Satya Nadella, chief executive of Microsoft, recently claimed in a showpiece interview that artificial intelligence (AI) “is going to be the next big thing”.
The same week, Amazon unveiled its Go service after four years of development. All the attention was on the shopper’s experience, with a slick video showing a consumer walking into a store and picking up a few items, before leaving without having to stop at a checkout.
Amazon’s Just Walk Out technology uses sensors, computer vision and deep learning to determine which products the consumer has taken. This sounds very much like AI that will disrupt the grocery supply chain in ways that we can hardly imagine.
Talking about AI, on which Microsoft spent a big part of its US$12bn research and development budget last year, Nadella said: “It is a transformative technology that changes all walks of life, and every industry and every business process.”
The last time a Microsoft leader said something similar was 20 years ago, when Bill Gates announced: “The internet changes everything.”
So when Amazon, with a 1% share of the $800bn US grocery market, launches AI, rival distribution channels need to pay attention. Amazon’s spokesperson says Just Walk Out automatically detects when products are taken from or returned to the shelves and keeps track of them in a virtual cart. If it can see what is happening in the store, then this will be visible to its supply chain, too.
Nels Stromborg, a vice president of US shopping platform Retale, told news outlet Retail Dive that because everything in-store was trackable, Amazon now has a data stream that captures what consumers are doing in the physical world. “If you shop there enough, eventually Amazon will predict those consumption habits with a great deal of accuracy.”
Lots of retailers are experimenting with various types of technology to make smart shopping lists and personalised offers based on where the shopper is, to assist with in-store navigation and so on.
However, there are challenges, as AI needs system integration and process orchestration so that you can monitor the vast amounts of data that will be created by consumers’ smartphones travelling around the world with their owners. Joining it all up and having the ability to scale up seems to play to Amazon’s strengths.
Does this spell the end to wholesalers and their customers? Probably not. But if Amazon is growing market share and can combine this with information that appears to show how a case of product moves from factory to shelf to shopper in real-time, it is likely to be in a position to grab the lion’s share of the bigger manufacturers’ large marketing budgets – much as Google and Facebook have been successful in taking 85% of all new digital advertising money.
Amazon has a great model: observing what consumers buy and using this information to modify its product offerings and nudge them to act in ways that benefit it. But on his influential AVC blog, venture capitalist Fred Wilson points out that ‘the inevitable often takes way longer to happen than you might think.’
This was prompted by the news in January that streaming had just become the number one way that Americans listen to music. Last year, the number of on-demand audio streams surpassed 251bn, a 76% increase on 2015.
Wilson notes that in 2007, he wrote that streaming was preferable to downloading music and that he expected the market to flip quickly.
“A decade later, the market is in the process of flipping,” he says, “which is a reminder that something may be inevitable, but that does not mean it will happen quickly.”
AI is likely to be the next big thing. It is likely to generate lots of opinion and ideas in every industry. As a business leader, you need to pay attention to it.
But if you are not in the AI business, there are probably plenty of other things that you need to attend to first, and plenty of other ways to help your customers, your suppliers and your business to make money.