Challenge

Choose your company’s existing business and undertake a short AI-assisted strategic exploration.

1. Provide AI with a description of your company’s assets, capabilities, resources, relationships and organizational characteristics.
2. Ask AI to identify five potential business opportunities outside your company’s current core activities.
3. Ask it to explain how each opportunity could leverage your existing strengths and what additional capabilities would be required.
4. Have AI rank the opportunities according to market attractiveness, strategic fit, investment requirements and execution complexity.
5. Select the most interesting opportunity and ask AI to develop three alternative scenarios for entering that market.

Finally, ask yourself:

Is our company’s strategic horizon being determined by the opportunities available to us, or by the limitations of what we currently know how to do?