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Enterprise hits and misses - NVIDIA rides high on AI, but retailers have the macro-blues. The ROI of gen AI heats up, and sustainability simmers

Jon Reed Profile picture for user jreed May 28, 2024
Summary:
This week - NVIDIA rolls on, but for retailers, the ride is bumpier. Do generative AI projects reduce work? It's complicated. OpenAI had a rough week, but should enterprises care? And: sustainability is still a factor. Plus: epic event whiff.

Man with megaphone yelling at businessman juggling with currency symbols © Tsung-Lin Wu - Fotolia.com

Lead story - Retail sector gut check - updates from Macy's and Target bring mixed signals

NVIDIA might be riding high on AI, but it's not that simple for retailers. We've been looking for an upbeat turn in Target's story - are we there yet? Stuart bears down in Digital provides some green shoots for Target after another quarter of revenue decline

Target's news isn't lovely: Q1 revenue of $24.1 billion was down 3.7% year-on-year, while net income was down to $942 million, down 0.8%. But: digital revenues, supposedly a hallmark of Target's transformation, are up, albeit modestly (1.4%). What gets the credit for the bump? AI? Nope. Stuart quotes Target CEO Brian Cornell: 

This growth was driven by our same-day services, Drive Up, In-Store Pickup and same-day delivery, which has been rapidly embraced by our guests in recent years. In the first quarter, our same-day services saw high single-digit growth over last year, led by Drive Up, which grew in the low teens.

A relaunch of the (free) loyalty program is bearing fruit, with 1 million new sign ups on the first month. AI is in the mix here too, with personalization - one of AI's most reliable revenue bumps - paying off. Stuart quotes Target's Chief Growth Officer:

 We recently engaged in a pilot with one of our biggest vendors to test our latest personalization capabilities with guests shopping our personal care categories. We're very encouraged by early test results, which showed a nearly three times lift in conversion rates from personalized promotions versus mass offers, including higher sales lift across the rest of the category as well.

Leading Stuart to conclude: 

Cornell and his team still have a lot of work to do to get things convincingly back on track, but there are clear ‘green shoots’ to be seen. Target’s re-invented itself before; it can do so again.

The big takeaway here: if you get the omni-channel mix right, adding the right AI services will make logical sense. The data integration necessary to blur the lines between online and storefront is exactly what AI will thrive on also. But macro-economic pressures aren't going to make this easy. Enter Macy's. Stuart's latest, Macy's profits collapse as retailer's latest omni-channel plan takes time to take hold, paints a challenging picture indeed: 

The Bold New Chapter, Macy’s latest turnaround strategy, is taking time to kick in, as the retail icon saw Q1 profit plummet 60% year-on-year to $62 million on revenues down 2.7% to $4.84 billion. But at its First 50 stores, which have been refurbished, there were more encouraging signs, insists CEO Tony Spring.

The strategy may be "bold," but the quotes from executives don't appear to be. I had trouble making sense of them, except that omni-channel will eventually fall into place, selling stuff for babies online seems promising, and Macy's iconic brand will carry the day. Not a gambit I'd be comfortable wagering on. Stuart? 

Slow, but steady is the message that we’re likely to hear all year from Macy’s as it tries once again to get its omni-channel house in order. If Wall Street gives it the long lead it needs to achieve this, then so much the better.  But while activist investors appear to have been held at bay for now, they’re still a looming presence and will want to see stronger signs of the Bold New Chapter coming to pass. I’m still unconvinced that the plan is actually bold enough, but...

Diginomica picks - my top stories on diginomica this week

  • Europe keeps sustainability on the corporate agenda, despite the double-edged sword of cloud and gen AI - Attention enterprises: don't sleep on ESG, particularly if you have a European/international footprint. Cath: "To illustrate the point, Mayes pointed to companies, such as German multinational sports brand Puma. Despite a volatile trading environment last year, it increased sales by 6.6%, while also cutting greenhouse gas emissions by 24% after moving to the use of renewable energy and recyclable materials." Also check: my ten minute no-time-for-BS podcast with Brian Sommer, recorded at Planful Perform: ESG for finance - where do we stand now? 
  • Why semantic search is a better term than understanding for gen AI - George continues his AI series with another notable installment: "The next time you find yourself overly trusting your persuasive new chatbot or liking it a little too much, it may not hurt to remind yourself that it's just running a sophisticated semantic pattern-matching algorithm under the covers. Recognizing that it’s all about semantic search may also inspire a better approach to organizing data into multiple levels of meaning to get better results."

