Key summary:

Across markets, stronger margins can coexist with weaker demand and lower headcount, making headline growth a less reliable measure of how broadly value is being created.
As efficiency and productivity become easier to replicate, value increasingly depends on deliberately creating what others cannot easily reproduce, and where capital, capability and attention are concentrated.
Watchmaking provides a concrete historical example of the current interplay between value and efficiency: Waltham watchmaking in America, industrialised faster, but Switzerland ultimately retained the stronger global position by competing on more than efficiency alone.
Value is deliberately built, and becomes clear when a business connects what it offers with how it is positioned, who it is for and how the organisation is structured to deliver it in its chosen market.
More companies now have to decide not only how to differentiate, but what market they want buyers to understand they belong to in the first place, as AI and wider tech capabilities are enabling new category creation.

A geopolitics of weaker constraint: From expansion to yield

The last decade brought with it unprecedented change which weakened the practical constraints holding both politics, and the economy, together on the world stage. These constraints belonged to an older rule book, one which institutional checks made power more predictable, accountable, and economic behaviour more bounded. This ecosystem helped shape how power was exercised and how value was created, supporting an environment in which economies could grow, enterprise could flourish and, most importantly, more people could participate in and benefit from that growth.

Within this model, the prior dominant model of corporate expansion rested on growth being visibly associated with scale; if a company wanted to create substantially more economic value, it generally had to involve more budget and people in doing so. However, today the focus is expanding from simply enlarging the system, to making every part of it yield more, from: covering revenue per customer, output per employee, margin per transaction and lifetime value per account.

Here the post-pandemic inflation period offers a clear example of how companies were able to protect profitability, even when the underlying conditions of growth became less stable. An IMF analysis of the Euro area found that profits accounted for 45% of price rises between the beginning of 2022 and the first quarter of 2023. Whilst The European Central Bank found a similar pattern, with company profits contributing significantly to inflationary pressures during the surge.

There was also a long-running rise in corporate mark-ups across advanced economies, concentrated particularly among the most dominant firms, while the pattern across emerging economies has been much more uneven.

In the United States, Federal Reserve research documented rising market concentration, higher profit margins and a growing share of national income going to profits. Whilst in the Middle East, listed companies have held more market power than their US counterparts, although that has been declining over time. Finally, across sub-Saharan Africa, companies in less competitive markets are often able to hold on to higher margins for longer, with weaker competition linked to lower investment and a smaller share of economic output going to labour.

Whilst many economic factors contribute to these market conditions, there’s an implicit pattern emerging: where firms have had greater pricing power or faced weaker competitive pressure, weaker demand did not always translate directly into weaker margins. This has given firms more room to protect profitability, but with the consequence of how economic gains are shared between companies, workers and consumers.

The British grocery market illustrates this imbalance more clearly as not every part of a sector has the same ability to protect profitability when demand weakens. The Competition and Markets Authority found that supermarket profitability fell as rising costs outpaced revenue growth. However, earlier in the supply chain, some branded suppliers were able to raise prices by more than their costs had increased, even as consumers switched to cheaper alternatives and sales volumes came under pressure.

A company, it turns out, can sell less and still improve the economics of what remains.

In most cases this could be considered as rational management responding to rising costs, which inevitably leads to weaker demand as a result. However, the aggregate effect results in businesses being able to sustain a larger share of their economics through fewer customers; the amount of participation required to generate a given level of corporate value begins to fall, and the same logic that once made mass-market ubiquity the only path to scale, no longer holds. Some of the most valuable businesses today generate extraordinary economics from comparatively narrow groups of customers.

AI brings the same economics inside the company

This same weakening of the relationship between participation and valuable output, is now appearing inside the company where AI is beginning to separate productive capacity from the amount of labour required to create it.

The first wave of corporate AI adoption has focused largely on productivity; a 2025 field experiment in the public sector found that generative AI improved completion time by 34%, though the answer quality by 17% on document-based tasks. However, on data-analysis tasks it reduced quality by 12% and produced no significant time saving.

A separate 2025 randomised trial of experienced software developers found that AI tools actually made them 19% slower, even though the developers believed they had become faster. And a 2025 OECD review concludes that the gains from generative AI varied substantially by task, worker and organisational context.

