With the rise of agentic AI (artificial intelligence), it is time to gear up for a new era of work—one that will exist in an intelligent economy and one where Frontier Firms will guide the way.
But first, let’s back up to really take a step forward. Let’s better understand where we have been. Historically, in many industries, the workforce has had to search for information across many disparate systems and have had to work across siloed teams. At the same time, many leaders have had to rely on their own expertise and judgment to make decisions with incomplete data.
This is precisely the conversation I had on a recent episode of The Peggy Smedley Show with Yury Gomez, global commercial head for supply chain manufacturing and mobility industries, Microsoft. As she points out, with the challenges that exist in today’s geopolitical environment, these ways of working represent big risk for companies that need to be faster than ever before.
Agentic AI—an AI-powered system that can reason, plan, and act to complete tasks or entire workflows autonomously, with human oversight—can help guide these business processes and decisions in the future. Enter Frontier Firms.
What Is a Frontier Firm?
The Frontier Firm was born earlier this year. Microsoft analyzed survey data from 31,000 workers across 31 countries, LinkedIn labor market trends, and trillions of Microsoft 365 productivity signals. The data and insights point to the emergence of an entirely new organization, a Frontier Firm.
What Microsoft discovered is a Frontier Firm is powered by a hybrid team of humans and agents, and they can scale rapidly, operate with agility, and generate faster value.
“Frontier Firm organizations recognize the power of AI and agentic AI as key technological enablers to deliver seamless orchestration across critical workloads, whether that is in procurement, production planning, demand planning, forecasting, or logistics,” explains Gomez.
Microsoft suggests these firms are already taking shape and within the next 2-5 years, every organization will be on their own journey to becoming a Frontier Firm.
Here is what the data shows us:
- 82% of leaders say this is a pivotal year to rethink key aspects of strategy and operations.
- 81% say they expect agents to be moderately or extensively integrated into their company’s AI strategy in the next 12–18 months.
- 53% of leaders say productivity must increase, but 80% of the global workforce say they’re lacking enough time or energy to do their work.
- 24% of leaders say their companies have already deployed AI organization-wide.
- 12% remain in pilot mode.
Perhaps, most importantly, Frontier Firms recognize the need to invest in employees, and as such, people and agentic AI will work together in this new era of work. This evolution will happen in 3 key phases, according to Microsoft.
- Phase 1: human with assistant
- Phase 2: human-agent teams
- Phase 3: human-led, agent-operated
However, Gomez urges Frontier Firms to adopt AI at scale and move beyond pilots. “That is a critical piece to remember. They are not just optimizing; they are recalibrating how work gets done.”
Supply Chain Case Studies
Let’s narrow in on one area for today: supply chain. Supply chain is one of the more critical areas in organizations, where at least 25% or more of the total number of people employed touch everyday processes and decisions, according to Gomez of Microsoft. The challenge is many supply chain leaders and associates have had to rely on their own expertise and judgement to make decisions with incomplete data.
Now this is all beginning to change with AI and agentic AI, which can help businesses become more agile by automating workflows and enabling faster decision making in a challenging geopolitical environment. Let’s consider a few case studies that Gomez shared on the recent podcast of The Peggy Smedley Show.
U.S. Venture set out to modernize operations and migrate data from warehouses. Through Microsoft Dynamics 365 and agentic AI, it was able to deliver 60% reduction in reconciliation time, 40% reduction in order processing time, and 100% accuracy in inventory scanning. Most importantly, it was able to build resiliency in transparency and supply chains.
Outdoor power and construction equipment company Husqvarna Group is redefining operations with the AI factory companion, which is a generative AI copilot, powered by Microsoft Azure. It is designed to accelerate equipment troubleshooting across its global operation network. The solution tackles a persist operational challenge, which is how to reduce downtime and scale expert knowledge across all shifts, all sites, and all experience levels. The factory companion has transformed how the company operates all of its factories, empowering every technician with instant intelligent guidance. Technician resolution times have dropped by more than 60% in some case scenarios. Data deployment speed improved by 98% and infrastructure imaging costs were reduced by 50%.
Dow processes about 4,000 daily shipments, leading to potential overpayments. Many times, these charges are buried in hundreds of thousands of invoices. Dow has spent several billion dollars annually on outbound shipping. The company decided to explore how copilot and AI agents can be used to automate the shipping and voice analysis process and optimize freight. The company is achieving multiple millions of dollars in cost savings in the first year. Even 1% improvement in the freight optimization space can drive significant value for business and drive substantial cost efficiencies.
What’s Next
The next leap will be a big one, and Microsoft has a few steps to get started on the path forward for Frontier Firms.
- First, hire your first digital employees. Make sure to define their roles.
- Second, set your human-agent ratio. Consider where customers expect a human touch.
- Third, get to broad scale fast. It is time for broad adoption across an organization.
“We are pushing the boundaries of innovation and helping organizations, not only adopt technology, but also redefine how they operate by continuously adapting and turning AI and agentic AI into a driver for decisions, processes, and growth at every level,” says Gomez.
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