19 Mar 2026 · 30m · 22 quoted facts
Harvard Business School professor Tsedal Neeley argues that succeeding with AI takes radical organizational change, not just buying new technology. Her "30% rule" says everyone needs a baseline understanding of AI and change, without becoming a programmer. She says companies that pair that literacy with a company-wide mandate, unified data and redesigned processes pull ahead of rivals.
The central tension is hype versus proof. AI is old, but generative AI and agents have sped things up, creating both real productivity gains and anxiety. Neeley points to Rakuten, Moderna and TikTok beauty sales as evidence, while warning that old processes and siloed data hold most firms back. In Q&A she tells leaders to measure outcomes, train widely and trust evidence.
Neeley's 30% rule compares AI literacy to the 30% of English that non-native employees must master. She says it cuts fear and lets whole workforces contribute, as at Rakuten.
Rakuten set a "triple twenty" growth goal across marketing, operations and clients. Neeley says employees built over 25,000 custom bots and marketing costs fell sharply within about four months.
Citing a study by Harvard colleague Marco Iansiti, Neeley says the biggest driver of AI success is changing processes alongside the technology. Copying old workflows onto a new platform fails.
Neeley contrasts a shared "AI factory" data platform, with controls on access, with siloed firms stuck in meetings over whose data is whose. Unified data lets inventory and supply chains respond automatically to demand spikes.
Neeley says some AI spending, like Wi-Fi, has no direct return you can calculate, though productivity clearly rises. She tells leaders to track innovation and concrete outcomes instead.
Tsedal Neeley says it is the minimum technology and change knowledge everyone in an organization needs, without being a programmer or data scientist. She compares it to the 30% of English that non-native speakers must master to function.
No. Neeley says it dates to the 1950s and has passed through four waves, with generative AI like ChatGPT (2022) being the latest. Big tech firms have used narrow, task-specific AI at scale for fifteen to twenty years.
Neeley cites Microsoft's definition: systems that can plan and act to complete tasks or whole workflows on their own, with key moments of human oversight. She says agents are on the rise but still early.
Neeley says many copy old processes onto new platforms and keep data locked in departmental silos. AI-forward firms redesign processes and share data through a unified platform with controls.
Neeley recommends demystifying AI through widespread training, relying on empirical evidence instead of hype, and showcasing specific use cases relevant to the organization. She says understanding lowers fear.
Stated by the speakers. Each quote matches the transcript, which shows what was said, not that it is true.
Tsedal Neeley's 30% rule holds that employees need only a baseline understanding of AI, not programming or data science skills.
“you don't need to be a programmer, you don't need to be a data scientist, you don't need any of those things, but you need baseline understanding”
Flagship Pioneering has identified four waves of innovation in AI.
“flagship pioneering has captured for us four innovations or four waves of innovations in AI.”
The first wave of AI, called the cybernetics era, began in the 1950s.
“The first one actually started in the nineteen fifties. It's called the cybernetics era”
In the 1980s and 1990s, the trained expert era used rule-based programming to replicate human decision making in domains like medicine and engineering.
“This era is called the trained expert era, and this is where machines were attempting to replicate human decision making in specific domains like medicine, like engineering”
Generative AI emerged in the 2020s with the 2022 release of ChatGPT, followed by increasingly agentic systems.
“the twenty twenties, generative AI, with, of course, the release of ChatGPT in 2022, and increasingly agentic systems.”
The transformer technology enables AI to generate new text, language, video and audio content.
“This is where the new technology called the transformer enables us to create new content, text, language, video, audio”
Neeley says Meta, Apple, Amazon, Google and Netflix have deployed specific AI at scale for roughly fifteen to twenty years.
“Many of the companies in the 2,000 s, like Meta, used to be Facebook, Apple, Amazon, Google, Netflix. They've been deploying specific AI at scale in the last fifteen, twenty years.”
Neeley says studies, including at Harvard Business School, show a one-hour task with AI used to take up to three or four hours without it.
“a one hour task uh with AI used to take up to three or four hours without AI.”
Neeley says Moderna had only about 800 employees early in the COVID period while Pfizer had 100,000, and Moderna's CEO calls it a technology company that happens to do biology.
