Only 9% of leaders are running Frontier Firms: How to stay ahead of the divide

According to Microsoft’s 2025 Work Trend Index Annual Report, Frontier Firms are defined by 5 core traits, including active use of AI agents and AI maturity.

Only 9% of leaders say that they are running a Frontier Firm—and that number isn’t a reflection of ambition or investment. It’s a reflection of how difficult true transformation really is.

Leaders across industries ask the same question: “We’ve invested in AI, we’ve run the pilots, so why aren’t we further along?” The honest answer is that investment and adoption aren’t enough on their own.

The organizations pulling ahead aren’t necessarily spending more, they’re making different decisions about how their organizations are designed to work.

Frontier Firms operate around on demand or proactive intelligence, powered by hybrid teams of humans and AI agents to enable faster scale, greater agility and accelerated value creation. With only 9% of leaders saying their organizations meet these criteria, there is a growing divide of long-term competitiveness as Frontier Firm capabilities become table stakes for an AI-driven economy.

The risks for organizations that don’t evolve with the landscape continue to increase. As firms who embrace AI and agent-led transformation operate more efficiently, those firms who don’t will fall further behind. 

What most don’t realize is that leadership is a crucial factor to a Frontier Firm’s success. Leaders make deliberate investments in organizational strategy, data quality, security, compliance and governance. These choices might raise short  term costs or slow early rollouts, but they enable long term success. 

The frontier is not static; it evolves as the 9% of leaders meeting frontier criteria continues to shift. The divide widens not from a lack of tools, but from delayed transformation. Frontier status is earned and re-earned through continual reimagination of how work, decisions and value creation evolve alongside AI.

AI adoption has been expanding rapidly over the past few years, moving from experimentation to enterprise impact. Its evolution can be observed in three distinct phases. 

1.    Human with assistant: Starting out, AI would augment individual productivity. Employees would use assistants to draft content, analyze data and automate simple tasks. The productive gains are largely personalized and local. Most of our clients we work with have started at this point, where employees are using AI to increase their productivity, but the results are often staggered and siloed.

2.    Human-agent teams: Then, work transferred to being shared alongside humans and agents. They don’t just respond to prompts but can now coordinate and execute multistep processes. Humans can now shape and orchestrate the work. This development represents a significant leap from the human-with-assistant model, where agents acted more autonomously, but it still has potential downfalls.

3.    Human-led, agent-operated: Now, leaders are setting the direction, intent and guardrails. This point is where Frontier Firms start to truly emerge. AI agents are executing processes and operations at scale, speeding up decision-making and propelling the pace of innovation. 

From our perspective, clients who meet the Frontier Firm capabilities see increased productivity and lower costs, adding significant value to employees and stakeholders. This is where all leaders should aim to be with their organizations.

Many organizations recognize the importance of evolving into a Frontier Firm, yet far fewer have clarity on the capabilities that transformation truly requires. There is no single initiative; progress at the frontier is driven by thoughtful layering of strategy, technology and operating model change.

While every journey looks different, a few foundational capabilities consistently set Frontier Firms apart.

No single AI solution or tool can make an organization a Frontier Firm. They must start with the big picture. Success begins by building a strong foundation that enables a long-term AI and agentic-led vision. This means firms must design with scale, security, resilience and compliance in mind. 

Incremental upgrades to legacy environments might deliver short term gains, but might also lead to costly backtracking later. A more intentional architectural approach enables organizations to move faster with fewer reinventions along the way. 

In our work with clients, the organizations that are at the frontier are rarely those companies who started with the most tools. Instead, they are the ones who were most deliberate about the foundation they built first.

If data isn’t ready to move, then your organization isn’t ready to scale. Frontier Firms should treat data as an input that must be of the highest quality possible so it can become a trusted, governed enterprise asset that fuels intelligent systems. Organizations must be confident that their systems and data are compliant, secure, observable and accessible by those who need them. Time and again, we’ve seen data readiness become the hidden bottleneck because cross-functional commitment is harder to sustain than any technology decision.

Starting with the most tools rarely leads to success. In fact, most enterprises suffer from an excess of multivendor and multidata format sprawl. By simplifying procurement and unifying data into a smaller number of platforms, customers can accelerate their Frontier Firm journey. They can also improve their cost and efficiency savings while improving accessibility to data and systems across internal organizations. With the immediate dollars saved and efficiencies realized, clients can more quickly reinvest the savings to advance Frontier Firm initiatives.

Frontier transformation doesn’t happen in silos. Leading organizations move beyond isolated pilots and proofs of concept to embed AI across the enterprise. This means integrating AI into workflows, decision-making and business processes—not just technical tasks. When AI is operationalized across functions, the entire organization advances together, rather than being constrained by disconnected progress. When clients plateau after a successful pilot doesn’t scale, it’s usually not because the technology failed. It’s because the change management, incentives and workflow integration weren’t built for the whole organization from the start.

It’s worth emphasizing that the 9% statistic isn’t a fixed endpoint. It’s a living indicator that will continue to shift as models mature and the real value of agentic AI is realized.

Organizations don’t need to wait for that number to change to act. By investing now in the right foundational capabilities, leaders can position their firms to make meaningful progress at the frontier. If you haven’t started yet, now is the moment to do so.

Partnership can play a critical role in the transformation journey. Together, IBM and Microsoft help organizations design, build and operate the capabilities required to operate at the frontier. Organizations can stay competitive as the landscape shifts from cloud and modernization to responsible AI governance

Frontier Firms might be rare today, but with the right leadership mindset, architectural courage and trusted partnerships, new growth and capabilities are well within reach.

 IBM-Microsoft summit puts clients on the path to becoming a Frontier Firm