The Art of Structuring AI Practice in Retail and Consumer Goods 8 minutes

Artificial Intelligence in Retail: A Necessity

The retail industry is not just evolving; it is transforming, propelled by the undeniable power of artificial intelligence and data analytics. Ordinary figures fall short in describing this ongoing revolution. The global AI market in retail, valued at $7.14 billion in 2023, will know no modest limits. According to Fortune Business Insights, it will soar to a colossal sum of $55.53 billion by 2030.

And this is no coincidence. Artificial intelligence is now recognized by business leaders as a necessity to remain competitive in the retail arena faced with particularly demanding challenges.

In this article, we will address the importance of adopting a holistic approach, including proactive change management, a strategy for adapting roles to be filled for an AI project, and well-defined governance to ensure its success.

Artificial intelligence is the strategic cornerstone for the retail industry

The integration of AI is the cornerstone for maximizing your company’s operational efficiency.

Demand prediction is the starting point. AI solutions are essential for overall business optimization.

By accurately anticipating demand trends, benefits manifest in several ways :

• Better scheduling for improved workforce distribution.
• Maintaining optimal stock levels, avoiding losses or overproduction.
• Optimizing pricing strategies.

And many other benefits accessible to businesses capable of predicting demand, as detailed in our previous article: Artificial Intelligence in Retail: The Ultimate List of Use Cases.

Beyond data: The often overlooked essential element

In the realm of artificial intelligence projects, companies pay particular attention to essential technical aspects such as data, algorithms, and modeling. These elements are undoubtedly indispensable for the success of these initiatives.

However, we are now addressing an equally essential element that is often overlooked: organizational structure and governance. The success of your AI initiative is not simply based on lines of code but also on the solid foundation of your organization.

According to a study by KPMG, more than a third (36%) of Canadian organizations have not yet seen benefits from their digital transformation initiatives, indicating the need to reassess their strategies to fully leverage their technological capabilities after implementation. The challenge lies in the common difficulty organizations face in optimizing digital technologies, such as cloud or multi-cloud adoption, after their initial deployment.

To ensure success, it is essential to embrace a comprehensive approach that integrates proactive change management, a strategy to adapt the necessary roles for an AI project, and clearly defined governance.

This expanded perspective also involves promoting a culture of innovation within the organization, fostering a mindset conducive to efforts to implement new technologies.

The three major challenges for retail businesses

The challenges are significant, but businesses see opportunities to innovate and grow. In a sector facing a labor shortage, with nearly 29,000 positions to be filled in retail in Quebec, intensified competition due to the proliferation of online transactions, and often narrow profit margins, AI emerges as the essential catalyst for overcoming these obstacles.

Establishing governance and structure

The success of an AI project in retail and consumer goods relies on the implementation of robust governance mechanisms and the definition of an adequate organizational structure. This step is essential to ensure compliance, transparency, and efficiency of the project.

The technical structure of the artificial intelligence project

The role of organizational structure and governance around an artificial intelligence project

Change Management

Imagine this : you’ve developed the most revolutionary AI solution, invested time, resources, and money to develop it. But if nobody within your organization adopts it, all that work is largely in vain.

Implementing an artificial intelligence project in a retail business represents a significant shift in how the business operates. For this transition to occur smoothly and for the benefits of AI to be fully realized, effective upfront change management is essential. Here are the key elements to consider as part of this change management process :

