Artificial intelligence (AI) has long been a hot topic in retail but has now become a pivotal factor as retailers compete to showcase their innovative edge. Reports from Dunelm and Boots highlight the substantial impact of digital investments on both online and in-store sales. Such success is not just down to technology; the continued investment in innovation is critical to future success.

With the most recent Golden Quarter now in the rear-view mirror, retailers who haven’t yet harnessed the power of AI should be analysing the experiences of early adopters to inform their approach. If you haven’t adopted AI already does it mean you are a laggard? Not necessarily. Smart CIOs will look before they leap by answering the question: Are our core IT systems ready for AI?

To ensure your AI tools effectively enable your business and empower your staff, it is critical that your business processes are integrated and that you are working with a single view of all the data within your organisation and your retail supply chain.

Bringing order to your core IT systems

At the heart of most retail businesses are core enterprise applications that span everything from internal business processes to managing inventory and supplier relationships. These systems generate vast amounts of data, which should be fed into your AI application. Data must be accurate, complete, and free from bias to avoid misleading predictions and decisions. Unlike the new wave of digital retailers who have developed digital-first strategies from the outset, established retailers considering AI must first overcome issues around:

• Technical debt: Retailers may have built up an enterprise application environment spread across multiple locations, with different versions of applications and adaptations through customisations to meet local market requirements.
• Interoperability: When there are varied application versions across different locations, ensuring seamless communications between these systems becomes challenging. Moreover, when valuable data is isolated in silos, it contributes to technical debt.
• Agility: When an AI application functions effectively, it should generate real-time insights and recommendations. However, without interoperability, it becomes impossible to compile a unified view of all organisational data, leading to an inaccurate portrayal by the AI and ultimately hindering the business’s ability to respond swiftly to market changes.

So, how do you get your core IT house in order?

Software vendors might say the best way to solve these challenges is through upgrades or complete system migrations, but neither vendor-driven approach necessarily equates to modernisation or transformation. It’s important to consider key factors to ensure your core systems are prepared to embrace innovation such as AI:

• Know the difference between mission-critical and strategic systems: Mission-critical applications run core business processes such as HR, finance, and payroll. While they must remain operational, they are not what separates you from your competitors. Strategic systems help deliver competitive advantage, such as Sephora Virtual Artist, an augmented reality feature of the Sephora mobile app that allows customers to try on make-up, or Uber Eats new Sales Aisle, an AI-powered tool to help users find deals and explore different food options. AI needs to be able to extract data from mission-critical applications, but it’s essential not to be swayed by vendors pushing for upgrades of these mission-critical systems to leverage their AI tools. Leveraging the latest AI shouldn’t require completely upgrading your core business applications.
• Avoid the hidden costs of moving to the cloud: Vendors entice customers to migrate to the cloud version of their existing business applications, but there can be significant (and sometimes hidden) consequences. For starters, you may lose your customisations. Do you understand the impact this could have on your business processes? Do you have the requisite in-house skills to operate cloud-based environments? While application vendors will automate their application updates, it’s unlikely they will support other applications and tools that interact with their software.
• Use the opportunity to turn IT into a profit centre: You must be able to invest in the future if you are to respond dynamically to opportunities. But historically, IT has been seen as a cost centre, using budget to keep systems running. In a sector like retail, where margins and investment funds are tight, shifting the mindset to viewing IT as a profit centre is critical. This means allocating IT spend where the business has a clear return on investment.

All (AI) that glitters is not gold

Given the volume and velocity of AI news today, it’s easy to be ensnared by all the hype and rush to adopt AI to make the most of this year’s Golden Quarter. However, it’s more important to take a step back and look at your IT strategy holistically, as many moving parts can impact your AI implementation’s effectiveness.

The key is to shift your approach to IT investment to drive profitability, mindful that IT can only help you deliver that growth if your innovation is built on solid foundations. Your core applications must be optimised and tuned to exploit the capabilities of AI tools. AI may be the new shiny toy in retail and every other industry, but success depends on building a strategy from the ground up. Get it right, and you can minimise disruption, redirect resources to innovation, and maximise the value of your AI investment.

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