“technology company that happens to do biology. And what we know from Moderna early early on during the COVID days they had only 800 employees Pfizer had 100,000 employees”
Rakuten's AI-ization strategy targeted triple twenty growth: 20% gains in marketing productivity, operating productivity and client productivity or revenue.
“the AI-ization strategy at Rakuten was to achieve triple twenty business growth, and what that meant was 20% increase in marketing productivity, 20% increase in operating productivity”
Tsedal Neeley says she sits on the board of Rakuten.
“I happen to sit on the board of Rakuten, and I can tell you”
Neeley says Rakuten saw a 77% decrease in marketing cost in about four months after its AI mandate.
“seventy seven decrease in marketing cost in about four months.”
Neeley says Rakuten employees created over 25,000 custom bots internally in a decentralized way, plus another 800 agents.
“over 25,000 custom bots created internally within the company in a very decentralized way, empower people, equip people”
Neeley says Rakuten's AI semantic search raised gross merchandise sales by 6.5%.
“This simple innovation has led to increase in gross merchandise sales, 6.5% here, gross merchandise sales.”
Neeley says TikTok is the third largest sales platform for beauty in the United States and has over 3 million influencers.
“The third largest sales platform for beauty in the United States is TikTok, and this is how it works. TikTok has over 3 million influencers”
Influencer Li Jiaqi, called the lipstick king, is a former L'Oreal employee with over 100 million followers across platforms.
“His name is Lee Jia Qi. They call him the lipstick king, and he's an ex L'Oreal employee who now is an influencer with hundred with over 100 million followers”
Neeley says influencer-driven beauty sales on these platforms can reach $3 billion in one day.
“People buy them in extraordinary ways, and the type of sales that you will see are things like $3 billion in one day.”
Microsoft defines AI agents as systems that can plan and act to complete tasks or entire workflows autonomously, with key moments of human oversight.
“Microsoft defines AI agents as systems that can plan and act to complete tasks or entire workflows autonomously, with key moments of human oversight.”
Microsoft's frontier firm report describes three working patterns: humans with assistants, humans with digital colleagues, and human-led agents.
“they've defined aspirationally three working patterns that includes humans with assistants, humans with digital colleagues, and maybe even human led agents”
Neeley says a study by Harvard colleague Marco Iansiti found the biggest driver of AI success is changing processes alongside new technology architecture.
“the biggest driver of success is that with any technological architecture that you bring in, like the unified platform that I mentioned, you need to also change your processes.”
Neeley describes an ideal AI organization where business units keep independence but share data through an AI factory platform with controls.
“You have multiple data sources, including business units that can retain and maintain their independence, but they can share their data.”
Neeley says AI hype recurs roughly every forty years.
“Every forty years or so, um, there's AI hype. Uh, it's not new”
Neeley frames the talk around moving at a pace that fits each organization, separating real AI change from hype.
“figure out how do we get beyond the hype and start moving”
She introduces the minimum baseline understanding every employee and leader needs, no coding required.
“you don't need to be a programmer, you don't need to be a data scientist”
AI dates back to the 1950s, so today's moment is the latest wave, not a sudden invention.
“AI is not new. It's been around for a very, very long time.”
More data improves algorithms, which improve services, which draw more usage and more data, driving innovation.
“the more data we have that we can harness to serve our customers”
Examples of firms that put technology at the core and reaped measurable results.
“we're a technology company that happens to do biology”
An influencer-driven sales boom shows why unified data and inventory systems matter once AI creates demand.
“The third largest sales platform for beauty in the United States is TikTok”
Agents plan and act with human oversight, and success depends on changing processes, not copying old ones.
“You cannot cut and paste your old processes onto uh the new platform”
A checklist for judging how urgently and deeply your organization must change.
“is your culture freezing your company in outdated models?”
Neeley advises measuring outcomes over strict ROI and easing fear through training and evidence.
“The outcomes, obsess on outcomes.”
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That's P-E-G-A dot com slash AI. Turn breakthrough ideas into real results at the virtual HBR Innovation Summit on November twelfth, with top CEOs and master classes on AI and growth. HBR executive subscribers attend free with exclusive programming November thirteenth. Learn more at HBR dot org slash innovation summit. I'm Alison Beard, and this is the HBR IdeaCast. Harvard Business Review recently hosted the HBR Strategy Summit 2026, a day filled with expert advice and guidance from executives and academics alike.
