Technology Adoption is not Transformation. AI Included.

Enterprise AI makes an unprecedented bet that companies transform from the inside-out. This is a bad bet.

New technologies remake industries from the outside-in. In digital media, in ecommerce, in electric vehicles, it’s the challengers that have forced incumbents to adapt. Enterprise AI wagers that by adopting new technologies companies will transform from the inside-out. This is a bad bet.

Firms routinely adopt new technology without changing what they are. U.S. retail banks have invested heavily in adopting cloud technologies. Yet no challenger has forced U.S. retail banks to transform their business model. Technology adoption is not enterprise transformation.

Entertainment illustrates how challengers transform industries by reducing barriers to entry, weakening gatekeeping power, and creating new demand. YouTube bypassed barriers to building an audience for filmed entertainment. As YouTube grew, Hollywood’s gatekeeping power over fame and celebrity weakened. YouTube channels created new categories of demand outside of Hollywood’s star-heavy talent and distribution model. Their success forced Hollywood to adapt and compete in an increasingly creator-led, direct-to-consumer model.

AI reduces barriers to accessing expertise, weakening the power of gatekeepers in industries that rely on credentialed expertise: like healthcare, law, financial services, real estate, and education. Every day, millions of LLM conversations and vibe-coding sessions weaken incumbent gatekeeping power in each of these fields. They reveal a demand for expert guidance beyond what incumbents provide today. The ingredients for AI-led transformation of credentialed industries are there. But the ingredients alone are not enough.

When YouTube debuted in 2005 much of the early content was copyright protected, and for years YouTube faced legal challenges by Hollywood studios who sought to enforce their gatekeeping power. 2005 was the desktop era of computing, when the most popular mobile devices were the Nokia 1100 and Motorola Razr—the iPhone was two years away.

The iPhone enabled YouTube to move beyond the limits of the desktop. It reduced barriers to entry for everyday video creation, and coupled with YouTube’s streaming platform helped build demand for content and creators that bypassed Hollywood gatekeepers.

What would YouTube have looked like in a world without the iPhone, or one where the iPhone debuted in 2011 instead of 2007? It might have gone the way of Napster, a peer-to-peer service trapped in the pre-smartphone desktop era, that trafficked mainly in copyright protected content. What would Hollywood look like in that world? Would a Hollywood insulated from the challenge of streaming and smartphones have produced Mr. Beast and the creator economy?

YouTube’s challenge to entertainment reveals that we cannot roadmap transformation in advance. Transformation depends on a combination of technologies coming together in the hands of talented entrepreneurs. It’s the opposite of planned technology adoption.

Leaders navigating this moment need to stay focused on the market for signs of those combinations. But today’s “enterprise AI” turns focus inward, to company operations—reimagining workflows, deploying customer-facing AI agents. In a previous era this looked like moving servers to the cloud, or building APIs to extend a business’s services and reach customers outside its own products. Important modernization work. But fundamentally different than transformation.

The market has so far rewarded signs of AI-led technology adoption and transformation differently. Reports of successful AI-led productivity and efficiency gains drive the market up. But even the hint of AI-led transformation drives the market down. Fears that AI agents would erode the lock-in advantages of leading software platforms drove the ‘SaaSpocalypse’ sell off. Citrini Research’s fictionalized account of an AI and stablecoin pairing transforming e-commerce caused an immediate drop in payment networks. As much as the market talks about AI as the most transformative technology of its time, what it rewards is inside-out technology adoption, not outside-in transformation.