Structural uncertainty is the condition where the game itself is in question, not just your position within it. In this episode of The Innovation Show, Rita McGrath and Sangeet Paul Choudary join Aidan McCullen to explain why the old strategy playbook assumed a stable playing field, and what leaders do once that assumption breaks.
Rita McGrath wrote The End of Competitive Advantage and gave the field the idea of transient advantage. Sangeet Paul Choudary wrote Reshuffle and won the 2025 Thinkers50 Strategy Award. Put them together and one question does the work: are advantages getting shorter, or are a few firms locking in something far more durable?
What is structural uncertainty?
For most of the post-war period, firms faced what Sangeet calls operational uncertainty. Demand fluctuated and supply shocks arrived, but the rules of the game held steady. You knew your industry, your channel and your customer.
Structural uncertainty is different. Here the playing field itself moves, because technology keeps removing the bottlenecks that held the old structure in place. As a result, the object of strategy stops being your position and becomes the field.
AI accelerates this. Previously, technology reshaped the structured interfaces between firms. Now it reaches inside workflows, negotiations and contracts. When a procurement agent handles a conversation that used to be tacit, that interaction becomes structured and learnable, and the value it generates moves somewhere else entirely.
Why strategy’s founding assumptions no longer hold
Rita traces the field back to industrial economics, which rests on two assumptions. First, that industries have clear boundaries and your real competition sits inside them. Second, that equilibrium is the normal state of things.
Relax both and you get a very different world. Edith Penrose saw part of it early: firms accumulate slack, entrepreneurial managers redeploy it, and each firm’s path is so idiosyncratic that copying it is close to impossible.
The balance sheet tells the rest of the story. In 1975, roughly 93% of the assets of large firms were tangible — plant, property, equipment, inventory. Today that ratio has almost exactly flipped, and most of the value sits in things you cannot drop on your foot.
Carlota Perez and the turning point
Rita’s current work with economic historian Carlota Perez places us at a turning point. An old regime loses its ability to drive growth, capital goes hunting for the next thing, bubbles inflate and then burst. Afterwards, if we play it well, capital realigns with production and a golden age follows.
Perez argues we have been here five times before. Consequently, the hallmarks are recognisable: severe inequality, populism, and a widespread sense that the rules changed mid-game. Where oil was cheap and ubiquitous in the last regime, data and intelligence are the general-purpose inputs of this one.
Platforms, network effects and the Netflix lesson
Sangeet’s first body of work explained digital platforms. The pattern underneath them is the same one now driving structural uncertainty: a technology shift removes a bottleneck, and the whole system restructures around the gap.
Netflix illustrates it before streaming even arrives. Both Netflix and Blockbuster shipped DVDs, but Netflix’s data-driven inventory system let it predict demand nationally. Therefore it could serve local demand with national supply, while Blockbuster served local demand with local supply. Blockbuster could copy the end of late fees and it could go online. It could not copy that.
Rita adds the sharpest version of the story. An investor told her he had always bet against Netflix, because he never believed the film studios would be stupid enough to hand over their libraries.
Rule makers and rule takers
Traditionally the regulator made the rules and firms took them. Platforms changed that, because the smartphone let customer journeys cross industry boundaries and data let capabilities do the same. Suddenly the rule-making of whole new arenas was up for grabs.
Reliance Jio is the clearest case. Moving from oil and gas into telecom, Jio invested early in 4G and made voice and data almost free, commoditising the industry’s own cash cow and amassing 400 million users in three to four years. Incumbents read it as a price war and fought on those terms. Most of them consolidated or disappeared, and a sector of roughly seventeen players became three.
That is the distinction. Rule takers run from one transient advantage to the next because they inherit whoever’s rules are on offer. Rule makers set the field. However, the position is never permanent — Google made the rules for years and then found itself taking OpenAI’s for a while.
Seeing your advantage through a new lens
Both guests warn against silver-bullet thinking. A lens is not a box you squeeze into; it is a way to read an uncertain landscape and find the few points where pressure pays.
Rita offers two examples from her Columbia course. A seed and fertiliser executive realised halfway through the week that he was actually in the information business, sitting on soil quality data with real value to townships and regulators. Separately, Leading Hotels of the World reframed itself as a platform for individual properties, under the line “every kind of one of a kind”.
Sangeet points to Tesla, which integrated vertically during the decade everyone else preached openness, precisely because rapidly evolving capabilities meant the bottleneck kept moving. He also tracks Schibsted, the Norwegian media group that went from newspapers to classifieds to marketplaces, and now faces a horizontal AI agent capable of walking straight past the local network effects that protected it.
