Why AI is a leadership challenge – not a technology one

Whether we like it or not, generative AI is challenging almost every aspect of how we do business. But are we approaching that challenge in the best way? A common misconception is to focus purely on the technology – when in truth we should be framing this as a leadership problem: the real constraint is an organisation’s ability to adapt, learn and transform. This becomes ever more important as people grapple with fear and uncertainty about the future.

As part of London Business School’s AI Masterclass, in partnership with the Financial Times, Professor Herminia Ibarra, Charles Handy Chair in Organisational Behaviour, sat down with Professor Michael Jacobides, Sir Donald Gordon Professor of Entrepreneurship and Innovation, to explore how leaders should respond – redefining their own roles, while supporting their teams through a period of profound change.

“The issue isn’t the technology itself,” Herminia explains, “it’s humans’ ability to use it.” That may sound familiar. We have been here before, she argues, through waves of digital transformation and earlier technological shifts. But AI – and the pace of change it brings – raises the stakes. “It demands a systemic look at your value proposition and how you get it done,” she says. “As a leader, your job is to enhance the capacity of your organisation to be a learning system – to adapt and transform.”

That shift also means engaging people at a time when they’re extremely anxious about their job, status, power and security, she explains. In order to do that, leaders have to take a look in the mirror, to find within themselves those more human qualities that they may not have been hired or rewarded for in the past.

Understand the landscape

First, leaders must be outward, as well as inward facing. “Get out of the house,” Herminia advises. “Maintain your external networks, talk to people, benchmark.” Organisations are often insular, relying too heavily on internal perspectives. But in a fast-moving space like AI, understanding what’s hype, what’s real, and where value is actually being created requires looking beyond your immediate environment.

This external lens is what enables leaders to form and maintain a clear vision. “You only get that from outside, not internally,” she notes. Without it, leaders risk reacting to noise rather than shaping a clear direction.

Don’t just deliver – change

Second, leaders must shift from delivering to transforming. It’s no longer enough to execute against a predefined role or KPIs dictated from above. “Redefine your job,” Herminia says. “Figure out how you can add more value strategically.”

That means questioning how work gets done, not just how well it’s done. “The work processes need to change and the culture of the organisation needs to change – you have to look at how your people behave and what they’re rewarded for – or you’ll reach a big impasse,” she cautions.

She points to the example of Microsoft, which has systematically dismantled practices that no longer make sense. One such move was eliminating time-consuming quarterly reporting processes that had become little more than “corporate theatre,” giving people the time and space to focus on more important customer-facing work instead. The lesson is clear: if something no longer serves the organisation’s goals, leaders must be willing to challenge and remove it. “Culture eats strategy for breakfast,” as the saying goes – but culture is shaped by systems and processes. If you want people to behave differently, you have to change what you’re asking them to do, how their time is allocated and what is recognised as valuable.

Get better at the people side

If transformation is the imperative, people are both the constraint and the enabler. AI, Herminia notes, disrupts people’s sense of identity. Employees are not just learning new tools; they are questioning their relevance, their career security, and the future for both them and their families.

“You need people to be candid,” she says – to share what they are learning, to experiment, to adapt. But that requires psychological safety, at a time when many feel vulnerable. At the same time, leaders must take a hard look at their teams: do they have the right team for the challenges ahead? Those who are unwilling to accept change – even high performers – may struggle.

This is where leadership becomes less about control and more about coaching. With new tools reducing the need for compliance, monitoring and inspection, the role of the leader shifts to enabler. “You want your people to be autonomous beings,” Herminia says, “able to act quickly and in an agile way.”

Combine empathy with architecture

Crucially, this is not just about “soft skills.” Leaders must combine empathy with organisational design. Transformation requires both: creating the conditions for experimentation while also redesigning processes, incentives and workflows.

That includes being explicit about how experimentation is handled. What constitutes acceptable failure? How are risks managed? Without that kind of clarity – and without empathy from their leaders – people will be too afraid to try news things, resulting in stasis. At the same time, those leaders must be willing to nudge and push back – encouraging people to adopt new ways of working, even when it feels uncomfortable.

There’s also a need for greater honesty. As Michael notes, many organisations project a false sense of certainty. In reality, leaders are navigating unknowns. Being open about what is known, what is being tested, and what may change builds credibility and trust.

Leading at different levels

Finally, leadership in the age of AI plays out slightly differently depending on where you sit in the organisation. Senior leaders are responsible for setting direction, shaping culture and acting as role models for change. Crucially, they must create an environment where learning – by definition involving mistakes and uncertainty – is possible.

But much of the real work happens in the middle of the organisation. Here, leaders act as “link pins”, Herminia observes, connecting teams to the outside world, turning strategy into action, and feeding insight back up. They’re not just managing delivery but actively shaping how the organisation adapts. “That reporting up is not just a formal thing,” she notes; “it’s also about managing your boss, redefining your job so it’s not just internally facing, bringing in political support and understanding who the real stakeholders are – rather than just managing your team and your deliverables.”

In this sense, AI does not diminish the importance of leadership – it amplifies it. The technology may be powerful, but it cannot, on its own, resolve the organisational, cultural and human challenges that determine whether or not it creates real value. That remains the work of leaders.