As artificial intelligence (AI) increasingly transforms the business landscape, traditional notions of long-term competitive advantage are being challenged. In a recent masterclass at the Harvard Business Review (HBR) Strategy Summit 2026, Columbia Business School professor Rita McGrath shared her insights on how companies must rethink strategy and organizational design in this rapidly evolving environment. Moderated by HBR editor in chief Amy Bernstein, the discussion explored how firms can thrive when they can no longer rely on enduring competitive moats, emphasizing the importance of strategic centering and permissionless, "unbossed" organizational structures.
### The Shift from Physical to Intangible Assets
Rita McGrath begins by framing the profound economic transition underway. Historically, business strategy revolved around physical assets-factories, supply chains, tangible products-and hierarchical, mass-production models. These assets and structures provided durable competitive advantages, grounded in physical barriers to entry and economies of scale.
However, the world is moving towards an economy dominated by intangible assets such as digital products, intellectual property, services, and innovation. This "dematerialization" of value fundamentally changes the rules of strategy. What once sustained advantage through physical scale and control is dissolving, and companies must adapt their strategic thinking accordingly.
### The Importance of Choosing a Strategic Center
At the core of McGrath's thesis is the idea that companies need to define their "center" or "center of gravity"-a clear, focused core around which to build their capabilities and allocate resources. Without this, diversified companies face difficult trade-offs and political debates over where to invest and what to prioritize.
She illustrates this with the example of Novartis under CEO Vasant Narasimhan. When he took the helm in 2018, Novartis was a sprawling conglomerate with businesses in eye care, consumer products, generic pharmaceuticals, and innovative medicines. Narasimhan made a decisive move to "center" the company on its mission of inventing new medicines that fundamentally treat serious diseases. To do so, Novartis divested its non-core businesses, reducing its workforce by nearly 30,000 employees and sharpening strategic focus.
The impact of this centering was dramatic. While the market value of Novartis's former diversified portfolio was roughly $120-130 billion before the shift, the combined market value of the separated businesses today is around $510 billion. This highlights how clarity of mission and focus can unlock enormous value by allowing different units to specialize and excel independently.
### Cultivating an "Unbossed" Culture
Alongside strategic centering, Narasimhan fostered a company culture described as "inspired, curious, and unbossed." Being unbossed does not mean employees do whatever they want; rather, it means talented, mission-driven individuals are empowered to take initiative without excessive hierarchical oversight.
An example of this cultural shift was Novartis's bold Super Bowl ad campaign aimed at raising breast cancer awareness. The ad featured candid footage of women's breasts, ending with comedian Wanda Sykes sharing her breast cancer experience. This unconventional and courageous approach demonstrated how Novartis was willing to break from traditional "stuffy" pharmaceutical norms to engage audiences meaningfully in service of their mission.
### New Strategic Realities and Organizational Design
McGrath emphasizes that in today's economy, intangible assets dominate corporate value. In 1970, most of a company's worth came from physical assets like factories and equipment. Now, the majority is tied up in patents, software, brand, and technology. This shift demands a new approach to strategy and organizational design-one that integrates the two rather than treating them as separate domains.
The key challenge for strategists is to define the company's center clearly. This decisively narrows the opportunity set and guides important choices, such as capital allocation. For Novartis, focusing on inventive medicines clarifies why investing in cutting-edge radioligand therapy-as opposed to predictable, generic products-makes sense.
This clarity also enables what McGrath calls a "permissionless" or unbossed organization. Unlike traditional bureaucracies built for mass production and control, modern organizations must empower small, loosely coupled teams to innovate autonomously while aligning around the strategic center.
### Principles for Designing Modern Organizations
McGrath offers several guiding questions and principles for leaders seeking to build effective, unbossed companies:
1. **Simplify by Stopping Stupid Stuff:** Sharon Price John, CEO of Build-A-Bear Workshop, uses the mantra "Stop Doing Stupid Stuff" (SDSS) to eliminate outdated processes and unnecessary complexity. Clearing organizational drag frees space to "Start Doing Smart Stuff," enabling agility and innovation.
2. **Leverage Small, Loosely Coupled Teams:** Inspired by Jeff Bezos's "two pizza rule," small teams of 3-12 people reduce communication overhead and accelerate decision-making. These mission-aligned teams outperform large, rigid structures. Increasingly, value creation is happening at the level of small teams or even individuals.
