Most executives are preparing for the wrong battle. Here’s how to spot the real threat before your competitors do.
Last month, I watched a room full of senior executives debate whether AI would replace their customer service team. For two hours, they dissected chatbot capabilities, analyzed cost savings, and planned retraining programs.
They were solving the wrong problem.
While they obsessed over operational efficiency, a startup in Silicon Valley was building AI that could replicate their core customer insight engine — the thing that actually drove revenue. Six months later, three major clients jumped ship.
This scene plays out in boardrooms every week. Leaders fixate on how AI will change their operations while missing the real question:
Is AI coming for what we do, or what we deliver?
The difference determines whether you’re facing a manageable transition or an existential crisis.
The Blind Spot That’s Costing Billions
Here’s what’s happening: executives see AI through the lens of their last technology upgrade. They think about efficiency gains, cost reduction, and process improvement. It’s the natural CEO response — focus on what you can control and measure.
But AI isn’t just another productivity tool. It’s fundamentally different because it can replicate outcomes, not just processes.
Consider RWS, the translation giant that employed thousands of linguists and built sophisticated quality systems over decades. When ChatGPT launched, their stock price dropped 50% in months. Not because AI could do their job better, but because it could deliver what customers actually wanted — quick, good-enough translation — at zero marginal cost.
RWS was optimizing the wrong thing. They were perfecting human-powered translation while customers were discovering they didn’t need perfection. They needed speed and accessibility.
The Two Types of AI Disruption (And Why Most Leaders Focus on the Wrong One)
Every AI threat falls into one of two categories:
Operating Model Disruption: AI changes how you work internally. Think supply chain optimization, predictive maintenance, or automated reporting. These changes are significant but manageable. They typically strengthen incumbents who have the resources to implement them at scale.
Value Proposition Disruption: AI changes what customers want from you entirely. This is when AI can deliver the outcome your customers seek through a completely different path. This is the category that destroys companies.
The brutal truth? Most executive teams spend 80% of their time discussing operating model changes and 20% thinking about value proposition threats. It should be the reverse.
The Three-Question Reality Check
Stop guessing about your AI exposure. Ask these three questions instead:
Question 1: Do you sell atoms or insights?
If your core offering is physical — manufacturing equipment, hotel rooms, medical procedures — you’re in the safer zone. AI can make you dramatically more efficient, but it can’t digitally replicate a hip replacement or a luxury resort experience.
If you sell information, analysis, or creative output, your risk is exponentially higher. AI is getting scary good at pattern recognition, content generation, and synthesis. If your value is what you know rather than what you make, pay attention.
Question 2: Do clients pay for your process or your judgment?
This distinction is everything. If customers buy your service because you execute a repeatable process that happens to require humans — document review, basic market research, routine design work — you’re vulnerable. AI excels at systematizing and scaling these activities.
If clients pay for your strategic thinking, creative problem-solving, or trusted relationship in complex situations, you have breathing room. But only if you actively strengthen these irreplaceable human elements.
Question 3: Could a well-funded team replicate your core magic with AI in 18 months?
Be ruthlessly honest. If your competitive advantage comes from proprietary processes, information access, or workforce scale, you’re in danger. Smart entrepreneurs with AI tools can potentially recreate these advantages quickly and cheaply.
If your moat is regulatory expertise, unique proprietary data, integrated customer relationships, or physical infrastructure, you’re more defensible. The key is knowing which category you’re in.
What Smart Executives Are Actually Doing
The leaders who navigate technological shifts successfully don’t predict the future better — they prepare for uncertainty better.
They run learning experiments, not transformation projects. Instead of betting big on one AI initiative, they launch ten small experiments across different areas. The goal isn’t immediate ROI; it’s building institutional knowledge about what works in their specific context.
They strengthen their irreplaceable assets. What makes your company hardest to replicate? Your brand reputation? Your unique dataset? Your team’s creative chemistry? Your distribution network? Whatever it is, they invest there. They make their strongest human advantages even stronger.
They master the collaboration, not the replacement. The winning organizations won’t be the ones that replace humans with AI or ignore AI entirely. They’ll be the ones that figure out how to make their best people more creative, insightful, and effective by working with AI tools.
The Uncomfortable Question Every Executive Must Ask
Here’s the question that keeps me up at night on behalf of my clients: If a startup could deliver 80% of your customer outcome at 20% of your cost using AI, would your customers care about the 20% difference?
For some businesses, the answer is clearly yes. Customers will always pay premium for trust, expertise, and relationship in complex situations.
For others, the answer is terrifying. If your customers are buying efficiency, speed, or good-enough quality, AI might eliminate their need for you entirely.
The companies that survive won’t be the ones that guess right about AI’s trajectory. They’ll be the ones that honestly assess their value proposition and act accordingly.
The Real Advantage
The AI revolution isn’t a prediction problem — it’s a preparation problem. You don’t need to know exactly how AI will evolve. You need to build a business that can thrive regardless of which specific scenario unfolds.
That means being honest about what you really sell, strengthening what makes you irreplaceable, and building the capability to move quickly when the technology crosses new thresholds.
Most importantly, it means having the courage to ask the hard questions about your value proposition before your customers start asking them for you.
What’s your take? Are you seeing value proposition threats in your industry, or mainly operating model opportunities? The difference might determine your strategy for the next decade.
The authors at ISZ.AI regularly analyze how emerging technologies reshape business strategy. What patterns are you observing in your market? We’re always interested in hearing different perspectives on how AI disruption plays out across industries.
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