This article originally appeared in InnoLead's Pointers series.
What do business leaders and fortune tellers have in common? In hindsight, the most successful ones look really, really smart. Pick your favorite iconic story from this list:
- Netflix’s evolution toward streaming
- IBM’s reinvention as a technology services company
- The 2004 Red Sox shaking off the Curse of the Bambino
In each story, it’s easy to conclude that visionary, brilliant leaders were able to read the tea leaves, make all the right choices, and navigate uncertainty to an incredible outcome.
I’m not here to disagree with the premise that Reed Hastings, Lou Gerstner, and Theo Epstein each demonstrated exceptional smarts. But intelligence alone is not enough to meaningfully change the trajectory of a big organization.
Executing such a significant strategic shift in a large organization is far more difficult than just coming up with the smartest answer. It requires understanding and maneuvering all of the incentives, motivations, and capabilities of the myriad stakeholders both inside and outside your organization.
The same complex network of people, interests, capabilities, and assets that allowed you to accomplish what you have in the past can turn into a labyrinthine puzzle to manage as you prepare for the future.
This means transformation is far more than an intellectual riddle. It’s also a complex and profoundly human game of trust, tribe, and politics. So, what does this mean for executives working in a decade where generative AI is threatening to commoditize intelligence? It’s a mixed bag.
- Good news: Emerging AI isn’t coming for the hardest part of your job: steering the ship in a new direction.
- Bad news: Emerging AI isn’t going to make the hardest part of your job easier in any meaningful way.
To unlock forms of transformation that are next-to-impossible within the confines of a corporation, don’t just try to outsmart the Innovator’s Dilemma. Go around it by building and launching truly independent ventures.
The Limits of Leveraging LLMs at the Executive Level
We don’t need to rehash the state of the GenAI landscape here.
We all know about (and, hopefully by this point, are using) major LLM tools like ChatGPT, Claude, and Perplexity to streamline and speed up our day-to-day work. These LLMs have captured our imagination by imitating human intelligence (or at least human facility with the written word) with startling accuracy.
It’s easy enough to spend a half hour in ‘conversation’ with an LLM and feel like you are talking to a very smart person — one not just with an encyclopedia of knowledge at their fingertips, but also a real talent for making compelling arguments with that knowledge.
Today’s LLMs can capture context, tap into examples, and frame options as well as a talented, junior-level strategy consultant, and they are only going to get better at the task. It’s perhaps not surprising to hear more and more frequent predictions that gen AI is going to mark the undoing of the strategy consulting profession.
While there’s likely some truth to this prediction, it also runs a risk of fundamentally misunderstanding how organizations and their leaders make decisions.
In practice, this process is surprisingly human: Ideas are socialized, discussed, and debated. Personal career risk and opportunity can be as important as the good of the enterprise, and decision-making processes are never as straightforward as even the most carefully documented RACI chart.
You’ll note that none of these steps have anything to do with the quality of the decision or thoughtfulness of the recommendation, and everything to do with navigating the complexity of an organization and the human beings it is made up of.
Anyone who’s worked around great consultants knows this already:
The quality of the answer and analysis is table stakes, while the consultant’s ability to help leaders navigate uncertainty with trust and empathy is priceless.
This challenge doesn’t stop at the four walls of the company. External stakeholders are not perfectly logical. They also need to be managed and massaged. Take Amazon in the early 2000s, for example.
Amazon had a brilliant leader, with a very intelligent strategy of reinvesting massively into their own infrastructure and customer growth. It all added up on paper, but the animal spirits of shareholders needed appeasing, which Amazon was able to do by flashing a de minimis paper profit for one quarter just to prove that they could do it before turning the reinvestment machine back on.
Intelligence Is Not the Problem — or the Solution
Let’s return to the exercise of looking back with hindsight at business leaders and evaluating their decisions.
We’ve already laid out the first side of the fallacy, which is assuming that successful leaders were just extra smart. The second side of the fallacy is even more dangerous: assuming any leader that failed to transform their organization struggled because they were foolish.
While this is certainly sometimes the case, it’s important to remember the most critical (and often overlooked) aspect of the Innovator’s Dilemma:
The thing that makes it difficult for existing organizations and their leaders to innovate is exactly the fact that they are so competent. As Clay Christensen said, “Successful companies can fail by making the right decisions in the wrong situations.”
The beauty of venture building — wielding entrepreneurship and startups as tools against the biggest challenges we face — is that it acknowledges the Innovator’s Dilemma instead of trying to fool you into thinking you can outsmart it. Steering the ship isn’t hard because it’s intellectually challenging.
It’s hard because the ship is big!
Artificial intelligence on its own cannot change any of the structural conditions that serve as barriers to innovation in large organizations. You cannot think your way into a smaller, nimbler organization.
That’s why we have so much conviction in venture building as an exciting and practical alternative: You can lean into the challenge by strategically deploying a few startups better structured to navigate choppy waters.
