The way I think of it is that in a business you often need to get a certain fixed number of things right before you could even start to make money.
Indeed, 95% of those things are mundane and tractable (maybe you have to be fast and careful), but the remaining 5% are challenges that can only be solved by specialized knowledge or some innovation.
If you hire someone good at solving mundane problems, they can contribute to the 95%. But if 95% of the company is hired like that, the pool of people you can draw on to do the remaining 5% is Another approach is to hire, say 50% to do mundane work and 50% to do both mundane work and more special work. This costs more, but if done right it can make the company move faster, and have better chance to survive than any case of the former.
First of all, it's often (but not always) the case that people who can do special work can be trained to do the mundane things better. Second, having many people who can solve one-of-a-kind problems is especially important if for each project the 5% can depend on a different set of things; it's often also the case that solutions to the innovative work is closely related to experience dealing the more mundane parts, so this structure basically recognizes that innovation can come from rank and file rather than a specialized "ideas guy" that just flies by to solve problems. So what happens in certain small but profitable companies is that they try to find people who are happy to do dirty work, have a business mindset, but at the same time show signs of being innovative.
This is not to say I agree leetcoding is a good test. I think Google and Facebook don't test enough whether someone is capable of or interested in identifying technical priorities with a business mind. Although Google has some data to connect leetcode performance to job performance, I'm skeptical of their performance evaluation methods.