And we're sharing the highlights of the event in this special IdeaCast series. Today, you'll hear a master class, an interactive lecture from HBS professor Tsedal Neeley, about how organizations can drive successful AI transformation. You'll hear her explain the 30% rule, the minimum organizational change and baseline understanding of AI technology needed to drive real results. She'll walk through examples from Moderna, Domino's Pizza and Rakuten, and field audience questions facilitated by HBR editor-in-chief Amy Bernstein. Enjoy the episode.
Hi everyone, I'm delighted to be here today to talk about why AI means radical change. And what I'd like to do in the time that we have together is talk about what it takes to adopt AI at the pace that makes sense for you, for your organization, and for your um industry. AI is everywhere. People are talking about AI, AI, AI, and even agentic AI, agentic AI, agentic AI. Some of it is hype, some of it is real.
The job that we have in all of our organizations is to figure out how do we get beyond the hype and start moving at the pace that makes sense for us. Now, first of all, I'd like to talk about the 30% rule, just to orient us on how we should think about AI and how much do we need to understand as individuals, as leaders, but also as entire workforces in order to make advancements in AI.
The 30% rule is actually a proportionality that says that we all will need a minimum technology and change capability threshold in order to contribute to a future, which has data algorithms and AI as part of them. And the 30% rule says you don't need to be a programmer, you don't need to be a data scientist, you don't need any of those things, but you need baseline understanding, like the 30% of the English language that most global employees have to master if English is not their native language.
So one of the ways to get beyond the hype is to have some baseline understanding of what AI is and what AI is not. The reality is AI is not new. It's been around for a very, very long time. And in fact, flagship pioneering has captured for us four innovations or four waves of innovations in AI. The first one actually started in the nineteen fifties. It's called the cybernetics era, and in the cybernetic era, that's the period where scientists at Stanford, MIT, and the military were trying to use biology or engineering to say, can we actually have machines behave in ways that have human elements?
And can we actually have machines? These were very rule-based, feedback-based, behave a bit like machines. These are the early periods of robotics, actually. And then you go to the nineteen eighties, the nineteen nineties. This era is called the trained expert era, and this is where machines were attempting to replicate human decision making in specific domains like medicine, like engineering, and really relying on rule-based programming and databases in order to simulate expertise in those fields. This was an effective period, not wide adoption, but we saw a big leap in AI innovation.
And then you fast forward to the 2,000 s. This is a period where machine learning uh came to be. We started to be able to learn from the abundant data that were coming in and computing power were present, and machines started to learn and to adapt. And this was kind of the early period of computer visioning, natural language processing, all of the things that got us to today, uh, the twenty twenties, generative AI, with, of course, the release of ChatGPT in 2022, and increasingly agentic systems.
This is where the new technology called the transformer enables us to create new content, text, language, video, audio, big wave that has dramatically shifted the pace of how AI has been developing. But AI is not new. That's really important to understand. Now I offer two definitions of AI that we need to think about. One of them doesn't exist yet, one of them is very much in our world. The one that exists is specific AI, general AI doesn't quite exist yet, but I will define it for you because computer scientists and philosopher of AI actually always talk about these two elements.
The one that doesn't exist yet, general AI. You can think of this as the terminator, where you have these systems that are human like, they behave like humans, they act like humans, they make decisions like humans, doesn't exist yet, piece of me hopes they never do. What truly does exist is what's called specific AI or narrow AI. This is where AI performs specific tasks, much like large language models, or facial recognition or voice recognition. Okay, now, what do we know?
Many of the companies in the 2,000 s, like Meta, used to be Facebook, Apple, Amazon, Google, Netflix. They've been deploying specific AI at scale in the last fifteen, twenty years. So we've actually been very much exposed to this specific AI at play in our world. So today, AI enables scale. We can serve millions and even billions of people very quickly. Speed and decision making in operations and scope, we can do so many more things now that we have data and we can be creative at how we get to solutions.
