There are two separate functions for a coach or instructor in the martial arts, modeling and coaching. By modeling I don't mean posing in trendy outfits, I mean demonstrating - whether it be demonstrating proper technique, proper attitude, or proper intensity. Coaching is also multifaceted. Coaching entails structuring group workouts, directing progress (you need to work on X and Y, but not Z), and offering appropriate coaching cues to improve technique (keep your elbow down when your punch, etc.)
Both functions are important, but not equally important to every student at every time. I remember thinking I was doing okay at a particular set of pre-arranged movements in my style (not kata, but something similar). One day in class, by chance, I happened to be lined up next to a 4th degree black belt who trains with us on occasion. He was half a step ahead of me and I noticed the way he was moving. It's not easy to describe, but there was a quality to his movements that mine were lacking - they were forceful, dynamic, and very clear. This was a pretty good example of modeling. He wasn't showing me anything - I have no idea if he even noticed that I was there, or that I watched him, and he certainly wasn't trying to demonstrate anything - he was just going about his daily training. That experience really motivated me to work harder, and probably gave me a little humbling that I needed.
Examples of good coaching are, if anything, easier to catch. Anytime your teacher taps you on the shoulder and tells you to keep your abs tight or mentions that you should work on a particular kata you're being coached.
The skills of coaching and modeling are very different. Some people are more gifted than others. They may move well without knowing "how" they move. These people tend to be good modelers but are often mediocre coaches. My best coaches have tended to be the least athletically gifted - they're the ones who had to intellectually break down every technique, every bad habit, every facet of movement, and they're often the ones who are best at verbally conveying that information.
The ideal combination would be to have a karate genius to watch, for modeling purposes, and a karate idiot (talent-wise) as your coach. Scott Sonnon does a great job of selling himself this way. His entire pitch is that he's a guy with learning disabilities and a distinct lack of talent who had to learn techniques for developing himself into a great athlete - techniques he's willing to share with us. I'm not necessarily a huge fan of his particular system (that's a topic for another blog), but I love the marketing thrust he uses.
Not every genius will be a bad coach - some geniuses, through working with less talented students, acquire excellent coaching skills. But as a student you have to identify the strengths of your seniors and work accordingly. If you think you're moving well, who can you watch at practice and compare yourself to? If you are having trouble throwing a spinning kick, who is most likely to be able to pass on the cue(s) that you need to improve them? If you don't know what to work on next, who is going to give you the best guidance?
In addition, coaching and modeling skills vary across techniques and areas. The best kicker in class might not be the best puncher. The person who can guide your technique might not know much about strength and conditioning. And so forth.
In the modern era good coaching is more important than good modeling. Why? Because you can see good karate on YouTube (along with lots of bad karate, of course). Your coach has to work with you personally, which makes remote coaching very difficult (though possible - I can imagine a scenario where you send videos of yourself to a coach and get feedback, but I have to think that's less valuable than having a coach in class). Unfortunately, it's harder to tell who is going to be a good coach. You can see the quality of somebody's karate - which tells you how good they are at modeling - but assessing coaching ability takes a lot longer if you're trying to choose an instructor.
If you are yourself an instructor, you need to work very hard to assess and re-assess your own coaching ability. Are you giving too many cues at once? Are you providing feedback to your students? Are you giving coaching cues in the right order (fixing big mistakes before little ones)? Are your workouts structured properly? Most importantly, remember that many of your students are probably less talented than you, and will need help with things that you mastered easily. That is the downside of having talent.