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The S&P500 is out of ideas–and it can’t keep telling Wall Street that AI will fix all their problems



Shares and earnings at the “Magnificent Seven”–the tech companies at the forefront of artificial intelligence (AI), Nvidia, Tesla, Meta Platforms, Apple, Amazon, Microsoft, and Google–beat forecast this cycle. These companies have an outsized impact on the S&P 500 and account for roughly one-quarter of the Morningstar U.S. Market Index–but for the remaining 98.6% of companies in the S&P 500, the story is much different.

When everyone has access to the same amazing technology, and everyone uses the same amazing technology in the same amazing way, you get a sea of sameness at an amazing scale. Technology in all its forms and permutations is a commodity input. It is easily accessible and widely reproducible by anyone with access to the Internet and the ability to market their vision in under 10 slides, which is, well, a lot of people.

Limitless access to new technology is one thing. But harnessing that infinite flow in a way that produces an advantage over a rival is something else entirely. Technology-led visions are the short road to parity. They produce monotonous repetition, lead to overload and boredom, and sustain the status quo.

Everyone is waiting for someone else to deliver the kind of supersize impact from AI promoted in podcasts, at JP Morgan’s Annual Healthcare Conference in San Francisco, from atop the magic mountain in Davos, and promised as the panacea for slow growth in calls business leaders in every industry from pharmaceuticals to marketing services to banking to media to freight and delivery (the S&P 493) have been making this earnings season to analysts and investors.

Lots of observers. Lots of ornamental hand-waving. Nothing tangible beyond a cool tech pilot.

“Two-thirds of the executives we surveyed believe that it will take at least two years for AI and GenAI to move beyond the hype, and 71% are focused on pursuing limited experimentation and small-scale pilots,” BCG noted in its From Potential to Profit with GenAI report published last month.Some 90% of leaders fall into one of these two categories.”

Without a novel strategy, management innovation, and new concepts, generative AI can’t produce a world much different than the one we already know. However, it’s difficult not to get distracted by the technical potential of technology. It’s also difficult for business and government to separate what is truly strategic from what is simply generic. And, as Upton Sinclair famously quipped, “It’s difficult to get a man to understand something when his salary depends on his not understanding it.”

Groupthink is deep-rooted. This is one reason why original and penetrating insight is harder than ever to find and communicate with confidence. Why, as John F. Harris writes in Politico, “the Davos smart set sounds so dumb.” And why soft guidance is so widespread.

The latest “better-than-feared” (as opposed to good) earnings from tech companies such as TCS, Infosys, and Wipro reveal a demand environment for technology services that is actually soft. The disappointing outlooks from big pharmaceutical companies, including Novartis and Pfizer, tell a similar story of strategic drift and an inability to evolve commercial models despite the sector’s deep pockets and drug development enabled by all things digital. And expect no-to-low growth from companies such as WPP and IPG in the marketing services industry, more head-scratching in Hollywood, and a total system collapse in media and publishing companies such as Gannett and News Corp. 

The whole “tough economic environment” thing is a hard nut to crack. Instead of facing the existential problems in their respective sectors, everyone sells Wall Street that they’re investing heavily in tech to transform their business, which should probably amplify returns at some point down the road. Few will deliver. And even generative AI can’t forecast when this era of bleak prognosticating will end.

What seems to be getting lost in the complexity and confusion of the moment is the absence of ideas. That’s the real problem, not the absence of technology. For the most part, we are either asking the wrong questions, or our questions are based on the wrong framework.

Under pressure and out of ideas

In business, the key to a sustained edge is to do something a competitor can’t. Amidst all the hype, Korn Ferry published How Ecosystem Leadership is Transforming Tech, an executive brief on organizational leadership with their view of “ecosystem management” as the new competency for professional success–if not survival.

“Tech CEOs are under increasing pressure to deliver greater growth,” they say. “But traditional growth approaches–growing internally or growing through acquisition–no longer produce the desired results. In a rapidly changing world characterized by disruption and uncertainty, companies that achieve and surpass their growth goals all share one thing in common: executives with ecosystem leadership skills.”

Indeed, the process knowledge to “see, say, sell, and sustain” with an ecosystem vision is a next-level skill, a leap into a different orbit for market innovation by way of management innovation. But it’s not just for tech CEOs–understanding how to approach strategy at a system level is imperative for anyone under “increasing pressure to deliver growth”.

That includes everyone in the $223 billion marketing services market selling into the $1.2 trillion technology services market, everyone in the technology services market selling into the $1.4 trillion pharmaceutical market, everyone in the pharmaceutical market selling into the $21 trillion healthcare provider and payer market, and everyone in the healthcare provider and payer market selling into the $700 billion employee and employer health market.

Industry and government leaders are all trying to figure out a weird new reality characterized by hyper-commoditization and blow-up-your-brain complexity.

The primary mode for competition is between integration models, not the constituent parts, and certainly not the capabilities of generative AI. Whoever is better positioning and marketing their integration model becomes the winner over their rival, whether that’s Walmart vs. Amazon, Eli Lilly vs. Novo Nordisk, Ford vs. Tesla, Google vs. Microsoft, or even geopolitically, with the U.S. vs. China.

Technical potential promoted by technology visionaries–and the media outlets that adore them–leads to competitive convergence, not strategic differentiation. To believe otherwise is to be trapped in the wrong storyline.

The world is between orders–it is adrift. In the absence of a unique strategy story, management teams will muddle along and manage by cliché, tweaking things at the operational level, confusing new technology for new strategy, and bouncing from crisis to crisis in a form of motion without movement.

As the old order disintegrates and a new one struggles to be born, the advantage lies with those who understand how to navigate skyrocketing complexity, hyper-commoditization, and essentially zero bandwidth for insightful, original creative thinking.

Today, the only sensible way to compete is by being better than your rivals at molding new economic systems, and then steering those ecosystems to lasting growth. Instead of the brand, the ecosystem becomes the primary unit for strategy-making, the thing that gets assembled, deployed, managed, measured, embedded in the marketplace, and evolved to accommodate more and more components over time in a process known as progressive integration.

This brings us back to the need to rebalance, if not replace entirely, the game as it’s currently being played. When it comes to economic competition, it’s better to think in terms of gravitational pull, not technical push. Management innovation should come first. Technology innovation comes second.

John G. Singer is the executive director of Blue Spoon Consulting, which specializes in constructing new industry ecosystems.

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The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.

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