And I'll give us some examples about this in a little bit. A little bit of groundwork before I do, is around the the what I just described in terms of scale, speed, and scope. What are the ways in which these are operating? Well, there are the three P's predictions, pattern recognitions, that's the facial recognition example I gave you, and automation. A fourth one that's now taking hold more and more. The fourth P is production with agents, and I'll define that for us in a little bit.
Now there are three vectors of value that we need to think about with AI and this is why we say AI means change and radical change. The first one is we need to make sure that we have products that people want to use with features and functionalities that make sense for our world today. The second vector of value is network value. We want as many people using our products and services so we can not only expand those who have value from what we have to offer but also in order to innovate.
And that final vector of value is data, data, data, both internal to our organization and external data as well. And so a flywheel of AI, as you think about what this means for us and how we need to change for this, is that the more data we have that we can harness to serve our customers or stakeholders, or even super serve them, the better the algorithms can become or the models that we use, and the better the services.
So we know how to customize and personalize, and the better the services, people use um our services more, and uh that leads to more data, more data, better algorithms, better uh services, more usage, more data. That's really the flywheel, and this is where innovation truly comes comes through, and often specific to our stakeholders, how we can super serve them. Now, the impact of AI has been quite divided. On the one hand, we know some are really leading the way with AI.
We also know adoption has been a challenge, and I'll talk about that as well. So the impact of AI inside of organization, and there's so much data today to show that people who are using AI, particularly generative AI inside of organizations, are seeing a boost in their productivity. The data, if you look at the many of the studies that have been conducted at the Harvard Business School and way beyond in many other places, a one hour task uh with AI used to take up to three or four hours without AI.
So it's really accelerating what people can do and how they can do them, including by using tools that typically used to be done manually. So if we think about sales and marketing, marketing is an area that's really been pressured and changing in the in the face of AI because of all the video and audio and all the images and all the content creation that's now much faster to do. In finance or even fintech, the legal environment, HR, engineering, customer service, all of these areas, when done well, are really boosting creativity and redefining the nature of competition, which means if a firm is using AI and another is not, it becomes obvious.
On the external side, we have many examples, right? Some examples includes companies like Moderna early on, and the this this mindset shift that we need is captured in this quote by Stefan Bancel, the CEO of Moderna, we're a technology company that happens to do biology. And what we know from Moderna early early on during the COVID days they had only 800 employees Pfizer had 100,000 employees both companies were critical in the production and the delivery of the COVID vaccine in 2021 or so you see the differences in scale Domino's we're a technology company that happens to do pizza Domino's has had a quite the storied run for many years in terms of its performance because
they've put technology and now AI at the heart of everything that they do Rakuten is another example of a company I happen to sit on the board of Rakuten, and I can tell you, Rakuten, uh, when it announced its AI strategy that's called AI-ization, imagine the term, not the not uh the easiest term uh to say AI-ization, but you can imagine what that means. And to put a a much more specific point to this, the AI-ization strategy at Rakuten was to achieve triple twenty business growth, and what that meant was 20% increase in marketing productivity, 20% increase in operating productivity, and 20% increase in client productivity or revenue.
And this was a mandate for the entire organization to pursue and interpret in the right way, depending on the services that uh were um uh uh the services that were um functioning for each of the various businesses that Rakuten has. It has an ecosystem, and within months, the results were staggering, particularly since with this was an organization mandate, plus the 30% rule for everyone. And here's some of the things that um that the the company saw.
One is seventy seven decrease in marketing cost in about four months. For those who had mobile phones, Rakuten mobile phones, we saw an increase of 50% in the e commerce side, and the adoption of AI was pretty massive, particularly because of this mandate and 30% rule, over 25,000 custom bots created internally within the company in a very decentralized way, empower people, equip people, and then they begin to manage their workflows, another 800 agents as well.
Another example I can give you is what was implemented called AI semantic search. So if you need to make a purchase on any e commerce site of any kind, you typically say Amazon. You typically would go on the dialogue box and you say, huh, maybe it's um sneakers. I want sneakers, women's sneakers. Maybe I'll even add uh a size, maybe I won't, maybe I'll add a color or not. I hit enter, and then I see what comes out.
