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The Collapse of Differentiation in the AI Red Ocean

· 6 min read
Dave Hulbert
Dave Hulbert
Builder and maintainer of Wardley Leadership Strategies

In the last post, we discussed the age of diffused agency, where AI empowers individuals to execute at a scale once reserved for large organisations. This creates a hyper-competitive environment where new ideas can be replicated and scaled with unprecedented speed. What does this mean for traditional sources of competitive advantage?

AI is compressing the evolution of software so quickly that differentiation evaporates before leadership teams can mobilise around it. Wardley Mapping reminds us that everything evolves, yet AI also accelerates the very mechanisms of evolution—communication, automation, recombination—so the curve itself steepens.

How this post fits the series​

1. Mapping the acceleration​

Design, engineering, testing, and deployment used to define the product era of software. Now, they are industrialised instantly: design mockups can become production code overnight, and global deployment is a single pipeline run. This is more than just a productivity gain; it's an evolutionary compression. What was in the product stage last quarter is in the utility column this quarter, forcing leaders to treat once-differentiating capabilities as table stakes.

In mapping terms, components that once felt unique are now migrating to the far right of the map at machine speed. The doctrine of differentiation becomes a vanity project when AI-assisted teams can replicate your surface features before your launch announcement has even finished trending.

2. The mirage of standing out​

For two decades, the mantra was "be different." This worked when design systems, infrastructure, and data pipelines were still maturing. Today, AI has eroded that buffer. Assistants can clone your elegant flow or novel pricing model as soon as it becomes visible. Creativity is not dead, but it needs to live further to the left on the map, where uncertainty and exploration still exist. Differentiation is a contextual doctrine: it's powerful at the genesis edge, but wasteful once components become commodities.

3. Evolution evolving​

The climatic pattern that everything evolves is now joined by a second truth: evolution itself is evolving. The mechanisms of change are also mutating. Communication breakthroughs are accelerating the diffusion of ideas, and ecosystem feedback loops are compounding learning. Faster feedback cycles, model-to-model conversations, synthetic data, and automated governance are all steepening the curve. Leaders must assume that the rate of change is accelerating, not stable. Waiting for markets to normalise is a mistake; the tempo will only increase.

4. Where advantage migrates​

When visible features commoditise, advantage moves to the less obvious terrain:

  • Distribution as gravity. Communities, ecosystems, and channels that direct attention become the choke points.
  • Messy and regulated niches. Domains with compliance friction or opaque workflows stay left of the map longer because learning trumps automation.
  • Integration inertia. Components that must connect to legacy stacks or ingest expensive data accrue defensibility through switching costs.
  • Ecosystems and network effects. When user participation compounds value, you reshape the landscape rather than sell a feature.
  • Systems of record. Platforms that store operational history accumulate power as daily workflows become dependent.
  • Regulation as tempo control. Policy drag creates temporary scarcity, buying time for differentiated service even as everything else speeds up.

5. The industrial sweep​

As components mature, the Town Planners move in. Large platforms will bundle "good enough" copies of standalone AI tools, not out of malice, but because evolution drives every product toward becoming a utility. Founders will feel the squeeze, but the answer is not to despair. It's to map faster than the market evolves. Anticipate which components will commoditise next and reposition your business before the crowd realises what's happening. Strategy is about movement, not marketing copy.

6. Leading through acceleration​

Wardley Mapping reframes the AI red ocean as a predictable stage of industrialisation, but today the stages blur:

StageCharacterStrategic focus
Genesis / CustomUnknown needs, creativity dominantExperiment, learn fast, explore
ProductGrowing market, feature raceStandardise, stabilise, prepare to scale
Commodity / UtilityHyper-competition, margin collapseAutomate, bundle, move up the value chain

AI drops new offerings into the market already halfway through their own commoditisation. To lead in that context:

  1. Map relentlessly. Keep situational awareness current so you can see where scarcity still exists.
  2. Move with evolution. Accept that components will keep sliding right and design the next play accordingly.
  3. Anchor power beyond novelty. Invest in distribution, ecosystems, inertia, and regulation-aware positioning.

7. The leadership takeaway​

AI makes software easy to build but hard to defend. Differentiation hasn't died, it has just moved. Leaders who understand Wardley evolution and the accelerating evolution of evolution itself will be able to sense where the advantage has relocated and move before their competitors can react. The goal is not to escape the red ocean, but to surf the accelerating tide while others are still looking at last year's map. Use LLM-driven competitor simulations to rehearse how your rivals might collapse your moat next, and then recalibrate your positioning with the readiness playbook in positioning for the AI age.

References​