3. **Adopt a Stewardship Mindset:** Companies should focus on their long-term vitality rather than short-term gains. Fujifilm is a prime example, having transformed from a film company to a diversified technology firm by centering on its core technology and applying it across markets.
4. **Operationalize Diversity:** Healthy diversity in backgrounds, experiences, and perspectives is essential for innovation. Organizations must actively seek and include diverse voices to avoid groupthink and enhance decision-making.
5. **Institutionalize Trial and Error Learning:** In uncertain environments, experimentation is key. Netflix's "Chaos Monkey" program, which intentionally disrupts parts of its system to identify vulnerabilities, exemplifies how companies can embed continuous learning and resilience.
6. **Make Space for Emergence at the Edges:** Innovation often arises from frontline employees closest to customers and operations. Adobe's "Kickbox" program gives employees a $1,000 gift card to pursue experimental ideas independently, fostering bottom-up innovation.
### Applying These Ideas to AI Strategy and Beyond
The conversation also addressed how these principles apply to AI strategy. McGrath cautions against trying to develop a formal "AI strategy" in the traditional sense, likening AI to electricity-a fundamental tool to be widely deployed rather than a standalone strategic initiative. Unbossed organizations empower employees to experiment with AI tools freely, share insights, and innovate collaboratively.
The discussion also explored lessons for the social sector. Non-profits often face "mission creep" when they stretch to satisfy diverse donor demands. McGrath recommends a clear, focused mission-such as that of the Harlem Children's Zone, which concentrates on providing equal opportunities for children in disadvantaged neighborhoods-and disciplined resource allocation aligned with that mission.
### Simplifying Mission Statements and Aligning Teams
When asked about lengthy, complex mission statements common in healthcare, McGrath advocates for simplicity and clarity. Novartis's mission is concise and consistently communicated by its CEO through multiple channels. Simple, memorable phrases like "curious, inspired, unbossed" help embed the mission into everyday behavior.
Regarding balancing autonomy and alignment, McGrath points to Toss, a South Korean fintech company. Toss centers its mission on "removing friction in financial services" and organizes work around directly responsible individuals (DRIs) rather than hierarchical titles. This loose coupling allows teams to experiment and innovate independently while staying tightly aligned with the company's core mission.
### Concrete Steps to Organize an Unbossed Company
For leaders eager to start building an unbossed organization, McGrath suggests beginning with decision rights:
- **Clarify where decisions are made:** Push clear, routine decisions to the edges where information is richest; assemble experts for complicated decisions; and reserve complex, uncertain decisions for leadership judgment.
- **Define what freedom means in context:** Freedom comes with accountability. Leaders must design incentives and communicate clearly about what is inbounds and out of bounds.
- **Invest in training:** Transitioning from hierarchy to autonomy requires teaching people how to resolve conflicts, have difficult conversations, and self-manage. Novartis invested heavily in management training to cultivate these skills.
- **Use formal agreements:** Morningstar Corporation uses "colleague letters of understanding," where peers explicitly commit to deliverables and accountability, replacing traditional management oversight.
This approach trusts in people's ingenuity and good intentions, unleashing human potential when supported by the right structures and culture.
### Integrating Diversity in Small Teams
Finally, McGrath addresses how to ensure diversity within small teams. Because small teams have a limited number of members, it's easier to understand and manage the diversity profile-backgrounds, experiences, perspectives-ensuring healthy variety that drives innovation.
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### Conclusion
Rita McGrath's insights highlight that in an era defined by AI, digital transformation, and intangible value creation, companies must rethink strategy and organization. Long-term competitive advantage as once conceived is increasingly elusive. Instead, firms must choose a clear strategic center that defines what they are and what they are not, enabling focused capital allocation and mission-driven decision-making.
This centering unlocks the potential of "unbossed" organizational structures-permissionless, loosely coupled teams empowered to experiment and innovate. Leaders must simplify processes, embed trial-and-error learning, cultivate diversity, and invest in training to support autonomy with accountability.
Companies like Novartis, Toss, and Fujifilm provide compelling examples of how these principles can drive growth and resilience. For organizations seeking to thrive amid AI and rapid change, McGrath's framework offers a roadmap to build adaptive, purpose-driven, and human-centered enterprises ready for the future.