When you embed AI, specifically an AI semantic search, uh, like Rakuten did, you put in, I'm going to a music festival. It's a work event, it's a family event, it's a date, whatever it may be. Um, it might be a rainy day. You know, my favorite color is red. Uh, what do you recommend? And the system would recommend a full outfit. This simple innovation has led to increase in gross merchandise sales, 6.5% here, gross merchandise sales.
If your gross merchant merchandise sales is in the billions, imagine what this number can do. So this is the kind of thing that um leads us to say this is about change, and this is about redefining the nature of competition. I'll give you another big example that's taken the US. beauty industry by surprise and by storm. The third largest sales platform for beauty in the United States is TikTok, and this is how it works. TikTok has over 3 million influencers, and this is an example of how things can play out and do play out.
This particular algorithmic AI process, uh, an example I'm going to share with is of this influencer. His name is Lee Jia Qi. They call him the lipstick king, and he's an ex L'Oreal employee who now is an influencer with hundred with over 100 million followers across many platforms. You see him with a product, he's showing the product. While he's showing the product, there are a couple of algorithms running behind the scenes, an engagement heat map.
Imagine if you can do this for yourselves, and a product heat mat heat map that are determining how engaged your people are, and is this product going to sell? Now, when Li Jia Qi says his catchphrase, oh my god, sis, you should buy this. People buy them in extraordinary ways, and the type of sales that you will see are things like $3 billion in one day. Now, think about our beauty care industries. They never saw this coming.
Now, with this kind of sales, you've got to deliver on that, and this is why the change becomes really important. How do you deliver on this? Once you have this type of sale, you can only deliver on this if you're structured the right way. Number one, data integration. All systems are unified into one platform, one source of truth, allowing marketing, supply chain to be aligned with this influencer's campaign. That's the first thing. The second thing is the inventory management.
You need a unified platform that ensures that when the influencer's campaign is effective and there's a spike in demand, the system automatically is updating the inventory and supply chain uh operations. And then consumer behavior. Consumer behavior, like I showed you the engagement and the product heat map. The heat maps, for example, is a geometric algorithm that's analyzing the videos, the likes, the swipes, and everything in between to determine the level of engagement. And the product engagement is actually a machine learning model that uses historical data and current data to predict uh whether or not this is going to sell and sell well.
And all of these put together ensures that not only is the influencer selling, but you have to fulfill these sales, and you need to be organized in a particular way to do that. And I'll show you what that is. But first, AI agents. I'd be remiss if I didn't take time before we transition to talk about AI agents. And what I'll point to is it's definitely on the rise, it's definitely early days, and it's definitely something that we're going to see and hear about more and more over the next couple of years.
And essentially, what an AI agent if you think about this, and this is Microsoft's definition that I like a lot. Many of the other uh mag seven um have their own definitions, but I think this one is is clear and clean. Microsoft defines AI agents as systems that can plan and act to complete tasks or entire workflows autonomously, with key moments of human oversight. Microsoft released last April, and you might want uh to pull this very easy to get, what they call the year the frontier firm is born.
And they've defined aspirationally three working patterns that includes humans with assistants, humans with digital colleagues, and maybe even human led agents, all interesting to look at as a way to think about what does this mean for us and our workflows, and to try to understand what does it mean to develop uh agents and these autonomously directed uh workflows with human oversight. A site that I like that can give you a sense of how this plays out is n eight n i o.
Check it out. Once you spend half hour on the site, it'll clarify what all of this means. But I bring this up because there are now important reasons to figure out how we need to be organized and what's next for us and why this is a radical change. One is a study by one of our colleagues, Marco Inyasi, that looked at the leaders and laggards when it comes to AI, and they he finds that the biggest driver of success is that with any technological architecture that you bring in, like the unified platform that I mentioned, you need to also change your processes.
You need to innovate in your processes. You cannot cut and paste your old processes onto uh the new platform or the new approach or the new strategy that's AI driven in the forms that I've uh described so far. The second thing is that AI forward companies are organized by data, algorithms, and unified platforms, not just departments. AI platforms or AI organizations look like this. This is the aspiration. You have multiple data sources, including business units that can retain and maintain their independence, but they can share their data.
