From Arrowhead Pride:

Chris Ault, father of the pistol offense, told me one QB who'd be really good at running it would be: Alex Smith!
Yes, the QB who was replaced by Colin Kaepernick. Ault said when he was at Nevada and Smith was at Utah, he thought he'd be perfect for what they were trying to develop. "An Alex Smith could run the read system also," Ault said. "I remember him at Utah, he would have been an excellent pistol quarterback."
Since the Chiefs traded for Alex Smith, I have liked and defended the move because I believe that if you build an offense that is tailored to your QB's strengths, then that player has the opportunity to perform at an ELITE level. Tom Brady is an elite QB but if you put him in the pistol offense that they run in D.C., Seattle, and San Francisco, he'd be one of the worst QB's in the league. Put a running, athletic QB in an offense where he has to make reads, go through progressions, and call plays at the line, and he'll go from being above average to below average. (see Mike Vick)

There are currently several different offenses being run in the NFL. If you ask your QB to do things that are not a strength of his, chances are, that QB simply will not perform to his potential. I believe that has been the case for the majority of Alex Smith's career. Andy Reid thought Smith would be a perfect fit in his offense, they've brought in Childress to install some spread offense, and now they've brought in Ault to install some pistol. Reid's West Coast offense is a great foundation to install spread and pistol formations.

Alex Smith was chosen #1 overall because he showed attributes that made scouts, GM's, and coaches think he had the tools to become a franchise cornerstone QB capable of performing at an elite level year in and year out. If Alex Smith were just the run-of-the-mill first round QB "bust," he wouldn't still be in the league. (see R. Leaf, V. Young, Akili Smith, J. Russell etc) Smith has had his share of injuries and those concerns are not to be taken lightly. However, I think they are a separate issue than whether or not he can perform at an elite level in the NFL based purely on his skill-set.

If the Chiefs manage to build an offense around Smith that highlight his strengths rather that trying to mold him into what the coaching staff wants him to be, then barring injury, Alex has the talent, support, and staff around him to be able to produce at a top 5 level at his position. Whether or not all that comes together for him is yet to be seen, but this staff is absolutely putting Smith in a position to be successful.

By the way, anyone want to do a comparison of Russell Wilson and Chase Daniel? Chase Daniel in a spread/pistol offense after sitting behind Brees and Smith for a few seasons could be an absolutely terrorizing proposition for future defenses. Just keep that in mind as the Chiefs install their new offense and having made Daniel a WELL-PAID backup QB behind a guy like Smith who has a history of injuries.