This is a summary of the event on 17th July at the Shard London where we looked at how Artificial Intelligence is Transforming the Retail industry and how that is impacting the use of Customer Data.
The event was excellently hosted by @Andy Pardoe and expertly chaired by Martin Hill-Wilson with contributions from @Mary Wallace (IBM iX)and Julian Burnett (VP Global Markets at IBM) and @Mignon Mappleback (IT Director and CIO), Mark Janoff from Gallup, @Martin Green from Thoughtspot and Karl Barnfather from Withers and Rogers LLP.
I kicked off my presentation titled “are people machines” by asking what is the purpose of a business?
1. growth and dominance or
2. profit, people and sustainability
75% of the delegates voted for profit, people and sustainability.
Then I asked the directors forum “do they know what drives them”: only 2 delegates voted indicated they did
If we don’t know what drives us maybe it is no wonder the business outcome and actions, we are heading towards is akin to growth and dominance at the cost of profit, relationships and sustainability!
So, as Hannah Evans suggested: “can businesses continue to leverage AI at the possible expense of sustainability, business profit and human relationships?
As Mary suggests are people being left out of the tech decision making and highlighted the increase in marginalised people living in the catacombs under Paris, who prefer to drop out altogether
Mignon provided an overview of the technologies and choices
Joanna said “We are over-estimating the short term and under-estimating the long-term impact of tech”
My concern was to highlight how our actions have become distorted threatening business profit sustainability and relationships and are we in control.
1. Why are online retail costs higher than a multi-channel brick and mortar / online model?
2. 75% plan to invest but 42% have 0 business case, and only 1/8 2018 have succeeded
3. Machines replace p2p contact ( people are relational)
4. “Tech is inevitable” most don’t trust so are people wrong to object?
5. Growth aka ASOS hitting profits
6. “Online is the future” for every store that closes 2.7 open
7. “Service levels are a differentiator” service is pretty much on parity
8. “Online is the future” depends on demographics and high st sales/ sq’ has been increasing
9. “Chore vs cherish shopping” is there such a thing as chore shopping: retail always is an ART?
10. “Efficient standard format” Wyevale, Jamie Oliver, Little Chef show this demises profit
11. “Online is lean and efficient” Operating costs are 20% higher than a multi-channel retailer
12. Waitrose “tech and efficiency drives CX” – does it?
Customer experience is the chemical experience of the fun transmitter dopamine, our brains cannot cope with the tech-driven version, “we should not do it even if we can”
Tech-driven CX is abusing a useful and necessary system. Dopamine undermines willpower and screws our decision making, planning concentration and rational thinking and its addictive.
Dopamine is the same experience as that triggered by drugs and alcohol…
The tech working alongside people is a misnomer because there is no overlap between the human and tech version of the
1. knowledge source and
2. intelligence processes… or means to fix problems
The Growth focus in retail creates a tyranny of tolerance and overrides sustainability. As sustainability is of prime importance to 20 somethings this visibility through social media pressure threatens the existence of ASOS and other fashion retailers.
The issue is online retail has moved the changing room to the home with 40% returned and large reverse logistics costs and waste
The automated “tech fixes” don’t improve profits: the Ocado business model is loss-making (asset depreciation is vast) and ROI is tougher to achieve because it requires a huge £000’s M investment to launch an automated warehouse.
Even with a 48% gross margin, ASOS is only making 0.3% net margin. So the hidden costs of water and repairing environment damage is not costed for in the purchase nor can be accommodated for in the sales price. All in a purchase price that recovered this could far exceed the current purchase price?
With decreasing differentiation and the immediate emergence of the platform businesses such as Didi its clear that price will be the final frontier online leading to a reduction of profits which will further starve the coffers and credibility of national governments, in favour of these immensely powerful multinationals.
Asos shares’ price is increasing because the investors are still willing to “take a bet on the future”, says Neil Wilson… If betting is taking over the traditional investment controls – investors might be losing control and betting too is addictive!
Amazon has started making money because it has moved into an intermediator business model. Intermediator business models are perverse because the intermediator makes far greater margins than the people providing the products.
