Dr. David Stephenson’s article, 150 Data Scientists and still no business value? has done an admirable job of echoing the sentiment we hear from our customers daily: “The promise of big data has yet to materialize in changes to my bottom line.”

Underlining the issue Dr. Stephenson describes are the 2 inherent flaws that we have been discussing with our clients:

  1. The approach of buying software based tools.
  2. The addition of data scientists in an attempt to draw insights that drive success is ineffective.

Fundamentally, to achieve a positive change in profits, the optimization undertaken must be holistic in nature. It must incorporate and consider all of the dynamically changing pieces that operate in unison in a retailer’s environment that make up the entire P&L. Any approach which relies on examining only one piece of the puzzle at one time without considering the significant “ripple” effects that occurs throughout the organization is doomed to produce only short-term results, which when measured over time will have no effect to the results of the entire organization’s P&L.

Dr. Stevenson continues, “Although today’s technology has given data scientists great tools, along with an abundance of low-hanging fruit, the problem remains that a recent surge in unfocused data science programs, staffed with newly minted analysts, has created a high potential for program failure.” Yes, we see it all the time. Great promotion, nice short-term sales effect, yet no change in profits at the end of the month. Also, these types of optimizations are beyond human capacity. Hiring hundreds or thousands of data scientists will still not allow most retailers to scratch the surface of the complexity of optimizing results across thousands of products which have complex affinity and price elasticity relationships with each other. Now add in the complexity of competition, hundreds of locations, millions of customers, omni-channel environments, seasonality, cannibalization, purchasing cadence, etc. all of which change every day and the human just doesn’t stand a chance at finding the golden nuggets that would drive incremental results.

This is where AI based technologies enter the market. AI based services can go beyond human capacity and within a framework of a holistic model that is tied to optimizing incremental P&L as the desired outcome. It can analyze all the moving parts dynamically and simulate alternatives to find the right levers for the retailer to pull at the right time to truly provide value.

To learn more about what experts have to say about AI technology, read our blog here

 

 

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