Working for the model, or making the model work for you
Finally, the human question. Aidan raises the risk that we now use AI to work out what to do about AI, skipping the struggle that builds judgement in the first place.
Sangeet’s test is blunt. If most of your time goes on generating output and then correcting it into something usable, you are working for the model. He builds a knowledge graph of his own research first, so every session starts from his lens rather than a generic answer he has to retrofit.
Translators show the cost of getting this wrong. AI does the easy part, and they are left verifying and repairing the hard part — context, risk, judgement — in an unfamiliar workflow, for half the money.
Rita’s answer is discipline. Work expands to fill whatever time you allocate, so prioritisation is the real constraint. She cites Novartis CEO Vas Narasimhan, who describes his primary job as directing the energy of the organisation, and Sharon Price John’s SDSS times two: stop doing stupid stuff, then start doing smart stuff. Until the stupid stuff goes, there is no bandwidth for the smart stuff.
[Internal link: related episode with Carliss Baldwin and Kim Clark on Design Rules and the power of modularity]
Find Rita at ritamcgrath.com. Find Sangeet at reshufflebook.com and platforms.substack.com. Subscribe to the Thursday Thought on Substack for a chance to win a copy of Reshuffle, with thanks to Kyndryl.
Listen or watch now: Apple Podcasts | Spotify | YouTube
About the Guests
Rita McGrath is a longtime faculty member at Columbia Business School and one of the world’s most cited authorities on strategy in uncertain environments. Consistently ranked among the Thinkers50 top ten management thinkers and winner of their number one award for strategy, she is the author of The End of Competitive Advantage, Seeing Around Corners, Discovery-Driven Growth, MarketBusters and The Entrepreneurial Mindset. She directs the Leading Strategic Growth and Change programme at Columbia and hosts the Thought Sparks podcast. ritamcgrath.com
Sangeet Paul Choudary is the founder of Platformation Labs and the author of Reshuffle: Who Wins When AI Restacks the Knowledge Economy, winner of the 2025 Thinkers50 Strategy Award. He co-authored Platform Revolution and wrote Platform Scale, and his work on platforms has been selected by Harvard Business Review as one of the top ten ideas in strategy and featured four times in its Top 10 Must Reads compilations. A World Economic Forum Young Global Leader, he has advised the leadership of more than forty Fortune 500 firms. reshufflebook.com | platforms.substack.com
About the Host
Aidan McCullen is the 2025 Thinkers50 Innovation Award recipient, keynote speaker on AI, disruption, innovation, and change, host of The Innovation Show, and author of Undisruptable: A Mindset of Permanent Reinvention (Wiley). Learn more about Aidan.
Frequently Asked Questions
What is structural uncertainty in business strategy?
Structural uncertainty is the condition where the rules and boundaries of competition are themselves in flux, rather than conditions varying inside a fixed game. Sangeet Paul Choudary contrasts it with operational uncertainty, where demand and supply fluctuate but the game holds steady. Under structural uncertainty, the playing field becomes the object of strategy.
What is the difference between a rule maker and a rule taker?
Rule takers compete by whatever rules are currently set, which forces them to move from one transient advantage to the next. Rule makers define the playing field and the game played on it, so others must adapt to them. Reliance Jio made the rules in Indian telecom by commoditising voice and data; incumbents who read the move as a simple price war did not survive it.
Is transient advantage still relevant in the age of AI?
Rita McGrath argues that advantages remain transient for most firms, because the conditions that once protected them — clear industry boundaries, tangible assets, high barriers to entry — have largely dissolved. Roughly 93% of large-firm assets were tangible in 1975, and the ratio has since flipped towards intangibles. The exception is firms that succeed in setting the rules of a new arena.
What is a network effect, and why is AI weakening some of them?
A network effect occurs when a platform organises demand and supply around its own rules and tools, so each additional participant makes the platform harder to displace. Local network effects have protected regional marketplaces in property and used cars. However, a horizontal AI agent trained in one market can now represent the buyer side across many markets, which erodes that protection.
How can leaders use AI without outsourcing their thinking?
Sangeet Paul Choudary suggests a simple test: if most of your time goes on generating AI output and then correcting it into something usable, you are working for the model rather than making the model work for you. He builds a knowledge graph of his own research and starts every session from it, so the work begins with his lens instead of a generic answer he has to retrofit.
Who are Rita McGrath and Sangeet Paul Choudary?
Rita McGrath is a Columbia Business School professor and Thinkers50 top-ten management thinker, author of The End of Competitive Advantage and Seeing Around Corners. Sangeet Paul Choudary is the founder of Platformation Labs and author of Reshuffle, winner of the 2025 Thinkers50 Strategy Award, and co-author of Platform Revolution.