AI becoming mainstream in Retail

Expert systems to aid human and plant maintenance and clever OR (Operations Research) computer models (aka apps) to find optimum solutions to complex business problems have been around for over 50 years now

AI (Artificial Intelligence) is just the latest moniker for much the same, albeit more powerful

Retail Week recently published an article about ‘helpful robots’ – in it, IBM’s retail industry director, Danny Bagge, claims really exciting opportunities lie in areas like merchandising where Watson, IBM’s supercomputer, is “opening up new horizons by allowing retailers to have a hyper-local view of what they should be stocking – we can now get down to the level of a store in, let’s say, Reading, and say this is exactly your profile of consumer, what’s going to happen with the weather and the footfall from your CCTV camera last week”

The aim, according to Bagge, is “not to replace the role of humans but to augment the intelligence of a human merchandiser or buyer – humans could do it, but it takes a long time – Watson can do it in the blink of an eye”

Bagge says “currently, we are only scratching the surface of the potential for AI to transform the way retailers work”

James Donkin, General Manager at Ocado Technology, is looking to use AI to solve their vehicle routing problems – “we have hundreds of delivery vehicles and tens of thousands of drop locations, so we need the optimal solution to deliver the most groceries in the shortest time using the least vans”

In the old days, we used OR and mathematical programming to do the same for  Bejam (now Iceland) – however, ‘AI driverless’ vans will achieve even further gains

Overall, Donkin says: “AI is about enhancing the productivity of the individual and freeing him up to do more of the interesting work and less of the grind work”

The Fourth Industrial Revolution

The following sweeping pearls of wisdom are 100% from Klaus Schwab, founder and executive chairman of the World Economic Forum

I could not, indeed would not dare, try to improve on them but they surely deserve to be widely read

We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before. We do not yet know just how it will unfold, but one thing is clear: the response to it must be integrated and comprehensive, involving all stakeholders of the global polity, from the public and private sectors to academia and civil society.

The First Industrial Revolution used water and steam power to mechanise production.

The Second used electric power to create mass production.

The Third used electronics and information technology to automate production.

Now a Fourth Industrial Revolution is building on the Third, the digital revolution that has been occurring since the middle of the last century. It is characterised by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.

There are three reasons why today’s transformations represent not merely a prolongation of the Third Industrial Revolution but rather the arrival of a Fourth and distinct one: velocity, scope, and systems impact. The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance.

The possibilities of billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, are unlimited. And these possibilities will be multiplied by emerging technology breakthroughs in fields such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.

Already, artificial intelligence is all around us, from self-driving cars and drones to virtual assistants and software that translate or invest. Impressive progress has been made in AI in recent years, driven by exponential increases in computing power and by the availability of vast amounts of data, from software used to discover new drugs to algorithms used to predict our cultural interests. Digital fabrication technologies, meanwhile, are interacting with the biological world on a daily basis. Engineers, designers, and architects are combining computational design, additive manufacturing, materials engineering, and synthetic biology to pioneer a symbiosis between micro-organisms, our bodies, the products we consume, and even the buildings we inhabit.

Challenges and opportunities

Like the revolutions that preceded it, the Fourth Industrial Revolution has the potential to raise global income levels and improve the quality of life for populations around the world. To date, those who have gained the most from it have been consumers able to afford and access the digital world; technology has made possible new products and services that increase the efficiency and pleasure of our personal lives. Ordering a cab, booking a flight, buying a product, making a payment, listening to music, watching a film, or playing a game—any of these can now be done remotely.

In the future, technological innovation will also lead to a supply-side miracle, with long-term gains in efficiency and productivity. Transportation and communication costs will drop, logistics and global supply chains will become more effective, and the cost of trade will diminish, all of which will open new markets and drive economic growth.

At the same time, as the economists Erik Brynjolfsson and Andrew McAfee have pointed out, the revolution could yield greater inequality, particularly in its potential to disrupt labour markets. As automation substitutes for labour across the entire economy, the net displacement of workers by machines might exacerbate the gap between returns to capital and returns to labour. On the other hand, it is also possible that the displacement of workers by technology will, in aggregate, result in a net increase in safe and rewarding jobs.

