How Can AI Fundamentally Transform Businesses

Most companies today are using AI, but the difference is how they use it, according to an IDC study commissioned by Microsoft. More than 4,000 business leaders responsible for AI decisions answered questions to reveal how AI can fundamentally transform their business.

The findings reveal 68% of these companies are using AI today, but the real difference lies in how they’re using it. Frontier Firms, the ones leading in AI Transformation, report they are achieving returns that are three times higher than slow adopters. Their success goes beyond efficiency and productivity at scale, driving growth, expansion, and industry leadership in a new AI-powered economy. Based on the IDC study, Microsoft has identified five key lessons learned in becoming a Frontier Firm and how organizations can transform their business with AI.

1: EXPANDING AI IMPACT ACROSS EVERY BUSINESS FUNCTION

On average, Frontier Firms are using AI across seven business functions. Over 70% are using AI in customer service, marketing, IT, product development, and cybersecurity. These functions benefit from AI’s ability to automate workflows, generate content, and detect anomalies in real time. This broad adoption is translating into measurable business impact: Frontier Firms report better outcomes at a rate that is 4X greater than slow adopters across brand differentiation (87%), cost efficiency (86%), top-line growth (88%), and customer experience (85%).

2: UNLOCKING INDUSTRY-SPECIFIC VALUE

While many organizations start their AI journey with personal productivity gains like automating tasks and improving efficiency, Frontier Firms are moving further, deploying AI for strategic, industry-specific applications. According to the study, 67% are monetizing industry-specific AI use cases to boost revenue. Industries at the forefront of this transformation include financial services, healthcare, and manufacturing. Each is finding powerful, practical ways to apply AI to its most complex challenges. In financial services, organizations are strengthening fraud detection, accelerating transaction reconciliation, and elevating customer support. In healthcare, it helps clinicians generate accurate documentation, assist in diagnostics, and deliver more personalized care. In manufacturing, AI is driving predictive maintenance, optimizing production schedules, and automating quality inspections.

3: BUILDING CUSTOM AI SOLUTIONS FOR COMPETITIVE ADVANTAGE

Today, 58% of Frontier Firms are using custom AI solutions. Custom AI solutions allow businesses to embed proprietary knowledge, tone, and compliance into every interaction. They can be fine-tuned on proprietary data or industry-specific knowledge, enabling higher accuracy in predictions or content generation and better alignment with business goals and compliance needs. Within the next 24 months, 77% of Frontier Firms plan to use custom AI solutions. This reflects a growing trend that AI leaders are layering in deeper strategic integrations of AI across their business.

4: AGENTIC AI: THE NEW DIFFERENTIATOR FOR BUSINESS LEADERS

Agentic AI — systems that can reason, plan, and act with human guidance — is fast becoming the next defining capability of Frontier organizations. In the next two years, IDC estimates the number of companies using agentic AI will triple. Leaders today face a familiar challenge — teams are operating at full capacity, yet the demand for innovation and impact continues to grow. That’s where AI agents come in. In finance, they can surface real-time insights, provide policy guidance, review deal documents, and assist in sourcing suppliers. In sales, agents are becoming always-on teammates — building pipelines, unifying insights across CRM systems, meetings, emails, and the web, and helping sellers qualify leads and draft personalized outreach. In customer service, AI agents can manage cases, maintain knowledge accuracy, and interpret customer intent.

5: AI BUDGETS ARE GROWING AND SO IS THE TEAM BEHIND THEM

71% of respondents plan to increase their AI budgets, with funding coming from IT and non-IT sources. These investments are no longer confined to the IT department or the Chief Digital Officer’s office. To truly unlock AI’s transformational potential, it requires everyone collaborating across functions to drive innovation, adoption, and impact: 34% of respondents are adding net new investment, 24% are repurposing existing IT budgets, and 13% are reallocating funds from non-IT areas such as operations, HR, or marketing. This diversified funding strategy signals that AI is no longer viewed as a niche technology — it’s becoming a core enabler of enterprise-wide transformation.

The opportunity to demand more from AI is now. Among organizations surveyed, 22% are Frontier Firms, realizing measurable impact and moving with speed, while 39% risk falling behind. Many are navigating challenges around security, privacy, governance, and cost, as well as ethical considerations, integration complexity, and scaling from pilot to production. To stay competitive, leaders should act now and embrace AI not as an experiment but as a strategic imperative for growth. Success starts with investment, governance, and organizational readiness. Having a robust infrastructure that is secure, reliable, and scalable to support AI initiatives is critical. The emergence of Frontier Firms shows that customized AI deployment and responsible oversight can drive ROI and innovation.