@Kcmatt7 is right on the money here. The Chiefs turned Alex Smith into $17M of cap space, a third round pick, and a very good third corner. So immediately they have improved their defense (they now have one of the best, if not the best slot corners in the league).
They have a way to improve even more with both proven players (cap space) and unproven guys (draft pick). They also have flexibility with trade options. They will probably not re-sign Spencer Ware, which frees up more cap space. Their RB situation is set, and its low cost. They can sign a solid backup QB without breaking the bank. They can add more help on both the offensive and defensive lines.
Simply put, the Chiefs put themselves in the best position to strengthen their roster in 2018 and 2019 by moving Smith, which means they can maybe make a run if not this year, then in 2019.