Why Context Engineering Matters for AI Agents

Everyone’s suddenly talking about 𝗖𝗼𝗻𝘁𝗲𝘅𝘁 𝗘𝗻𝗴𝗶𝗻𝗲𝗲𝗿𝗶𝗻𝗴. Here’s why it matters. In the AI gold rush, most people focus on the LLMs. But in reality, context is the product. Context engineering is the emerging discipline of designing, assembling, and optimizing what you feed a LLM. It’s the art and science behind how RAG, agents, copilots, and AI apps actually deliver business value. It includes: - What information to surface (data selection, chunking, and formatting) - How to frame the user intent (prompt design, agent memory, instructions) - How to dynamically adapt to each interaction (tool use, grounding, policies) Think of it as the new software architecture but for AI reasoning. And just like traditional engineering disciplines, it’s becoming repeatable, measurable, and mission-critical. 💡The future isn’t just “prompt engineering.” It’s context engineering at scale; where the AI is only as good as the ecosystem of inputs it’s wired into.

Context engineering is increasingly the most critical component for building effective AI Agents in the enterprise right now. This will ultimately be the long pole in the tent for AI Agents adoption in most organizations. We need AI Agents that can deeply understand the context of the business process that they’re tied to. This means accessing the most important data for that workflow, using the appropriate tools at the right moment, having proper objectives and instructions, and understanding the domain that they’re in. Some of the big open items for anyone building enterprise agents are: * Narrow vs. General agents. The smaller the task, the easier it is to give the AI Agents the right context to be successful. But the smaller the task, the less value there will be. Finding the optimal task size for value generation will be an important factor for the next few years. * Getting data into an agent-ready system. Enterprise data is often fragmented between dozens or hundreds of systems, many of which are not prepared for a world of AI. Most companies will still need to modernize their data environments to get the full benefit of AI Agents. * Accessing the *right* data for the task is paramount. Even when you have data in a modern environment, getting access controls perfectly aligned to what the AI Agent is going to need access to is critical. Further, deciding what to do RAG on vs. just a general search vs. what to put fully into the context window will matter a ton per task. * Choosing what should be deterministic vs. non-deterministic. If you demand too much from the models, you’re likely to see some drop off in quality. Yet, if you have the model do too little, then you’re dramatically underutilizing what’s possible with AI. This of course is a moving target because the models themselves are improving at an accelerating rate. * The right user interface to get the AI Agents context deeply matters. Half of the problem for getting context to agents doesn’t look like an AI problem at all. It’s all about where the agents show up in the workflow and how the user interacts with them to provide them the context necessary to do the task. The race for the next few years in AI in the enterprise is to see who best to deliver the right context for any given workflow. This will determine the winners and losers in the AI race.

𝗗𝗲𝘀𝗶𝗴𝗻𝗶𝗻𝗴 𝗖𝗼𝗻𝘁𝗲𝘅𝘁-𝗔𝘄𝗮𝗿𝗲 𝗔𝗜 𝗔𝗴𝗲𝗻𝘁𝘀: 𝗧𝗵𝗲 𝟲 𝗗𝗶𝗺𝗲𝗻𝘀𝗶𝗼𝗻𝘀 𝗼𝗳 𝗖𝗼𝗻𝘁𝗲𝘅𝘁 Building AI agents isn’t just about fine-tuning prompts or plugging in APIs. The real differentiator lies in how effectively we design and manage context. Context defines the agent’s role, behavior, reasoning, and decision-making. Without it, even the best models act inconsistently. With it, agents become reliable, explainable, and enterprise-ready. Here are the 6 essential types of context for AI agents:  1. 𝗜𝗻𝘀𝘁𝗿𝘂𝗰𝘁𝗶𝗼𝗻𝘀 – Define the who, why, and how: • Role (persona, e.g., PM, coding assistant, researcher) • Objective (business value, outcomes, success criteria) • Requirements (steps, constraints, formats, conventions)  𝟮.𝗘𝘅𝗮𝗺𝗽𝗹𝗲𝘀 – Demonstrate desired (and undesired) patterns: • Behavior examples (step sequences, workflows) • Response examples (positive/negative outputs)  𝟯.𝗞𝗻𝗼𝘄𝗹𝗲𝗱𝗴𝗲 – Embed domain and system understanding: • External context (business model, strategy, systems) • Task context (workflows, procedures, structured data)  𝟰.𝗠𝗲𝗺𝗼𝗿𝘆 – Extend reasoning across time: • Short-term memory (chat history, state, reasoning steps) • Long-term memory (facts, episodic experiences, procedural instructions) 𝟱.𝗧𝗼𝗼𝗹𝘀 – Extend capability beyond training data: • Tool descriptions act as micro-prompts • Parameters and examples guide usage 𝟲.𝗧𝗼𝗼𝗹 𝗥𝗲𝘀𝘂𝗹𝘁𝘀 – Close the loop by feeding outputs back into reasoning: • Orchestration layers attach results • Enables agents to adapt dynamically 𝗪𝗵𝘆 𝗶𝘁 𝗺𝗮𝘁𝘁𝗲𝗿𝘀: By designing across all six dimensions, we move beyond “prompt engineering” into structured context engineering. This makes agents: • More autonomous • More explainable • Easier to scale across enterprise systems In practice, this framework underpins everything from agent orchestration protocols (MCP, A2A) to multi-agent architectures in production. Question for you: When building AI agents, which of these six contexts have you found most challenging to implement at scale?