We cannot foresee at this point which scenario is likely to emerge, and history suggests that the outcome is likely to be some combination of the two. However, I am convinced of one thing—that in the future, talent, more than capital, will represent the critical factor of production. This will give rise to a job market increasingly segregated into “low-skill/low-pay” and “high-skill/high-pay” segments, which in turn will lead to an increase in social tensions.

In addition to being a key economic concern, inequality represents the greatest societal concern associated with the Fourth Industrial Revolution. The largest beneficiaries of innovation tend to be the providers of intellectual and physical capital—the innovators, shareholders, and investors—which explains the rising gap in wealth between those dependent on capital versus labour. Technology is therefore one of the main reasons why incomes have stagnated, or even decreased, for a majority of the population in high-income countries: the demand for highly skilled workers has increased while the demand for workers with less education and lower skills has decreased. The result is a job market with a strong demand at the high and low ends, but a hollowing out of the middle.

This helps explain why so many workers are disillusioned and fearful that their own real incomes and those of their children will continue to stagnate. It also helps explain why middle classes around the world are increasingly experiencing a pervasive sense of dissatisfaction and unfairness. A winner-takes-all economy that offers only limited access to the middle class is a recipe for democratic malaise and dereliction.

Discontent can also be fuelled by the pervasiveness of digital technologies and the dynamics of information sharing typified by social media. More than 30 percent of the global population now uses social media platforms to connect, learn, and share information. In an ideal world, these interactions would provide an opportunity for cross-cultural understanding and cohesion. However, they can also create and propagate unrealistic expectations as to what constitutes success for an individual or a group, as well as offer opportunities for extreme ideas and ideologies to spread.

The impact on business

An underlying theme in my conversations with global CEOs and senior business executives is that the acceleration of innovation and the velocity of disruption are hard to comprehend or anticipate and that these drivers constitute a source of constant surprise, even for the best connected and most well informed. Indeed, across all industries, there is clear evidence that the technologies that underpin the Fourth Industrial Revolution are having a major impact on businesses.

On the supply side, many industries are seeing the introduction of new technologies that create entirely new ways of serving existing needs and significantly disrupt existing industry value chains. Disruption is also flowing from agile, innovative competitors who, thanks to access to global digital platforms for research, development, marketing, sales, and distribution, can oust well-established incumbents faster than ever by improving the quality, speed, or price at which value is delivered.

Major shifts on the demand side are also occurring, as growing transparency, consumer engagement, and new patterns of consumer behaviour (increasingly built upon access to mobile networks and data) force companies to adapt the way they design, market, and deliver products and services.

A key trend is the development of technology-enabled platforms that combine both demand and supply to disrupt existing industry structures, such as those we see within the “sharing” or “on demand” economy. These technology platforms, rendered easy to use by the smartphone, convene people, assets, and data—thus creating entirely new ways of consuming goods and services in the process. In addition, they lower the barriers for businesses and individuals to create wealth, altering the personal and professional environments of workers. These new platform businesses are rapidly multiplying into many new services, ranging from laundry to shopping, from chores to parking, from massages to travel.

On the whole, there are four main effects that the Fourth Industrial Revolution has on business—on customer expectations, on product enhancement, on collaborative innovation, and on organisational forms. Whether consumers or businesses, customers are increasingly at the epicentre of the economy, which is all about improving how customers are served. Physical products and services, moreover, can now be enhanced with digital capabilities that increase their value. New technologies make assets more durable and resilient, while data and analytics are transforming how they are maintained. A world of customer experiences, data-based services, and asset performance through analytics, meanwhile, requires new forms of collaboration, particularly given the speed at which innovation and disruption are taking place. And the emergence of global platforms and other new business models, finally, means that talent, culture, and organisational forms will have to be rethought.

