By Rita McGrath and M Muneer

For decades, strategy has been anchored in industrial economics, where two fundamental truths have dominated corporate thinking. First, a company’s position within an industry determines its fate. Second, equilibrium is the natural state, with change seen as an occasional disruption — what economists call “punctuated equilibrium”. Innovation, in this context, was an aberration rather than a core activity for businesses. Going by the abysmal pace of innovation in India Inc., clearly the old world still rules.

But the world has shifted, and with it, the rules of strategy too. Industries are colliding in unexpected ways, and competitive advantages can vanish overnight. Today’s strategists face a reality where agility and adaptability are paramount. In a matter of weeks, new cultural phenomena — like “Brat Summer” unexpectedly intersecting with US politics — can alter the business environment. A few months ago, hardly anyone was talking about Brat Summer, yet here we are.

In this new reality, several long-standing assumptions have been turned upside down. Globalisation, once viewed as a one-way street leading to ever-increasing prosperity, is now mired in uncertainty. Geopolitical tensions are at a peak, disrupting the smooth path many predicted for international trade. We’ve moved from “offshoring” to “nearshoring”, and now, in the wake of war in Europe, to “friend-shoring”. This shift signals the growing complexity and unpredictability of global markets.

At the same time, societal changes are reshaping the economics. Just three generations ago, women were largely excluded from commercial and political life. Now, they are poised to control the majority of global wealth by 2030. This seismic shift will leave unprepared industries — especially in financial services — scrambling to keep up. Companies that fail to recognise and adapt to this new reality risk being left behind.

Even the concept of truth itself has fractured. Gone are the days of mass markets for news, where a few trusted outlets shaped public discourse. Today, individuals can live in self-constructed echo chambers, consuming news that reinforces their existing beliefs. Traditional media are struggling to adapt, caught in the crosshairs of changing technologies and consumer behaviour. The implications for businesses are profound, as understanding and influencing public perception becomes ever more complex.

Another cornerstone of economic life — retirement — has also been upended. The traditional retirement age of 58-65 made sense when lifespans were shorter. But with modern medicine extending life expectancy and improving health, many seniors are working well past 65. This shift is creating new challenges in the workplace, as older employees stay in their positions longer, sometimes preventing younger workers from advancing. In some cases, people are even starting new careers in what used to be considered the twilight of life.

New risks are also emerging at an unprecedented rate. Cybercrime, for instance, was virtually non-existent two decades ago. Today, companies like JPMorgan Chase are spending billions — $15 billion annually, in fact — just to protect themselves from these threats. The speed at which these risks are developing is staggering, and businesses that fail to keep up are at serious risk.
In this new era, change is the rule. For strategists, this means placing as much emphasis on periods of disruption as on times of stability. In fact, strategy must now encompass the entire life cycle of competitive advantage, from its nascent stages to its eventual decline. Organisations that fail to adapt will either be forced to transform or face obsolescence.

Crucially, strategy can no longer be separated from organisational design. In an unpredictable world, a significant part of strategy involves creating an adaptable system. Fortunately, advances in artificial intelligence (AI) are providing new tools to help companies stay ahead of the curve.

One of the most promising applications of AI in strategy is predictive analytics. By analysing vast amounts of data, AI can identify patterns and trends that signal emerging challenges, such as declining market demand or shifts in consumer behaviour. During the Covid-19 pandemic, AI was even used to predict potential hotspots by analysing wastewater — a fascinating example of how technology can offer early insights into complex problems.

Another powerful application of AI is scenario analysis and simulations. Traditional scenario planning can be cumbersome, and once the scenarios are created, they often sit on a shelf, unused. But with AI, companies can run what-if simulations quickly and efficiently, allowing decision-makers to immerse themselves in a range of possible futures. This approach broadens the strategic lens, helping CEOs prepare for a wider array of potential challenges.

AI also excels at natural language processing (NLP), which can be used to analyse customer feedback, social media posts, and news articles. By understanding public sentiment, companies can detect early signs of reputational risks or shifts in customer preferences. NLP can even track references to competitors, providing valuable intelligence for strategic planning.

But perhaps the most transformative use of AI lies in decision support systems. By providing real-time insights and recommendations, AI helps leaders make informed decisions quickly. In some cases, AI can even automate the decision-making process, ensuring that appropriate actions are taken without delay. In the energy sector, AI can instruct a peaking plant to come online when demand exceeds a certain threshold, optimising efficiency.

As the pace of change accelerates, it’s clear that traditional models of strategy are no longer sufficient. Today’s organisations need to be as agile and adaptable as the environment in which they operate. AI offers a powerful set of tools to help in this new reality.

The world has changed, and so must our approach to strategy. Organisations that embrace AI and design their strategies around continuous adaptation will be the ones that thrive in this new era of constant disruption. If you’re ready to take the first step, consider running small experiments with AI in your organisation — you may be surprised at how quickly you can gain a competitive edge.

As industries collide and AI crunches data like a caffeinated oracle, if your strategy isn’t dancing to the rhythm of disruption, you’re about to miss the party — and in this game, there’s no DJ taking requests for a replay.

About the authors: Respectively professor, Columbia Business School, and founder, Valize, & Fortune-500 advisor, start-up investor, and co-founder, Medici Institute for Innovation.

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