This is the next big thing in corporate AI

For the past two years, artificial intelligence strategy has largely meant the same thing everywhere: pick a large language model, plug it into your workflows, and start experimenting with prompts. That phase is coming to an end.

Not because language models aren’t useful, with their obvious limitations they are, but because they are rapidly becoming commodities. When everyone has access to roughly the same models, trained on roughly the same data, the real question stops being who has the best AI and becomes who understands their world best.

That’s where world models come in. 

From rented intelligence to owned understanding

Large language models look powerful, but they are fundamentally rented intelligence. You pay a monthly fee to OpenAI, Anthropic, Google or some other big tech, you access them through APIs, you tune them lightly, and you apply them to generic tasks: summarizing, drafting, searching, assisting. They make organizations more efficient, but they don’t make them meaningfully different. 

A world model is something else entirely. 

A corporate world model is an internal system that represents how a company’s environment actually behaves — its customers, operations, constraints, risks, and feedback loops — and uses that representation to predict outcomes, test decisions, and learn from experience.

This distinction matters. You can rent fluency. You cannot rent understanding.

What a “world model” really means for a company

Despite the academic origins of the term, world models are not abstract research toys. Executives already rely on crude versions of them every day:

• Supply chain simulations
• Demand forecasting systems
• Risk and pricing models
• Digital twins of factories, networks, or cities

Digital twins, in particular, are early and incomplete world models: static, expensive, and often brittle, but directionally important. 

What AI changes is not the existence of these models, but their nature. Instead of being static and manually updated, AI-driven world models can be:

• Adaptive, learning continuously from new data
• Probabilistic, rather than deterministic
• Causal, not just descriptive
• Action-oriented, able to simulate “what happens if…” scenarios

This is where reinforcement learning, simulation, and multimodal learning start to matter far more than prompt engineering.

A concrete example: logistics and supply chains

Consider global logistics: an industry that already runs on thin margins, tight timing, and constant disruption.

A language model can:

• Summarize shipping reports
• Answer questions about delays 
• Draft communications to customers
• A world model can do something far more valuable.

It can simulate how a port closure in Asia affects inventory levels in Europe, how fuel price fluctuations cascade through transportation costs, how weather events alter delivery timelines, and how alternative routing decisions change outcomes weeks in advance. In other words, it can reason about the system, not just describe it.

This is why companies like Amazon have invested heavily in internal simulation environments and decision models rather than relying on generic AI tools. 

In logistics, the competitive advantage doesn’t come from just talking about the supply chain better. It comes from anticipating it better.

Why building a world model is hard (and why that’s the point)

If this sounds complex, it’s because it is. Building a useful world model is not a matter of buying software or hiring a few prompt engineers. It requires capabilities many organizations have postponed developing.

At a minimum, companies need:

• High-quality, well-instrumented data, not just large volumes of it
• Clear definitions of outcomes, not vanity metrics
• Feedback loops that connect decisions to real-world consequences
• Cross-functional alignment, because no single department “owns” reality
• Time and patience, since world models improve through iteration, not demos

This is exactly why most companies won’t do it — and why those that do will pull away. The hardest part of AI is not the models, but the systems and incentives around them. 

Why LLMs alone are not enough

Language models remain invaluable, but in a specific role. They are excellent interfaces between humans and machines. They explain, translate, summarize, and communicate. 

What they don’t do well is reason about how the world works.

LLMs learn from text, which is an indirect, biased, and incomplete representation of reality. They reflect how people talk about systems, not how those systems behave. This is why hallucinations are not an accident, but a structural limitation. As Yann LeCun has argued repeatedly, language alone is not a sufficient substrate for intelligence. 

In architectures that matter going forward, LLMs will play along with world models, not replace them. 

The strategic shift executives should make now

The most important AI decision leaders can make today is not which model to choose, but what parts of their reality they want machines to understand.

That means asking different questions:

• Where do our decisions consistently fail?
• What outcomes matter but aren’t well measured?
• Which systems behave in ways we don’t fully understand?
• Where would simulation outperform intuition?

Those questions are less glamorous than launching a chatbot. But they are far more consequential.

The companies that win will model their own reality

Large language models flatten the playing field. Everyone gets access to impressive capabilities at roughly the same time.

World models tilt it again.

In the next decade, competitive advantage will belong to organizations that can encode their understanding of the world (their world) into systems that learn, adapt, and improve. Not because those systems talk better, but because they understand better.

AI will not replace strategy. But strategy will increasingly belong to those who can model reality well enough to explore it before acting.

Every company will need its own world model. The only open question is who starts building theirs first.

View the full article