Overall, the inexorable shift from simple digitisation (the Third Industrial Revolution) to innovation based on combinations of technologies (the Fourth Industrial Revolution) is forcing companies to re-examine the way they do business. The bottom line, however, is the same: business leaders and senior executives need to understand their changing environment, challenge the assumptions of their operating teams, and relentlessly and continuously innovate.

The impact on government

As the physical, digital, and biological worlds continue to converge, new technologies and platforms will increasingly enable citizens to engage with governments, voice their opinions, coordinate their efforts, and even circumvent the supervision of public authorities. Simultaneously, governments will gain new technological powers to increase their control over populations, based on pervasive surveillance systems and the ability to control digital infrastructure. On the whole, however, governments will increasingly face pressure to change their current approach to public engagement and policy-making, as their central role of conducting policy diminishes owing to new sources of competition and the redistribution and decentralisation of power that new technologies make possible.

Ultimately, the ability of government systems and public authorities to adapt will determine their survival. If they prove capable of embracing a world of disruptive change, subjecting their structures to the levels of transparency and efficiency that will enable them to maintain their competitive edge, they will endure. If they cannot evolve, they will face increasing trouble.

This will be particularly true in the realm of regulation. Current systems of public policy and decision-making evolved alongside the Second Industrial Revolution, when decision-makers had time to study a specific issue and develop the necessary response or appropriate regulatory framework. The whole process was designed to be linear and mechanistic, following a strict “top down” approach.

But such an approach is no longer feasible. Given the Fourth Industrial Revolution’s rapid pace of change and broad impacts, legislators and regulators are being challenged to an unprecedented degree and for the most part are proving unable to cope.

How, then, can they preserve the interest of the consumers and the public at large while continuing to support innovation and technological development? By embracing “agile” governance, just as the private sector has increasingly adopted agile responses to software development and business operations more generally. This means regulators must continuously adapt to a new, fast-changing environment, reinventing themselves so they can truly understand what it is they are regulating. To do so, governments and regulatory agencies will need to collaborate closely with business and civil society.

The Fourth Industrial Revolution will also profoundly impact the nature of national and international security, affecting both the probability and the nature of conflict. The history of warfare and international security is the history of technological innovation, and today is no exception. Modern conflicts involving states are increasingly “hybrid” in nature, combining traditional battlefield techniques with elements previously associated with non-state actors. The distinction between war and peace, combatant and non-combatant, and even violence and non-violence (think cyberwarfare) is becoming uncomfortably blurry.

As this process takes place and new technologies such as autonomous or biological weapons become easier to use, individuals and small groups will increasingly join states in being capable of causing mass harm. This new vulnerability will lead to new fears. But at the same time, advances in technology will create the potential to reduce the scale or impact of violence, through the development of new modes of protection, for example, or greater precision in targeting.

The impact on people

The Fourth Industrial Revolution, finally, will change not only what we do but also who we are. It will affect our identity and all the issues associated with it: our sense of privacy, our notions of ownership, our consumption patterns, the time we devote to work and leisure, and how we develop our careers, cultivate our skills, meet people, and nurture relationships. It is already changing our health and leading to a “quantified” self, and sooner than we think it may lead to human augmentation. The list is endless because it is bound only by our imagination.

I am a great enthusiast and early adopter of technology, but sometimes I wonder whether the inexorable integration of technology in our lives could diminish some of our quintessential human capacities, such as compassion and cooperation. Our relationship with our smartphones is a case in point. Constant connection may deprive us of one of life’s most important assets: the time to pause, reflect, and engage in meaningful conversation.

One of the greatest individual challenges posed by new information technologies is privacy. We instinctively understand why it is so essential, yet the tracking and sharing of information about us is a crucial part of the new connectivity. Debates about fundamental issues such as the impact on our inner lives of the loss of control over our data will only intensify in the years ahead. Similarly, the revolutions occurring in biotechnology and AI, which are redefining what it means to be human by pushing back the current thresholds of life span, health, cognition, and capabilities, will compel us to redefine our moral and ethical boundaries.

