Microsoft Work IQ: The Context Layer Your Enterprise AI Has Been Missing
And for mid-market organisations, this might be the most important AI infrastructure announcement of the year.
What Actually Is Work IQ?
Work IQ is the intelligence layer that sits beneath Microsoft 365 Copilot and any agents you build. Think of it as the persistent memory and contextual awareness that transforms generic AI into an AI that understands your organisation.
It consists of three interconnected components:
1. Data — Your work content: emails, files, meetings, chats, and documents. This isn't just storage—it's the codified knowledge of how work actually gets done in your organisation.
2. Memory — Your personal work patterns: your style preferences, habits, workflows, and relationships. Crucially, this goes beyond the org chart to capture what Microsoft calls your "work chart"—who you actually collaborate with, regardless of reporting lines.
3. Inference — The intelligence that connects data and memory to predict next actions, surface relevant insights, and recommend the right agent for each task. This is where the magic happens—connecting a mention of "Project Phoenix" in a Teams chat to the related OneDrive folder, relevant stakeholders, and historical context from similar projects.
The Broader IQ Stack
Work IQ doesn't exist in isolation. Microsoft has introduced a unified intelligence layer comprising three components:
- Work IQ: Contextual intelligence from Microsoft 365 (your productivity data)
- Fabric IQ: Business semantics from your analytical and operational data—connecting Power BI models, time-series data, and location-based information to business meaning
- Foundry IQ: A managed knowledge system that consolidates Work IQ, Fabric IQ, custom applications, and web data into a single retrieval endpoint for agents
This layered approach means your AI agents can understand not just what people are discussing in emails and meetings, but what it means in business terms—connecting operational conversations to actual customer records, orders, and business entities.
Why This Matters for Mid-Market Organisations
Here's where I want to get practical. Enterprise organisations have teams dedicated to building sophisticated AI infrastructure. But mid-market businesses—the 200-2,000 employee organisations that form the backbone of most economies—often struggle with a fundamental challenge: how do we get AI to understand our context without building custom integrations for everything?
Work IQ solves this elegantly. Microsoft has essentially pre-built the context layer that would take most organisations months or years to construct. When you build an agent using Copilot Studio or the Work IQ APIs, that agent can immediately:
- Understand who the user typically works with and what projects they're involved in
- Access relevant historical context from emails, files, and meetings
- Respect existing permissions, sensitivity labels, and compliance controls
- Learn and improve based on ongoing interactions
For mid-market IT leaders, this dramatically reduces the "cold start" problem that has plagued many AI implementations. You no longer need to manually wire together data from multiple sources or painstakingly program context for every bot you build.
How Mid-Market Organisations Should Prepare
If Work IQ sounds compelling, here's how to position your organisation for success:
1. Audit Your Microsoft 365 Data Hygiene
Work IQ's effectiveness depends entirely on the quality of your underlying data. If your SharePoint is a mess, your file naming is inconsistent, and your Teams channels are chaotic, Work IQ will simply surface that chaos more efficiently.
Action items:
- Review and update sensitivity labels in Microsoft Purview
- Establish (or enforce) file naming conventions
- Archive or remove outdated content that shouldn't inform AI decisions
- Ensure permissions accurately reflect who should access what
2. Invest in Your Semantic Layer
If you're using Power BI, you're already building the foundations for Fabric IQ. Your existing data modelling work becomes an "immediate accelerant" for AI agents.
Action items:
- Review and strengthen your Power BI semantic models
- Define clear business entities (customers, products, orders) that agents can reason about
- Consider how your analytical data connects to your operational systems
3. Start with Focused Use Cases
Don't try to boil the ocean. Identify 2-3 high-value workflows where contextual AI would make a significant difference:
- IT Helpdesk: An agent that understands which systems users work with, their recent tickets, and relevant knowledge base articles
- Sales enablement: Agents that can contextualise prospect outreach based on internal conversations and historical deals
- Project delivery: Copilot experiences that understand project history, stakeholders, and relevant documentation
4. Prepare for Agent Governance
Microsoft introduced Agent 365 alongside Work IQ—a governance and control plane for managing AI agents across your organisation. Mid-market organisations should establish governance frameworks before agent proliferation becomes unmanageable.
Consider:
- Who can create and deploy agents?
- How will you manage agent identities through Entra?
- What observability and audit requirements do you need?
- How will you handle agent lifecycle management?
5. Address the Skills Gap
Work IQ lowers the technical barrier to building contextual AI, but your team still needs to understand prompt engineering, agent design patterns, and AI governance principles. The Agent Factory program Microsoft announced includes tailored role-based training—take advantage of it.
What to Expect: A Realistic Timeline
Based on the Ignite announcements, here's what mid-market organisations should expect:
Available Now:
- Work IQ capabilities within Microsoft 365 Copilot
- Work IQ APIs for custom agent development (with M365 Copilot license or consumption billing)
- Agent Mode in Word, Excel, and PowerPoint
Coming Early 2026:
- Enhanced Copilot Chat with Agent Mode
- Copilot in Outlook with inbox and calendar understanding
Frontier Program (Preview):
- Multi-tab reasoning in Edge for Business
- Advanced Agent 365 governance features
For mid-market organisations, my recommendation is to begin preparation now while these capabilities mature. Focus on data hygiene and governance frameworks today so you're ready to implement when features move to general availability.
The Bigger Picture
Work IQ represents something I've been advocating for in enterprise AI: the shift from "AI as a tool" to "AI that understands context." Too many organisations have deployed AI assistants that require users to constantly explain background, define acronyms, and provide context that a knowledgeable colleague would already know.
Microsoft's investment in a unified intelligence layer suggests they understand this limitation. Work IQ isn't just about making Copilot smarter—it's about creating the foundational infrastructure that allows any AI agent to operate with genuine organisational awareness.
For mid-market organisations evaluating AI investments, this is significant. Rather than building custom context layers, you can leverage Microsoft's platform investment and focus your resources on designing workflows and developing AI literacy across your teams.
The context gap is closing. The question is: will your organisation be ready when it does?
Have you started exploring Work IQ or the broader Microsoft IQ stack? I'd love to hear how mid-market organisations are approaching this new capability. Connect with me or share your experiences in the comments.
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