Meet your new co-worker: AI at work in 2025

Microsoft’s 2025 Work Trend Index Annual Report, “The Year the Frontier Firm Is Born,” delivers a bold vision for how AI will reshape the very core of work. The central idea is that the most successful companies of the next decade, called Frontier Firms, will be defined by how seamlessly they integrate AI agents as co-workers and how they reimagine their operations, leadership, and employee contributions.

Here are eight highlights from the report:

1. Frontier Firms make AI true collaborators.
   The Frontier Firm is a new organizational model in which AI agents are embedded into day-to-day operations and decision-making. These firms build AI-human teams that drive productivity, innovation, and speed. Microsoft defines Frontier Firms as those that scale their impact by making AI agents core collaborators across departments.
2. Companies go through three stages to become a Frontier Firm.
   Microsoft outlines a three-stage maturity model:
   1. AI experimentation: Organizations begin by adopting tools like Copilot, but use is fragmented.
   2. AI integration: Companies deploy AI in structured ways across functions like finance, marketing, and HR, embedding it into workflows.
   3. Agent ecosystems: This is where true Frontier Firms emerge. Employees work alongside AI agents that take on tasks, surface insights, and even coordinate with other agents — freeing humans for higher-order thinking.
3. Human-agent teams will upend org charts.
   The traditional pyramid-shaped hierarchy no longer fits. In a Frontier Firm, the workplace is flatter, faster, and more fluid. Employees delegate tasks to AI agents that operate in parallel, accelerating outcomes. As AI becomes more autonomous, the line between human manager and digital executor blurs, demanding new forms of oversight, orchestration, and trust.
4. Every employee will become a boss.
   With agents acting as “teammates,” every employee becomes an agent boss who delegates, monitors, and refines the work done by AI. For that reason, organizations must teach employees how to prompt, supervise, and collaborate with agents.
5. While Copilot use is mainstream, deeper change is underway.
   While millions have adopted Microsoft Copilot, they use it largely for tactical activities, such as writing emails, summarizing documents, or generating content. The next evolution involves embedding Copilot into daily systems, unlocking compound productivity gains across the enterprise.
6. AI is redefining skill sets.
   Beyond automating tasks, AI shifts what skills matter most. Frontier Firms prioritize judgment, strategy, creativity, and emotional intelligence, while agents handle data processing, coordination, and repetitive execution. This shift demands new leadership models and performance metrics.
7. Leaders must build the new workforce.
   Successful leaders will rethink organizational design for human-agent collaboration to include governance models for AI oversight, agent lifecycle management, and incentives that reward collaboration with AI, not just solo performance.
8. Trust and transparency are not negotiable.
   Employees will embrace AI only when they understand how it works, when to trust it, and where it is fallible. Frontier Firms are investing in responsible AI practices, clear guardrails, and cross-functional teams that blend IT, HR, and legal to manage risk while unlocking innovation.

Three Strategic Priorities for Leaders

Microsoft closes the report with a road map for action. Here’s how companies can move forward:

• Invest in agent fluency: Teach every employee how to work with, manage, and optimize AI agents, because in the new world, every employee is an Agent Boss.
• Redesign workflows, not just roles: AI-human collaboration requires reinventing processes. Look beyond productivity and focus on outcomes, speed, and scalability.
• Build for trust and scale: Embed responsible AI principles into daily operations and prepare for governance structures that evolve alongside agent capabilities.

The future of CPG and retail will not be AI versus people; it will be AI with people, and the winners will be those who know how to lead both.