What changes when intelligence stops being scarce?
Rod McNaughton
Professor of Entrepreneurship
University of Auckland Business School
Most boards and executives believe they are asking the right strategic questions about technology.
AI is on the agenda. Investment cases are reviewed. Risks are discussed. Management is asked how productivity will improve, how costs will fall, and how competitors are responding.
And yet many of these conversations are already outdated.
The problem is not that AI is being overestimated. It is that it is being framed too narrowly. AI is often treated as a powerful new capability when, in reality, it is acting as a solvent, dissolving assumptions that have shaped strategy for decades, often without executives noticing.
For decades, advantage largely came from superior decision-making under uncertainty. Better data, better models, better forecasts. AI dramatically lowers the cost of all of this, making intelligence abundant rather than scarce.
AI is quickly removing the intelligence bottleneck.
What follows is less visible, but far more consequential.
When intelligence is cheap, constraints matter more
Once cognition is no longer scarce, the sources of advantage move elsewhere. In our work with senior leaders, we see many organisations struggling to make this shift in thinking.
The binding constraints increasingly reside in places where intelligence alone cannot be effective: how things are physically produced, how organisations coordinate at scale, how trust is created and maintained, and how quickly decisions can be translated into action.
This is where a familiar board question begins to misfire.
When directors ask, “Do we have the right data and insights to make this decision?”, the answer is increasingly “yes”. The harder question is whether the organisation is actually able to act differently once the decision is made.
Technologies far from the AI spotlight are therefore becoming strategically important. Synthetic biology does not make better decisions; it changes what can be produced. Cryptographic trust does not improve judgment; it changes how coordination happens. Spatial computing does not enhance reporting; it changes how control is exercised.
The strategic question boards should now be asking is not “What AI capabilities should we be developing?”, but “What limits us once intelligence is no longer the problem?”
For many organisations, the answer is uncomfortable.
Optimisation is reassuring. Substitution is destabilising.
Much current AI investment is framed around optimisation. Faster processes. Lower costs. Better utilisation of existing assets. Optimisation feels reassuring because it preserves the underlying logic of the business while promising incremental improvement.
But the disruptions on the horizon will be driven by substitution, not optimisation. Substitution replaces the method itself.
Fermentation replacing petrochemistry. Verification replacing oversight. Automated workflows replacing roles rather than assisting them. When substitution occurs, cost structures collapse, value chains redraw, and previously defensible positions evaporate quickly.
Boards are naturally cautious here, because substitution does not ask how well the organisation does what it does. It asks why it does it at all.
Yet history suggests that firms that delay confronting substitution dynamics do not gain time. They lose options.
A deceptively simple test helps surface this risk: are we using new technologies to improve an existing method, or to make that method unnecessary? Many firms only discover how method-dependent their core competence was once that method is no longer viable.
Value is moving from products to rules
Another shift that remains poorly recognised concerns where value actually resides.
As technologies collide, products become easier to copy, simulate, and substitute. What becomes scarce is coordination. The rules governing interaction begin to matter more than the things being exchanged.
Standards, protocols, identity systems, verification layers, settlement mechanisms. These shape who can participate, under what conditions, and at what cost. They influence outcomes long before competition takes place.
This explains why some firms exert considerable power without appearing dominant in any single product category. They govern interaction rather than compete within it.
For boards, this raises a question that is easy to overlook but hard to reverse: are we competing inside systems designed by others, or are we deliberately shaping rules that others must adapt to?
Competition is moving upstream from the market
Traditional strategy assumes competition happens within markets. Market share is contested. Positions are defended. Rivals are outperformed.
Increasingly, advantage is being decided before the market stage is reached.
When AI is embedded into production systems, logistics networks, energy grids, and physical environments, outcomes depend less on individual decisions and more on architecture. Who has agency? Where do decisions occur? What is automated? What fails safely?
In these environments, power is architectural. Defaults embedded in systems shape behaviour more reliably than incentives or directives.
This is why leadership increasingly looks less like supervision and more like system design. Many familiar management instincts fail not because leaders are making poor decisions, but because they are intervening at the wrong level of the system.
Risk no longer behaves the way governance frameworks assume
Most risk frameworks are designed for bounded failure. A process breaks. An incident is contained. Lessons are learned.
Highly coupled systems fail differently.
When digital models are tightly linked to physical systems and decisions propagate in real time, small anomalies can cascade across layers before anyone intervenes. Optimisation improves efficiency, but often reduces resilience.
Risk management, therefore, shifts from prediction to containment. From preventing failure to limiting how far it can spread. Boards that continue to treat risk primarily as a reporting exercise are often surprised by how quickly issues escalate beyond their field of view.
Time is becoming a strategic advantage
As feedback loops compress, time itself becomes a source of advantage.
Firms no longer win by being right more often. They win by learning faster. By shortening the distance between hypothesis and evidence, and adapting before competitors even recognise that conditions have changed.
Long planning cycles, once a sign of rigour, increasingly function as strategic drag. In environments characterised by continuous feedback, static strategies decay quickly.
The competitive edge shifts to organisations that can experiment safely, absorb signals rapidly, and adjust without drama.
The deeper issue boards must now confront
Collectively, these shifts point to a deeper challenge than the adoption of technology. They expose a clash of worldviews.
The traditional industrial worldview assumes scarcity, hierarchy, scale, and control through supervision and management. The emerging architectural worldview assumes abundant intelligence, modular production, computational trust, and control through system design.
Organisations exposed to the same technologies behave very differently depending on which worldview shapes their strategic choices. This is why the hardest work ahead is not technical. It is interpretive.
The most important question for executives and boards is no longer “How do we use AI?” It is, “Which of our assumptions about value creation, control, and scarcity would no longer hold if we were designing this organisation today?”
That question is potentially destabilising, which is why many organisations defer it. But those who don’t gain the ability to see strategic risk before it becomes operational reality, and to shape change rather than respond to it once options have narrowed.
These are precisely the kinds of conversations now emerging in boardrooms that recognise intelligence is no longer scarce, but judgment about systems still is.
Rod B. McNaughton is Professor of Entrepreneurship at the University of Auckland Business School. He is a Chartered Member of the Institute of Directors.