Vendor analysis, diginomica style. Here's my three top choices from our vendor coverage:

Salesforce Connections 2024, diginomica coverage: with Dreamforce still months away, and a slew of AI news to announce (mostly of the Copilot variety), what's a vendor to do? Salesforce Connections provided that chance; I was on the ground in Chicago; Stuart provided coverage/analysis from Salesforce's superior virtual content on Salesforce+ (I say that to ding all the vendors who have decided hybrid doesn't matter, or will somehow hurt an on-the-ground event, nevermind the customers that can't make it, but want the darn content). 

A few more vendor picks, without the quotables:

Jon's grab bag - Mark Chillingworth profiles a underwriter turned tech leader in Lendr uses low code to simplify small business credit lines. Alyx looks at the art of internal communications in The art of corporate communications - why Axios HQ keeps it brief, but smart
Madeline hits on issues that matter in Equity in AI - stop being condescending and shutting ‘poor’ people out of tech!. How about this: "Another example was an 11-year-old girl who wanted to tackle air pollution, a big problem in northern India. She developed an app to help patients determine their risk of lung cancer, training the model based on a tool with US-only patient data." Awesome!

Chris looks at more troublesome developments in his latest AI Safety series. Two highlights: AI Safety - 49 countries sign up to protecting vendors’ interests and AI safety - Seoul food absent for ethics campaigners as Summit focus is technical

Best of the enterprise web

Waiter suggesting a bottle of wine to a customer

My top seven

  • Generative AI may be creating more work than it saves - Joe McKendrick brings the appropriate level of gen AI enterprise buzzkill: "The technological possibilities of innovation are intriguing, but the rollout tends to be slowed by realities on the ground. In the case of generative AI, any labor-saving and productivity benefits may be outweighed by the amount of backend work needed to build and sustain LLMs and algorithms." Insisting on using a jackhammer (gen AI) when some other tool will do is another potential culprit. "Old school" Machine Learning with numbers - a poor gen AI use case - is not anything to scoff at either. McKendrick cites the possibilities/problems there too: "Machine learning with numbers has been markedly underused. Some part of this has been database management questions. It takes a lot of effort just to put the data together so you can analyze it. Data is often in different silos in different organizations, which are politically difficult and just technically difficult to put together." ROI calculations matter - and factoring in human supervision plays a role in those calculations. Ergo: much to learn and much to prove.
  • Personal AI Assistants and Privacy - As AI assistants get more personal - and more embedded in operating systems (see: Microsoft), the privacy issues get thornier also. Recording all your screen activity included non-masked passwords, in order to make your AI assistant live up to its billing? What could go wrong. Bruce Schneier is on the case.
  • Gartner Top 25: The Beauty Contest of Underperformers – Lora Cecere (ex-Gartner, amongst other places) makes the cut solely on the pungent nature of this blog title alone. The analysis is worthwhile also: "Supply chain leaders have more to do than pop a cork for a crown. True winners outperform peer group companies year-over-year driving shareholder value."
  • Observability and Security: Thoughts on the Cisco-Splunk Acquisition - Analysis via Freeform Dynamics: "So where does this leave organisations looking to enhance their observability and security capabilities given It is very likely the market will continue to evolve rapidly in the coming years? As ever, the key is to stay agile and adaptable and seek to not get too locked into any one vendor or tool set."
  • Former OpenAI board members say the company can't be trusted to govern itself - It's been a rough week for OpenAI in general, and Sam Altrman in particular (Scarlett Johansson-OpenAI spat is a crisis for the AI industry). This is not as big a deal for enterprises as some think. Though the AI market is dominated by a handful, there are enough choices (and enough vendors) that dealing with OpenAI is not looking like a requirement for moving forward. Still, this is unfolding as a cautionary rehash of hubris gone awry tale more than a path towards the liberating future OpenAI is supposedly charting, never mind the responsibility thing, which seems to have been relegated to wet noodle mission statement status.
  • Cloud transformation dashboards and metrics - Sobering numbers and useful stats from McKinsey. Cloud transformations are not pre-destined for success; lining up the right metrics (including business metrics) should be mandatory. 
  • How to assess your AI readiness with 50 questions - If you can get through these 50 questions by Thomas Wieberneit, I'd say you are ready for an AI project...
     

Overworked businessman

Whiffs

Nice to know that the open web link economy is being sacrificed for the sake of glue recipes from Reddit: 

More AI goofy/creepy/questionable overreach: Amazon Ditches 'Just Walk Out' Checkouts at Its Grocery Stores


Though it seemed completely automated, Just Walk Out relied on more than 1,000 people in India watching and labeling videos to ensure accurate checkouts. The cashiers were simply moved off-site, and they watched you as you shopped.

Cutting edge stuff! I have no idea how this turned into green lighted reality, but the world is better for it: 

See you next time....

If you find an #ensw piece that qualifies for hits and misses - in a good or bad way - let me know in the comments as Clive (almost) always does. Most Enterprise hits and misses articles are selected from my curated @jonerpnewsfeed.

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