Your AI Strategy Is Failing Because You Didn't Restructure for It

Eoghan McCabe, founder and CEO of Intercom, co-founded the company 14+ years ago, left the CEO role in 2020 due to illness, and returned to find a bloated company with diluted strategy on a trajectory toward zero net new ARR. His transformation of Intercom into an AI-first company is the most dramatic case study in the archive.

Intercom was making hundreds of millions in ARR but had suffered five quarters of sequential decline. McCabe returned and one month later ChatGPT launched. He didn't treat it as a feature opportunity. He treated it as a survival event.

"I said, we need to become a wartime company. If we don't fight for this, we are dead. I jumped hard on AI, but I also restarted the culture. I rewrote the values designed to be a sharp knife to cut out the parts of the company that I just knew wouldn't be effective."

Eoghan McCabe

▶ 00:00:33

The values-as-sharp-knife metaphor is worth unpacking. Most companies write values that are inclusive and aspirational. McCabe wrote values designed to exclude -- to make clear that people who needed consensus before acting, who valued stability over urgency, should leave. Forty percent of staff turned over. But six weeks after GPT-3.5 launched, they had a working prototype of Fin. That speed was only possible because Intercom already had AI engineers doing rudimentary ML for customer service, and because the wartime culture eliminated every form of organizational drag.

The results speak for themselves: Fin grew from $1M to $12M ARR in its first year, is growing north of 300%, and will pass $100M ARR in less than three quarters. Intercom is now the biggest by customer count and revenue in the customer experience AI category, rated number one on G2.

"The way that greatness is created is that you find a CEO who's willing to make brave hard decisions and own the results."

Eoghan McCabe

▶ 00:00:52

This is the nuclear option, and McCabe is honest about the conditions that made it necessary: existential threat. When your core product -- customer support -- is directly threatened by AI agents, incremental integration is a form of denial. But McCabe also proved his willingness to take pain beyond headcount: Intercom wrote down roughly $50M in ARR by simplifying pricing, accepting short-term revenue loss for long-term clarity.

Dhanji R. Prasanna, CTO of Block, oversees 3,500+ people. He wrote the "AI manifesto" letter to Jack Dorsey that kicked off Block's transformation -- while he was part-time, having just had a kid. Under his leadership, Block has become one of the most AI-native large enterprises in the world.

Prasanna's approach is structural rather than cultural. Block had experienced what he calls "identity drift" -- thinking of itself as a financial services company when it was fundamentally a technology company. The company was organized into GM-led business units (Square, Cash App, Afterpay, TIDAL) that operated as separate companies with their own engineering teams, design teams, and even separate offices.

"This is what Jobs did when he came back to Apple as well. He reorganized Apple to be functional, and it wasn't like we were following a playbook. We discovered this as we were investigating what it's going to take to make these teams more tech-focused and to bring our DNA back to our roots, which really was putting engineering and design first, which is what technology first means to me."

Dhanji R. Prasanna

▶ 00:11:19

The reorganization unified all engineers under a single head, all designers under a single head. This enabled centralized AI strategy -- including the development of Goose, an internal open-source AI agent. The results are concrete:

"We find engineering teams that are very, very AI forward are reporting about eight to 10 hours save per week. Whenever I hear a stat like this, I think an important element is this is the worst it will ever be. This is now the baseline."

Dhanji R. Prasanna

▶ 00:00:07

The most surprising finding is who benefits most from AI tools. It's not engineers -- it's non-technical people using AI agents and programming tools. People who embrace the tools to optimize their particular workday show the most impact. Goose even monitors Slack conversations and proactively opens PRs for features being discussed.

Prasanna explicitly invokes Conway's Law to explain why structure matters more than strategy:

"Conway's Law can be really, really powerful. So it's the law that basically says you ship your org structure. So what you're organized as in terms of teams, in terms of collaborating groups and your operating model matters a lot to what you build."

Dhanji R. Prasanna

▶ 00:12:13

Lenny's newsletter profiled Block's GM-to-functional transition in detail: Jack Dorsey told shareholders that "the past organizational structure was holding us back, slowing us down, and weakening our skills." The same analysis showed Airbnb reverting from GM to functional after divesting new bets, and Shopify's functional model enabling more coherent product experiences -- reinforcing that the functional shift is a broader pattern, not a Block anomaly.

Brian Balfour, CEO of Reforge, runs the premier executive education platform for product and growth leaders. Reforge works directly with dozens of companies undergoing AI transformation, giving Balfour a uniquely broad sample of what's actually happening versus what executives think is happening.

Balfour provides the most sobering reality check in this debate:

"Most CEOs or most executives are incredibly disconnected from the actual AI adoption taking place inside their companies. I think a lot of executives who have done these decrees and all that kind of stuff think it's happening naturally."

Brian Balfour

▶ 01:14:15

The disconnect is not abstract. He describes a principal PM at a major tech company -- a company we would all recognize -- who shared an AI prototype with colleagues. The designer and eng manager escalated it to VPs. A month later, it was still stalled. The PM happened to mention it to the CEO at a happy hour. The CEO had no idea it was stuck. The next day, it happened.

Balfour's framework segments employees into three groups: catalysts (leading the charge on their own), converts (will adapt given structure and permission), and anchors (dragging their feet, creating silent friction). The companies that separate themselves are making the hardest decisions about anchors -- setting hard deadlines for transformation or exiting people.

"One company that we worked with developed this constraint that they benchmarked against other companies of their revenue size and the team sizes for those stages, and they set a benchmark that we will be one-fifth, each of our functions will be one-fifth the size."

Brian Balfour

▶ 01:09:30

Hard constraints -- headcount caps, mandatory prototypes before product reviews, no new hires until you prove AI can't do it -- force adoption where encouragement fails. Balfour also channels a critical systems insight from Fareed Mosavat: "Your output is constrained by the slowest part of your system." If you only accelerate engineering with AI coding tools, you just shift the bottleneck to PM and design. Product is the output of all three functions, and the system only moves as fast as the slowest.

Melanie Perkins, CEO and co-founder of Canva, is on track to be one of the most successful tech founders in history. Canva is valued at over $42 billion, makes over $3.3 billion in revenue per year, has been profitable for eight consecutive years, and was rejected by over 100 investors before succeeding.

Perkins offers the product-first counterpoint to every form of organizational restructuring. When asked how Canva integrates AI in a way that is "really helpful and people love it," she gives a disarmingly simple answer:

"Your question is actually the answer at the same time. I think being able to integrate it into the product where it actually helps people to get their work done where it genuinely helps them to achieve their goals, and then being really open to listening to your community and hearing what they're loving, what they're struggling with and refining from there I think is really, really important."

Melanie Perkins

▶ 00:52:56

Canva has embedded AI across the entire product -- the design tab used 170 million times a month, the elements tab used 900 million times a month. Users can generate videos, photos, code, and use an AI collaborator directly through comments. But none of this required a radical restructuring. Canva's mission -- "empower the world to design" with minimal friction between idea and result -- naturally incorporates AI. Perkins notes they were trying to do AI "before AI was actually a thing" because reducing friction between intention and output was always the goal.

"Just because AI is all the rage and investors really like AI doesn't necessarily mean it should be front and center, but if it can genuinely help your customers to achieve their goals."

Melanie Perkins

▶ 00:52:56

The philosophy extends to community-driven rollout. When teachers requested MagicWrite in classrooms, Canva unlocked it with safety controls rather than deciding top-down where AI should go. This is the opposite of a wartime mandate -- it's peacetime product evolution guided by the people actually using the product.