The emerging picture is therefore more complicated than a simple productivity vs valuable output story: AI can increase capacity, but whether that capacity becomes useful economic value, and whether that value is being captured, depends on what is being produced, its quality and how the surrounding organisation is designed to use it.

This traditional relationship between labour and output is heavily under pressure, and the strategic consequence isn't simply that companies will produce more which we're already a witness to; it's that increased productive capacity is becoming much easier to obtain for everyone, and not always with the desired output.

Once every reasonably well-capitalised competitor can increase output and automate more of the work required to produce it, that capacity stops being an advantage in itself. Instead, the advantage moves to how effectively it's converted into commercial value.

Why productive capacity does not guarantee market leadership: Lessons from Swiss watch making

Whilst History is never linear, watchmaking offers an unusually clear, and rather riveting, historical example of what happens when efficiency becomes easier to copy than the value built around it.

By the mid-19th century, Switzerland was already the centre of global watchmaking, built on centuries of specialist craft and a decentralised network of workshops across Geneva and the Jura. Whilst its strength lay in expertise, precision and variety, the system itself was fragmented.

Into that market came Waltham, one of the first American watchmakers to apply mechanised production and interchangeable parts to watchmaking on an industrial scale. Its manufacturing system represented a genuine breakthrough, allowing watches to be produced at a pace which traditional Swiss workshops could not match.

The commercial shock was severe, but not attributable to industrialisation alone. Swiss watch exports to the United States fell sharply by nearly three quarters in the 1870s, with contemporary observers initially blaming the aftermath of the American Civil War and the economic downturn that followed the railway boom. It was only later, particularly around the 1876 Centennial Exhibition, that the scale of American manufacturing became impossible to ignore. The decline was therefore both macroeconomic and competitive: weaker demand damaged the market, while Waltham exposed a structural weakness in the Swiss production model that the downturn made harder to dismiss.

This left Watchmakers with a predicament about the transformation happening all around them; to fully accept industrialisation would mean diluting their craft. But to not industrialise at all would mean getting left behind.

The Swiss eventually started to selectively incorporate parts of the industrialisation process that strengthened the product, but without compromising the basis of its value. Manufacturers adopted more mechanisation, greater standardisation and new forms of organisation which improved reliability and scale. Whilst continuing to compete on the elements that mass production could not easily replicate or dilute: precision, finishing, technical specialisation, craftsmanship and, increasingly, reputation.

Over time, this recalibration widened the competitive gap between Swiss and American watchmaking, and speed became a baseline requirement rather than the basis of advantage; they learned from their competitors without allowing efficiency to become the entire basis of competition.

Today, the original mass-production operation of Waltham no longer exists as the historic watch manufacturer it once was. Whilst Swiss houses occupy some of the most valuable positions in global watchmaking: Rolex generates billions of francs from roughly a million watches a year, while Audemars Piguet generates billions from only tens of thousands.

The same choice facing Swiss watchmakers in the 1870s is facing companies now, with one important similarity: they too are being asked to make structural decisions amidst uncertainty while History is still unfolding, some which are temporary and others which will permanently alter the basis of competition.

What is value, and what's worth scaling

Value was once easily defined by the bottom line. But recent market changes are proving that value was never, in fact, in the numbers alone.

Value is forged, not automated. Building deliberately means identifying the gaps in a market, and it's in those gaps that differentiation gets woven into through more subtle capabilities to help formulate a precise strategy such as: positioning, sequencing and hierarchy, into a single end-to-end value chain.

When execution is automated and scaled, it's precisely those gaps which are overlooked, and those nuances that get discarded first.

This is the very paradox of the current economy which we're seeing unfold in real time: our shared capabilities have enabled both strategy and execution to be easily replicated, and yet profitable outlooks remain unpredictable.

The companies that understand this are starting to spend more time discerning which activity will influence enterprise value, so the numbers, and the clients speak for themselves. Because once ‘more’ is no longer the obvious route to growth, leadership faces a harder decision than any spreadsheet can answer:

What, exactly, is worth building and scaling?

Because creating value, and then being able to capture it, are not the same thing.