1. Alignment with Business Strategy : AI must align with the overall strategy of the company. This ensures that the change brought about by AI is consistent with long-term business objectives and contributes to growth and competitiveness.
2. Development of Change Champions : Identify “change champions” among employees who are enthusiastic about AI and can serve as role models for others. These champions can help promote AI adoption within the company and encourage their colleagues to overcome any reluctance.
3. Proactive Communication : Communication is the cornerstone of change management. It is essential to inform employees, management teams, and stakeholders upfront about the reasons for introducing AI, its benefits, and how it will affect their work. Regular communication throughout the project is also crucial to maintaining engagement and addressing questions and concerns.
4. Employee Involvement : Employees should be included in the decision-making and project design process. Their contributions and feedback should be considered to customize AI to the specific needs of the business. Employee involvement reinforces their sense of ownership and investment in the project. Moreover, they are often the end users and the most knowledgeable about operations in their store.
5. Training and Skill Development : Employees, from store managers to sales associates, need to be trained to effectively use new AI technologies. This training should be tailored to the skill level of each user and should emphasize how AI can improve their daily work.
6. Continuous Evaluation and Adaptation : Change management is not limited to the initial implementation phase. It is essential to regularly monitor the impact of AI on the business and adjust change management accordingly. This allows for responding to emerging needs and optimizing the use of AI over time.

In summary, change management in an AI project for retail is complex but crucial. It enables a smooth transition to AI, increases its adoption, and ensures the full realization of its benefits. Effective change management is key to its success.

Role Adaptation

Building, deploying, and maintaining an artificial intelligence solution are not simple tasks. It requires a high-performing team with complementary talents and skills. The optimal composition of an AI project team may vary depending on the type of project and the organization. However, based on our experience, there are nine essential roles for creating and delivering an AI project.

One person may fulfill more than one role; for example, our project teams typically consist of 5 people who divide the different roles to be filled. These responsibilities stem from three distinct and complementary areas: data science, software development, and business. Assigning these roles at the beginning of the project increases the chances of success.

Governance Guide

Governance is the decision-making and control framework that guides the entire AI project. It must be clearly defined from the outset. Here are some points to consider :

1. Formation of a Governance Team : The first step is to form a governance team consisting of AI specialists, retail business managers, and, where applicable, other key stakeholders. This team should include AI technical experts, business decision-makers, data specialists, and project managers to ensure a holistic vision.
2. Development of a Master Plan : The AI project must align with the overall strategy of the retail business. This requires a master plan defining objectives, expected deliverables, timelines, required resources, and success indicators. This plan must be continually updated to adapt to changes and emerging needs.
3. Data Management : AI governance relies on data quality. The company must ensure that the data necessary for training AI models are available, relevant, and compliant with security and privacy standards. Data management policies must be established to ensure their integrity and accessibility.
4. Clear Responsibilities and Roles : It is crucial to define responsibilities and roles within the governance team. This involves determining who is responsible for decision-making, technical oversight, communication with stakeholders, etc. Clarity on these aspects helps avoid confusion in decision-making.
5. Risk and Security Management : Governance must include proactive risk management, including identifying potential threats to data security, AI model failures, and operational disruptions. Risk mitigation plans must be developed.
6. Risk Mitigation : A continuous process of monitoring and evaluating risks must be established, with feedback mechanisms to adjust strategies accordingly. Regular audits of AI models, assessments of compliance with security standards, and scenario simulations can help anticipate and prevent potential problems. Additionally, a culture of learning and continuous improvement must be encouraged to strengthen resilience to emerging risks.
7. Transparency and Responsible AI Practices : At the heart of any effective AI governance lies a commitment to transparency and responsible practices. It is essential to establish transparent mechanisms explaining how decisions are made by AI systems, especially in the retail context. End-users and stakeholders must have a clear understanding of the criteria and processes that guide recommendations and actions generated by AI models.
   
   In addition to transparency, the adoption of responsible practices is crucial to avoid any negative impact on society and individuals. This includes considering potential biases in training data, protecting consumer privacy, and implementing ethics and compliance mechanisms throughout the lifecycle of AI projects. Retail businesses must strive to integrate these principles into their AI governance, thereby demonstrating their commitment to responsible and ethical use of this innovative technology.

In summary, aligning the entire organization with the goals and benefits of the AI solution being implemented is essential to realize the benefits of artificial intelligence. This approach ensures that AI is properly adopted and leveraged, thereby strengthening the company’s ability to thrive in an ever-changing environment.