Artificial Intelligence Implementation in Retail Industry: A SWOT Analysis

This case study investigates current state of Artificial Intelligence (AI) implementation in retail industry. Amazon is the prime organization in retail industry that has been using AI in its product manufacturing, supply chain, human resource management, administration, and product marketing. The company is well ahead of its competitors in adopting AI into its business model and implementing machine learning in establishing new business models. A SWOT analysis on the adoption of AI into Amazon’s business model is performed. The result of the analysis reveals that the company will experience a strong business position and increased profitability through the adoption of the AI. It can thrive to explore new business opportunities through continued exploration of the technology. However, Amazon will have to be ready to face certain challenges and threats that are inherent to the AI adoption in business. Few recommendations and a brief implementation plan are presented in the paper with a focus on current adoption issues in mind. The analysis leads to the fact that Amazon has the ability to adopt AI into its business model and can exploit the full potential of the technology to enhance its market share and profitability.

Artificial Intelligence in Business: A S.W.O.T. Approach

Introduction

Artificial Intelligence (AI) and deep learning algorithm are in extensive use in retail industries but businesses were failing to exploit the super-smart future technology to full extent. Like many of us, the business leaders and decision-makers hardly know the full potential of an AI and thus, fail to fit the emerging technology to their business model (Ransbotham, Kiron, Gerbert, & Reeves, 2017). Still being in its infancy, the technology never ceased to surprise the industry with its enhanced capability to disrupt the world of retailers. Amazon is no exception. The giant retailer of the world, has shown its excellence in successful implementation of AI into various business models and gain market share. The company needs to develop a robust business plan considering future of the technology and its implications into its industry and business models. This paper sheds some lights on Amazon’s current position in AI adoption and future implications followed by recommendations and implementation plan.

Key Problems

Lack of proper knowledge how AI works and overly exaggerated expectations from an AI during its early stage of implementation are two major problems that hinder proper adoption of AI in an organization. An extensive study performed by Ransbotham, Kiron, Gerbert and Reeves (2017) on a global scale, surveying of more than 3,000 executives, managers, and analysts across several industries and interviewing more than 30 technology experts, shows that business leaders have wrong perception about AI. About 85% of the leaders believe that the role of AI is to help organization to transform the business into a new model. Certainly, they fail to realize the benefits of the technology in their business revenue.

An AI is not inherently intelligent rather it is talented to learn inductively from a large assortment of ‘big’ business data. Many companies take AI’s intelligent for granted and never facilitate proper learning environment for it. Lack of analytics expertise and easy access to business data are two major problems that prevent AI from helping businesses streamline their processes in line with the market demand and competitive environment (Ransbotham, Kiron, Gerbert, & Reeves, 2017). Essentially, large investments in AI fails miserably, which turns the business down.

For large organizations, the implication of the need for change in culture to accommodate AI can be extraordinarily complex and unachievable. AI cannot operate successfully without proper organizational flexibility, which difficult to achieve the concerned staffs and management do not deem it necessary.

Data privacy and regulatory concerns prevents smooth adoption of AI into business operation and hinders its growth. For example, an insurance company or a financial company that deal with the customer data cannot simply allow AI to analyze their data due to strict regulatory compliances around disclosure of private data (Ransbotham, Kiron, Gerbert, & Reeves, 2017).

Analysis and Evaluation

Current Position of Amazon in AI Adoption and Implementation

Amazon is the largest online retailer of the world and a pioneer in the industry. It is the titan of logistics, e-commerce, data storage, hardware and media (Voigt, Buliga, & Michl, 2016). Like many areas of business, where Amazon has led the industry through the adoption of the new technology, it sets its feet as one of the early adopter of artificial intelligence. The company has set an example by adopting AI for its size and variety of operations.

Amazon uses AI driven robots that are taught through a technique called “imitation learning” to imitate human workers grasping a wide range of objects that are available in Amazon’s shelves. These robots can distinguish between fragile, soft, heavy and hard materials and handle them properly without exerting excessive or less force on the container box (Simon, 2017). The company further employs reinforcement learning to train its picking robots learn on a trial and error basis for the best possible speed and accuracy. There robots have revolutionized Amazon’s retail business, logistics and supply chain management and helped the company retain its market leading position.

Besides its retailer and supply chain, Amazon started using AI into its cloud computing business Amazon Web Services (AWS) to remain competitive in the dynamic market. The company started offering its cloud business clients expert consultancy to teach them the basic of AI, skilled assistance to help them prepare their data and business model for AI adoption and training sessions to help them know how to handle the AI output (Amazon, 2017). The implementation of AI has seen its outcome quickly; in the most quarter that ended in December 2017, AWS has recorded a 55% growth over prior quarters, which accounted for 10% of total company income (Vena, 2017). AWS earned a total of $4.6 billion revenue, which helped the company remain profitable despite the loss it faced from the expansion of its ecommerce business (Vena, 2017).

Amazon started new product line based on the voice recognition feature of AI; under the new business name ”Echo”, Amazon has developed many home appliances that can be activated and operated through voice (Levy, 2018). The company has started Amazon Go, the first cashier-less retail store in the world, which will continue to pave the road to future shopping (Ghoshal, 2018). This AI based retail shop extensively uses computer vision and adaptive learning algorithm that can accurately keep track of items that a customer lifts and perform check outs accordingly.

As a new business model, Amazon is currently thinking to provide AI services to other business through enabling them enjoy the true potential of AI. Under this new business model, the company will offer training, workshops, consultancy and industry level expertise to its clients to help them implement the AI in their businesses (Levy, 2018).