You can see that middle part where it says AI factory, shared data with lockboxes. It's not just you're throwing all your data into any system. There are all these controls that you need to put in place. But if you have this AI factory right above it, all the various new units like Rakuten are sitting atop of this data platform, like apps on your iPhone. What the non-AI forward companies, like many of our companies, look like this siloed the spaghetti that you see, IT projects, meetings meetings.
Oh, no, you need to go to legal. Oh, no, you need to go to this. Oh, I don't know. No, that's my data. No, that's your data. No, I'm not sharing my data. All the things, right? All organizational, but this is part of the big change that we need to uh get through. Amy, I want to share one last thing, and maybe you and I can uh talk about this. The last thing that I want to share actually is uh existential threat.
I'd like to leave you with this list of uh five point list of existential threat that can determine for you the extent to which you need to change and how you need to change. The first one is will AI disrupt your core capabilities? The second one is are your investor and your competitors investing in and advancing with AI? Third is client expectations. Are they changing? And boy, are they changing? We see it quite clearly in our world.
Four, current tech is constraining your innovation. Think tech debt, and finally, is your culture freezing your company in outdated models? With that, Amy, let's talk. Oh my God. My my chest is tight from those questions, Sadal. Thank you. Um, you got a bunch of questions, Sadal. Let me let me share one that got an awful lot of upvotes from Kanan, who asks, how do we measure the ROI on the efficiency brought by AI? Ah, the ROI question is a massive question.
We hear it all the time, and there are two ways to think about this. There's return on investment that you're not going to get. For example, uh, my uh dear friend and colleague that you know so well, uh, Amy Kareem Lacani says, is there return on investment on Wi Fi? There's some things that we need to do where we're not going to have direct return on investment that you imagine. On the other hand, productivity absolutely goes up uh uh with the use of artificial intelligence, whether it's software development or even creating decks and slides and analyses, et cetera.
So it's hard to say we're going to measure this return on investment, but the thing that you need to measure is how are we innovating? What are the outcomes? We need to be very outcome driven in this world and even in any tech revolution that I've been looking at very, very closely. You need to think about what are the outcomes that we need, and can we measure those outcomes? That's where to go. The outcomes, obsess on outcomes.
I guess that's always true. We should be obsessing on outcomes. Let me ask you one more question. Uh it's it's hard to choose, but let's let's go with this one. Uh from a manual, the AI hype is actually generating a lot of anxiety within our organizations. As leaders, what message can boost buy in and engagement when adopting AI technologies? Every forty years or so, um, there's AI hype. Uh, it's not new, and it could get traced uh back uh quite nicely.
Every forty years, we're uh in in that uh era right now. AI is going to save humanity, AI is going to destroy humanity, et cetera. I think the best approach is number one, you have to demystify AI. 30% for everyone, and this is part of what we're doing at the Harvard Business School. If people understand AI, it really um reduces the fear and the temperature. So training, training, training. The second thing is empirical evidence. don't believe the hype, believe the proof.
so we are always seeking proof, evidence, empirical, empirical, empirical. third, um, be very clear about the use cases that matter and demonstrate them and showcase them inside of your organization so that people can narrow in and focus on the use cases that are most relevant for you. but the hype is going to be there, and it's going to be fierce. that was Tsedal Neeley giving a masterclass on AI as part of our recent HBR strategy summit.
Neeley is co-author of the book, The Digital Mindset. If you found this episode helpful, share it with a colleague and be sure to subscribe and rate IdeaCast in Apple Podcasts, Spotify, or wherever you listen. If you want to help leaders move the world forward, please consider subscribing to Harvard Business Review. You'll get access to the HBR mobile app, the weekly exclusive Insider newsletter, and unlimited access to HBR online. Just head to HBR dot org slash subscribe.
Thanks to our team, senior producer Mary Dew, audio product manager Ian Fox, and senior production specialist Rob Eckhart. And thanks to you for listening to the HBR IdeaCast. We'll be back with a regular episode on Tuesday. I'm Alison Beard. If you listen to IdeaCast for conversations and strategy, you'll want to check out Founder's Mentality, the CEO sessions, in-depth conversations with top executives about the judgment calls that define their careers. Follow wherever you get your podcasts.