Intermediators are now designing Waymo and Mobike products to suit the business models of Google and convergent platform models such as Didi. These will undoubtedly usurp the automotive OEMs products like Jaguar.
Didi is a profitless growth model which are almost impossible to compete with, and no investor will invest in. This begs the question who will pick up the pieces?
“Chatbots continue to grow and their impact is growing” This is in the context of leadership that has failed to engage 85% of their employees. So the growth and popularity of chatbots fuelled by weak leadership and processes?
“Machines will accelerate human achievement”, this is impossible because there is little overlap and people simply won’t be able to keep up with the exponential rate of learning
“People are more adaptable than machines” UK STEM government director, machines are now capable of designing mechanical designs and win games from scratch and during the process learn from their own exploration themselves, making it very difficult for people to rationalise or be qualified to validate the output.
• There were only 316k Luddites in the UK vs 75% of 32m UK workers
• An FTSE company employs 75% more people than the equivalent Tech Co
• Remove menial tasks is sensible, these are entry-level learning roles that make ANY work accessible for everyone. ANY work too even in the Bible is a pillar of wellbeing.
The challenge here is that analysts playing down the impact of tech on work is that they are looking at the “As is” business models rather than the emerging “platform businesses?” which are here now.
The next wave of platform businesses aka Alibaba is now moving into b2b trade, this will control the pricing and b2b market. Alibaba is now a listed US company so US investors will be looking to fuel its growth: surely a conflict?
The paradigm of endless growth presents an existential threat to humanity, work and the environment
These flawed paradigms create these risks:
• ONLINE OPS REDUCE PROFIT BY 23%
• UNSUSTAINABLE CONSUMPTION
• REDUCING PROFIT: DIFFERENTIATION?
• SUSTAINABILITY THREATS
• UNRECOVERED ENVIRONMENT COST
• CAN’T QUELL DEMAND
• WASTED TECH INVESTMENT
• CHEMICAL ADDICTION
• CAN’T UNINVENT
What’s the solution? The winningthinking.uk 1-day program enables teams to realign strategy with their challenge and create the awareness of each individual of what drives them. In that way, they can stay on track.
In the meantime, these tech actions create conflicts in approach and tyranny of tolerance which destroys the integrity, profits and alignment of retail and other businesses.
Marc Janoff from Gallup highlighted the role leadership must play to close the gap to make workplaces safe places to experiment, make mistakes, learn. Places that encourage open communication, agility and innovation. With 85% employee DISengagement and misaligned tech strategies, weak leadership there is rightly much fear. So there is a long way to go!
Executive summary
On ethics, I’m pretty sure we need real women in boardrooms rather than the type that “out aggressive” the men, and consider how well-positioned we are to control the growth of tech and AI and take action to correct this.
This is Brown’s (Dopamine labs) ethics test
a) Should this dopamine trigger work in this?
b) Should this change human behaviours?
c) Does this engagement encourage human flourishing?
d) If not, does it at least not make the human condition worse?
Furthermore, if as humans we are unable to get control of this, we should regulate the roll-out of the technology, and develop strategies that get technology in perspective and a means of achieving profit, relationships and sustainability?
As Julian Burnett said focussed tech investment such as blockchain (for supply chain traceability) and virtually trying on clothes (to reduce logistics costs) makes much business sense. Both of which enhance retail as Julian sees it “bringing people together to buy things.” In addition, supply chain replenishment is a useful back-office tech application.
People are relationally dependent on each other for their intelligence, health and well being, so to the contrary, we are not machines.
On innovation we are falling behind: China filed 473 AI-related patents vs US 65 vs 27 in the UK
AI in Online retail: “should we do it – even if we can?”
Let’s get a grip? To get a grip and removes the barriers to innovation run a 1-day www.winningthinking.uk program. it works 🙂
Cheers Tom
Tom Pickering is an internationally renowned business turnaround practitioner, portfolio chair, former Tech Silicon Valley Exec, CEO of the Year 2018, MBA Masterclass Leader. An award winner from 2002-2019. As a pioneer, he has developed a breakthrough capability winningthinking.uk. As CEO of icebreakerexecutive.com this has been the underlying capability has enabled his highly skilled team to turn around over 200 companies x-sector over the last 15 years.