Implication of AI Adoption for Amazon

Amazon is already hitting the market and the industry with its state-of-the art AI implementation. The company is leveraging the intuitive learning capability of AI into its profit enhancement and market position strengthening. The company once started losing its market share to its main rivals, Microsoft and Google, due to lagging behind in AI adoption. It responded to this market condition swiftly through proper and quick adoption of AI into its business model and establishing new businesses (Levy, 2018). Like many business areas, the company will remain as one of the pioneers in successfully adopting AI and turning it to the revenue making tools.

However, the implication of current and future AI adoption will not be all fairy tale for Amazon. The company is already experiencing disruption in its labor market due to AI implementation; most workers and prospective candidate are rethinking about their jobs at Amazon, which is mostly likely to be killed by the AI in near future (McKendrick, 2018). Moreover, people working in Amazon are feeling less engaged due to technology enhanced workplace environment and losing their motivations, which is taking its toll on overall productivity of the company (Levy, 2018).

SWOT Analysis on Amazon’s Adoption of AI

Strengths.

Amazon has significantly sped up its business process through the implementation of Ai into its operations, which is being translated into increased revenue. By using machine learning algorithm, the company is utilizing AI in analyzing customer’s purchase behavior, preference and habits; processing these information, the AI is offering the customers with products that they are likely to buy next from other stores. Through proper analysis of demand and market condition, AI helps Amazon in keeping its inventory small but adequate to meet customer demands. The technology is presenting the customer with best user experiences by enhancing various customer related service such as quick delivery, smooth packaging, and quick turnover (Ghoshal, 2018). Obviously, the company is leveraging the AI as its strength in its current business model.

Weaknesses.

The functioning of AI needs continuous feed of customer’s personal data, which puts Amazon against the regulatory bodies and privacy concerns. Being able to manipulate customer’s data means the company is in constant threat of legal implications. To implement AI into business practices needs major cultural shift, which can disrupt overall working environment of the company. Furthermore, it may reduce productivity due to increased threats of unemployment to the staffs.

Opportunities.

Amazon has the opportunity to take advantage of being one of the early implementer of AI; it will help the company collect customer’s data way before its competitor and go far beyond through the application of AI. Again, through predictive business operations, it has the opportunity to help customer stay filled with their demands and create brand loyalty. Implementation of AI will help Amazon reduce its overall cost of delivery by effectively scheduling its deliveries so that each delivery convoy can cover maximum customer order in a given locality (Levy, 2018). Amazon is currently on the verge of redefining the retail industry through its innovative business ideas throttled by its wise application of AI, which will help it gain significant market share in a competitive landscape.

Threats.

AI processed data can pose threats to customer’s privacy and bring legal implications to Amazon. Competitors might gain market share not implementing AI and thereby avoiding technical disruptions that AI incorporates.

Recommendations

The Artificial Intelligence has increasing application in financial, engineering, manufacturing, and almost all sectors of a business. To know what AI can offer for a particular business and how it can fit into the business model, are the keys to the successful implementation of the technology. Future business leaders, irrespective of their educational background and differences in interests, need to develop themselves by learning the details of machine learning, cognitive computing and the applicability of AI into the business. Only proper conception about the AI can help a business leader make decisions about where and when to turn to AI and what should be left to humans (Furness, 2017). Amazon needs to deploy AI in its business operations without posting any threats to customer’s privacy or its employees job stability. The management of the company needs to rethink its current pitfalls in implementation of AI and develop a business plan to mitigate them. In many cases, Amazon will need to restructure its business model to fit to AI disruptions and cultural shifts.

Implementation Plan

Amazon is currently adopting AI into many of its business operations and models and continuing to develop new businesses and product lines by leveraging the benefits of AI. However, the company needs to forecast its future business plans and market demands to evaluate whether the widespread application of the technology will worth its costs and efforts. On its course of implementation, the company is losing its efficient and skilled workforce who serve manual operation of the business. The company needs to develop an alternative plan to retain this workforce because in case of any potential failover of AI, this workforce will help the company remain in the business and explore the competitive industry. Furthermore, the company should devise detailed plan on how it will handle privacy concerns regarding customer’s data as it may lead to legal consequences.

Finally, Amazon has the potential to remain the business leader through potentially exploiting the advantages of AI. But to keep things under control against various pitfalls of the AI, the company needs to keep a backup plan.

Conclusion

From above analysis, it is evident that Amazon is leading the retail industry like before in terms of AI adoption to its business model. The company is already experiencing major improvement in its market positions through the technology. Market forecast shows that Amazon will continue to experience large market growth through its unique business models and proper application of AI.

References

Amazon. (2017, November 22). AWS Announces Amazon ML Solutions Lab. Retrieved from Amazon: http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=2318394

Furness, D. (2017). Top Business Schools Want MBAs to Monetize AI. Tech Emergence.

Ghoshal, A. (2018, January 22). Amazon is opening its first cashier-less retail store in Seattle. Business Insider.

Levy, S. (2018, January 02). Inside Amazon’s Artificial Intelligence Flywheel. Wired.

McKendrick, J. (2018, January 25). Artificial Intelligence Isn’t Killing Jobs; It’s Killing Business Models. Forbes.

Ransbotham, S., Kiron, D., Gerbert, P., & Reeves, M. (2017, September 06). Reshaping Business With Artificial Intelligence. MIT Sloan Management Review.

Simon, M. (2017, June 06). Your Online Shopping Habit is fueling a Robotics Renaissance. Wired.

Vena, D. (2017, December 17). Amazon Ramps Up AI at AWS. Madison.

Voigt, K.-I., Buliga, O., & Michl, K. (2016). Business Model Pioneers: How Innovators Successfully Implement New Business Models. Springer.