Shaping the future

Neither technology nor the disruption that comes with it is an exogenous force over which humans have no control. All of us are responsible for guiding its evolution, in the decisions we make on a daily basis as citizens, consumers, and investors. We should thus grasp the opportunity and power we have to shape the Fourth Industrial Revolution and direct it toward a future that reflects our common objectives and values.

To do this, however, we must develop a comprehensive and globally shared view of how technology is affecting our lives and reshaping our economic, social, cultural, and human environments. There has never been a time of greater promise, or one of greater potential peril. Today’s decision-makers, however, are too often trapped in traditional, linear thinking, or too absorbed by the multiple crises demanding their attention, to think strategically about the forces of disruption and innovation shaping our future.

In the end, it all comes down to people and values. We need to shape a future that works for all of us by putting people first and empowering them. In its most pessimistic, dehumanised form, the Fourth Industrial Revolution may indeed have the potential to “robotise” humanity and thus to deprive us of our heart and soul. But as a complement to the best parts of human nature—creativity, empathy, stewardship—it can also lift humanity into a new collective and moral consciousness based on a shared sense of destiny. It is incumbent on us all to make sure the latter prevails.

This article was first published in Foreign Affairs

Benefits of digital investment need time

An interesting article from IoT Agenda explores why digital investment in increasingly capable devices/ things/ solutions are empowering businesses to transform their processes and workflows but not yet showing up in real productivity gains

One theory is ‘the metrics used are suspect’ – however, the author sides with another

The rapid evolution in transformative technologies (e.g. Cloud, IoT, Big Data analytics) is resulting in too much change and complexity for the users – it’s the ‘rough edge of digital transformation’ – it’s preventing them from doing what they want and need to do – it has become ‘a barrier to productivity’, not an enabler

Education example – Universities are investing in on-line education to reach more students or interact more effectively with on-site students – however, teachers lack confidence and are uncomfortable with their technical ability – they feel burdened with having to learn the intricacies of all the technology required – for example, how to:

  • Support/ troubleshoot lecture capture solutions
  • Operate audio and video hardware
  • Monitor social engagement
  • Manage the movement of digital content into and out of learning management systems

 

Healthcare example – Digitisation of patient records is seen as a way to improve healthcare with consistent records following patients across different providers – but clinicians complain of interfacing too much with their computers and not enough with patients when the opposite was the goal – the result is doctors are now seeing fewer patients per day than they did before digitisation of the records

Both these examples smack of the perennial problem with software development and, nowadays, apps – too many are designed by geeks without reference to or testing by their ultimate customers, the users, before being launched

Five forces to reshape civilisation by 2030

Peter Morici, economics professor at the Smith School of Business, University of Maryland, USA, recently published some interesting views on changes he expects world-wide by 2030:

  1. A reworking of democracy – Democratic societies outperformed all others in the 20th century – however, recent populism (ideas which appeal to ordinary people) has led their governments to hamstring businesses and redistribute income in ways that discourage investment in new technologies and the skills needed to use them – meanwhile China’s state-directed capitalism and autocratic government has proven better able to nurture new industries (versus copy existing?) and inspire a strong work ethic – western democracies have reached a watershed moment in their development and need to better manage welfare versus efficiency to re-establish robust growth
  2. Artificial Intelligence (AI) – Automation is mostly good as it makes workers more productive – tractors replaced horses enabling farmers to farm 400 acres rather than 40, with those made redundant moving to cities to work in factories and stores, and most earning far more per week – the same has applied to clerical work, with the computer replacing the typewriter, and professional ranks with spreadsheets balancing accounts, ‘Big Data’ analysed to monitor shoppers’ preferences and doctors supported when diagnosing illnesses and deciding treatments – overall, however, this will widen the gap between folks with skills, learning and high-pay and the rest stuck in low-paid service jobs such as restaurants and dry-cleaners – increasing unrest is inevitable if this is not tackled
  3. Blending machines and human beings – ‘AI will never fully replace the human mind because electronic devices are only as good as the information that we let them access’ (an optimistic claim, methinks) – however, he foresees tiny chips and processors attached to human brains being commonplace, enabling us to be permanently on-line with access to information, analytics and communication – hence, a much more intelligent human race will become a reality
  4. Immigration – With birth rates falling below replacement rates in most developed nations, their need is for more immigration, not less, but those same societies lack adequate mechanisms for assimilating newcomers – however, without immigration, their economies ‘face stagnation and eventual collapse’ (what if machines cover for people shortages?) so, if their politicians don’t bite this bullet, democratic capitalism is under threat
  5. Climate change – With rising atmospheric temperatures, all nations are compelled to address global warming and jointly seek solutions – otherwise Darwinian competition among societies for hospitable places to live could set back humanity as did the black plague or collapse of Rome (this assumes places made inhospitable were not replaced by others, currently inhospitable, becoming hospitable)

