The AI Blindspot

Imagine you’re leading a successful company with thriving sales—only to have a competitor appear out of nowhere and gobble up virtually all of your business. This is the stuff of anxiety nightmares for the C-suite.  It’s also a reality that AI is bringing to industries, particularly retail.

Firms currently use AI for tasks like reducing inventory, optimizing pricing, personalizing consumer recommendations, and marketing. But experts say most are in the dark about competitors’ AI strategies, which means they face the very real possibility of losing a significant chunk of their market share to a rival. This is particularly true in retail. “The speed at which a competitor can optimize across their business will make it exceptionally difficult for competitors to follow,” says John Long, North America retail sector leader at Korn Ferry, who has put together a paper explaining how this scenario might play out.

In the paper, Long refers to AI as a “stealth weapon” with great potential to produce either “ultimate value creation” or “extinction.” “Aggressive ‘first-time’ movers will win every time,” the report says. “Even many ‘fast followers’ won’t be able to catch up and survive.”

Historically, most leaders could predict the applications of an emergent new technology with reasonable accuracy. But AI has completely changed the landscape. Thirty years ago, during the digital revolution, leaders could clearly see which firms were investing in websites. Today, however, they’re in the dark. Retail firms are employing AI with varying emphases, picking their own starting points—and, by extension, different end points—making this a blind game of apples and oranges. For example, a retailer could easily emerge with leaner staff and inventory, as well as minute-to-minute pricing capability, all of which would lead to markedly lower prices. Retailers aren’t announcing their AI strategies. “That would be foolish,” says Long.

To be sure, new AI technologies will produce at least as many failures as successes. But those successes will certainly come. What’s unknown is the timeline. Companies with AI initiatives are investing an average of $5 million per year, according to recent Bain & Company figures; but among large companies, 20% are investing up to $50 million per year. As AI tools become more sophisticated through training on more and more data, leaders’ analyses and decisions will improve, and the momentum of incremental changes will build quickly. “That’s the magic of this—it will create quick separation between competitors,” says Long.

Many industries, from finance to healthcare, are oblivious to their competitors’ AI plans. But retail is likely to see the greatest shifts first, experts say. Recall that thirty years ago, Sears dominated, and Walmart was small, and no one had heard of Amazon. “Retail has so much more going on,” says Craig Rowley, senior client partner at Korn Ferry. A typical grocery store carries 25,000 items; a big box store holds 100,000—all of it fodder for data crunching. Compare that to a consumer-products company, which might sell 50 to 300 products. Retail is also seasonal and impacted by the economy, news cycle, and weather, which means it requires constant adjustments in both buying and delivery, says Rowley. Agility and speed deeply affect the bottom line: The first retailer to get the customer the right product at the right time wins.

For leaders kept awake at night by fears of competitors’ AI developments, experts advise assessing which of the firm’s functions are most likely to be affected by AI (in retail, for example, that might include marketing, buying, and pricing), evaluating the current tools, and envisioning what might be needed in the future. “Find the gaps,” says Long. He suggests identifying opportunities to consolidate or drive efficient decision-making, such as shifting from person-led decisions to decisions that involve prompting or querying AI.

And don’t assume that no news is good news, experts advise: If other firms aren’t chattering about AI, that doesn’t mean it’s not flourishing and evolving in their offices. “There is a blind spot,” says Deepali Vyas, global head of the FinTech, Crypto and Payments practice at Korn Ferry. “No one is saying anything.”

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