21-07-2025
How's Your AQ? Why Adaptive Intelligence Is Key For Managers
If IQ reflects reasoning ability and EQ captures emotional insight, AQ is the capacity to adapt when ... More reality fails to align with our expectations.
In a world where change is the only constant, our greatest risk isn't ignorance — it's certainty.
Executives often pride themselves on their ability to recognize patterns and make quick decisions, grounded in hard-earned expertise. This may be valid in stable environments, but when the ground shifts — through technological disruption, changing consumer behavior or global shocks — those once-reliable patterns can quickly become traps.
Faced with this dilemma, people often double down on past strategies precisely when they should be reexamining their long-held assumptions. Mental models — the internal maps we use to make sense of how the world works — can start acting as blinders rather than guides.
This dynamic shows up across all types of organizations. But in the family-owned firms I work with and study, where identity, legacy and deep emotional ties run deep, the pressure to preserve tradition can make strategic shifts even more challenging.
This is where adaptive intelligence (AQ) becomes essential.
What is AQ?
If IQ reflects reasoning ability and EQ captures emotional insight, AQ is the capacity to adapt when reality fails to align with our expectations.
It enables us to detect when our assumptions, habits and beliefs are obsolete and update them accordingly. AQ helps us unlearn what no longer serves us and remain open to learning in real time.
In the context of family business, this ability is vital. The stronger the legacy, the easier it is to become overconfident. And the longer a playbook has delivered success, the harder it is to discern when it's time for a rewrite.
When traditions become barriers
Our brains are built for stability. We seek predictability and use mental shortcuts to make decisions quickly. These shortcuts are efficient but naturally conservative.
Once we develop a mental model — about a customer, a strategy or a market — we tend to ignore data that doesn't fit. Sometimes we even distort the information to confirm what we already believe. That's confirmation bias.
In family firms, this tendency is frequently intensified by emotional attachment to the past. Narratives like 'this is how my father ran the business' or 'we've always done it this way' can create a sense of consistency, but they can also evolve into unexamined rules that limit innovation.
The cost of certainty
Consider a second-generation industrial firm built on product quality and long-term supplier relationships. This approach worked well for decades, yet as customer expectations shifted toward speed, digital convenience and sustainability, the leadership continued to lean on its traditional strengths.
Younger family members pushed for change, but senior leaders dismissed their warnings. 'Our clients value relationships,' they insisted. 'They trust us.'
By the time the higher-ups recognized the shift, more agile competitors had taken the lead. Their brand had lost relevance — not because they lacked effort or talent, but because they failed to question an outdated mental model.
Building adaptive intelligence in your company
The good news is that AQ can be developed. It's not a fixed trait but rather a mindset and set of skills that any business leader, regardless of the type of company, can cultivate.
1. Make the invisible visible
Adaptability starts with metacognition — the ability to reflect on how we think. Ask yourself: What assumptions are shaping our decisions? Which beliefs are we treating as facts? What 'truths' might no longer hold?
Family firms often operate under invisible rules around loyalty, authority and risk. By making these rules explicit, the leaders of family-owned firms are able to question whether they still support organizational strategy.
2. Practice intellectual humility
AQ hinges on the willingness to admit, 'I might be wrong.' This humility must be modeled by leaders at all levels, particularly those with the most experience.
Encourage open questions and respectful disagreement. Make it safe to challenge long-standing views — not to undermine tradition, but to ensure the company stays relevant.
3. Run 'what if' scenarios together
Ask yourself tough, forward-thinking questions: What if our flagship product becomes obsolete? What if a digital disruptor enters our market? What if key family members clash over the future direction of the firm?
These scenarios are not predictions: they're exercises. The goal is to stress-test your assumptions and prime your mindset for the unexpected. Simply discussing these possibilities together across generations and roles can reveal blind spots and highlight mental models that need updating.
In many family firms, these conversations only happen when a crisis arises. Establishing the habit earlier sharpens your adaptive intelligence before you need it most.
4. Design for diversity
Firms can unintentionally become echo chambers, especially when leadership is drawn from a narrow pool, as is the case with some family firms.
To break this cycle, bring in non-family executives, appoint independent board members and encourage next-generation family members to gain experience in other industries and cultures. AQ thrives when we are exposed to different ways of thinking.
5. Redefine failure and success
In many family businesses, failure is often seen as personal, like a stain on the family's reputation. But when mistakes are punished or hidden, innovation stops in its tracks.
Instead, reframe failure as part of the learning process. Celebrate thoughtful risks and create space to share what didn't work, what surprised you and what was learned.
AQ as a legacy skill
The most enduring family businesses pass down more than equity and ancestry — they pass down a mindset, a commitment to adapt, to stay alert and to lead with both curiosity and conviction.
Adaptive intelligence may not show up on a balance sheet, but it could be your most valuable asset. It safeguards against complacency and ensures that your legacy stays dynamic and relevant.
Unlike your founding year or family name, AQ is something every generation must earn — by staying open to growth.
By Álvaro San Martín, Chair of Family-Owned Business and professor in the Department of Managing People in Organizations of IESE Business School.