 

Food for thought indeed

Dismal productivity trends need not continue

The OECD – Organisation of Economic and Cultural Development – recently painted a dismal G7 economic picture claiming  ‘slowing rates of productivity growth’ in advanced nations over the last ten years or so

Other data suggests the same trend is underway in many less affluent nations according to an article by Marc Levinson – his gloomy forecast is ‘the outlook across most of the world is sluggish economic growth that will raise wages and improve living standards only slowly over the longer term – and this will lead to festering discontent among the many who are falling behind’:

  • In the short term, a business cycle rebound, large government deficits, very low interest rates and healthier banks have combined to boost economic growth and raise many incomes
  • In the longer term, however, the rate at which living standards improve depends almost entirely on the (labour) productivity growth rate – and governments everywhere have poor records with this – their spending, tax and monetary policies cannot do much to help

 

Since the Industrial Revolution (labour) productivity growth:

  • First grew slowly, then faster in the late 19th century, sluggish in the early 20th century, and strongly (~ 5% p.a.) post-WW2 encouraging the development of welfare states and many entitlements to state healthcare, pensions and other social benefits
  • Then a slowdown at the end of the 20th century led to stagnant wages as welfare states became more burdensome despite a spurt in the late 90s as business re-organised around the internet

 

Overall, billions of people experienced unimaginable improvements in their quality of lives as a result

Now, however, labour productivity growth has flat-lined in just about every advanced national economy, being less than 1% per annum for most – this has led to wages stagnating, real spending power falling and inequality looming ever larger

Populations had got used to ever-rising incomes and generations always being richer than their parents but that has all come to a juddering halt

Some top businessmen now say: “Life is unfair so most people had better get used to it”

Equally, some government ministers offer no hope and just bemoan the fact that: “There’s no magic-money-tree to pay for public sector pay rises and our (inefficient) welfare state”

But that’s simply not good enough

We need leaders with energy, ambition, creativity and courage coursing through their veins – people who genuinely strive to improve the lot of their fellow-men and women

For  a start, different governments can each make a significant difference by comprehensive planning and coordinated investment in:

  • Education creating labour-forces capable of handling more complicated and value-adding work
  • Infrastructure, enabling truckers to move freight longer distances more quickly and allowing employers to recruit from wider labour pools
  • Research into areas like agriculture which can lead to higher crop yields per acre
  • International trade deals, not only to lower tariffs and increase trade volumes but also increase competition amongst suppliers to be more efficient and innovative

 

But most national performance improvement potential – revenue, wealth and wages growth – lies in the hands of private sector managers, especially the 80% of laggard companies that exist in every sector they have

All such businesses have huge potential to improve their productivity levels and results – indeed, most of their managers may well be working hard, doing their best and believing they could do little more – and, without good performance measures and ‘productivity knowhow’, they’re probably right

But the measures they need are already known and there’s plenty of new/ better ideas, technology, business methods, products or services, customers and markets at home and abroad for them to choose from which would make a big difference

Businesses just need the right people on the bridge – not mere watchkeepers whose only order is ‘steady as you go’ because they can’t see the opportunities, or rocks, ahead and wouldn’t know what to do even if they could