The most valuable competitive position is not owning the solution. It is owning the definition of the problem.
When every business can execute identically, the winner is the one that owns the problem.
Andrea Colantuono made an observation that should trouble every operating partner in private equity: when a market is too heterogeneous, we actually perceive it as homogeneous. Too much difference is like no difference.
The shampoo aisle. Thousands of options. All different. All the same. Volumising, smoothing, clarifying, strengthening, moisturising, colour-protecting, curl-defining, frizz-taming. Each product occupies a different functional position. Each one looks, from three feet away, identical to every other. Differentiation has collapsed into perceptual uniformity.
This is not a retail problem. It is a market structure problem. And AI is about to accelerate it across every sector PE operates in.
When every business in a sector has access to the same operational efficiency, the same customer service quality, the same analytical capability, the same content production, the same financial modelling, the functional differences between competitors shrink toward zero. The market becomes the shampoo aisle. And in the shampoo aisle, nobody wins.
The elevator problem
Most businesses respond to convergence by trying harder to differentiate. Better product. Faster service. Lower price. More features. This is the instinct, and it is wrong. Not because these things lack value, but because they are replicable. Any improvement that can be copied within a product cycle is not a source of sustained advantage. It is a cost of entry.
The solution is not better differentiation. It is problem ownership. Brand the problem, not the solution. When you reframe the problem in your terms, you de-position every competitor still solving the old problem. You do not need to be different. You need to be right about what the problem actually is.
The canonical reframe: mid-twentieth century, building occupants complained that lifts were too slow. Engineers were hired to make lifts faster. The work was expensive and the improvements marginal. Then someone reframed: the problem is not speed. It is the perception of waiting time. Solution: mirrors. Cheap. Effective. Transformative. Not because it solved the stated problem but because it identified the real one.
Everyone knows this story. Almost nobody applies the principle to their own business.
Most businesses are trying to make the lift faster. They are optimising the solution when the real opportunity is reframing the problem. The business that correctly identifies what the customer actually struggles with owns a territory that no amount of operational improvement can invade.
In wine, the industry assumes the problem is too much choice. Every subscription, app, and algorithm tries to reduce choice. The real problem is too little meaning. Consumers do not need fewer options. They need a reason why any given option matters to them specifically. The business that owns the meaning problem owns the category. Everyone else is competing to make the lift faster.
In hospitality, a consultant spent ten years helping independent hotels with dynamic pricing. The real problem was not pricing. It was that independent hotels are not independent at all: dependent on Booking.com and Airbnb for distribution, reviews, visibility, and survival. Reframing the problem from "how do we price better" to "how do we reduce platform dependency" opened a wider solution set, and every client said yes immediately.
In legal services, firms are competing on speed of document review. The real problem clients face is not slow legal work. It is uncertainty about legal risk. The firm that owns the uncertainty problem retains pricing power when document review costs converge to zero. Everyone else becomes a commodity processing centre with diminishing margins.
The epistemology of brand
Matteo Fattorini's framework offers a useful lens for understanding why problem ownership creates durable moats. There are three types of claim a business can make, and most businesses confuse them.
Empirical claims. "Our product is faster. Our service is cheaper. Our accuracy is higher." These claims are verifiable. They are also replicable. If your competitive advantage rests on an empirical claim, any competitor with equivalent resources can match it. AI accelerates this: what took a competitor two years to replicate now takes six months. Empirical advantages are real but transient.
Procedural claims. "We are certified. We are compliant. We are accredited." These claims provide trust but not meaning. They tell the customer that you meet a standard. They do not tell the customer why your standard matters more than anyone else's. Procedural claims are necessary but insufficient. They are the cost of playing, not the reason for winning.
Meaning-based claims. "We exist because this problem matters and nobody else sees it the way we do." These claims must be believed. They are not falsifiable. They are not replicable by a competitor who can simply invest more. They are the basis of brand moats that survive market convergence, competitive pressure, and technological disruption.
The insight for PE is this: most portfolio companies have strong empirical claims and adequate procedural claims. Almost none have articulated a meaning-based claim. They can tell you what they do and how well they do it. They cannot tell you, in a single sentence, what problem they exist to solve and why their perspective on that problem is uniquely right.
That is the gap. And in a market where AI commoditises the empirical and automates the procedural, the meaning-based claim is the last remaining source of pricing power.
Consider the difference. "We review contracts 40% faster than the market average" is an empirical claim. It is defensible today and worthless in 18 months when every competitor has the same AI tooling. "We exist to eliminate legal uncertainty for growing businesses" is a meaning-based claim. It cannot be copied because it is not a capability. It is a commitment, a perspective, a promise about what matters. The competitor who tries to copy it sounds hollow because they did not originate the insight. The originator owns the territory.
Specificity, not specialisation
Colantuono draws a further distinction that matters for PE value creation. Specialisation is narrow scope. Specificity is clear problem ownership with wide solution space.
A specialist says: "I do dynamic pricing for hotels." The scope is narrow. The solution is defined. And the specialist is vulnerable to any technology that automates dynamic pricing, because the value proposition is tied to a method, not a problem.
A specific business says: "I solve hotel independence from platform dependency." The problem is clear. The solution space is wide: pricing, branding, direct booking technology, guest data ownership, loyalty architecture, and a complete ecosystem of tools and strategies that address the underlying dependency. Specific about the problem. Expansive about the solution. The market is larger, the relationship is deeper, and the moat is wider because the customer is buying a worldview, not a service.
Applied to PE portfolio companies, this distinction should reshape how operating partners think about brand strategy. The value creation plan should identify not what the portfolio company does differently but what problem it owns. This is a brand strategy decision, not a marketing decision. It determines product development, hiring, pricing, M&A targeting, and the exit narrative.
The diagnostic question for every operating partner: can you state, in one sentence, the problem your portfolio company owns that no competitor has claimed?
If the answer is no, the brand is not defensible. If the answer references features, capabilities, or operational advantages, the brand sits below the automation line. If the answer references a problem that customers recognise as true and unaddressed, the brand sits above it and occupies territory that no amount of operational investment can invade.
The last moat
AI is converging execution. Markets are converging functionally. The remaining source of divergence is meaning. And meaning starts with the problem.
The business that names the real problem, that reframes the category around it, that builds product and culture and narrative around that reframe, creates a moat that no amount of operational efficiency can replicate. The competitor who tries to follow has to adopt your framing, which validates your position. The competitor who ignores it is solving the old problem while the market moves toward the new one.
Brand is not a logo. It is not an identity system. It is not a tone of voice document gathering dust on a shared drive. Brand is the act of making a business mean something specific to the people it serves. In a world where AI makes everything else identical, meaning is the last moat.
The PE firms that understand this will build portfolio companies that buyers pay a premium for. Not because the operations are excellent (everyone's will be) but because the brand owns a problem that customers recognise, trust, and are willing to pay for. The firms that do not will find themselves selling well-run businesses that nobody can distinguish from the one next door.