i3 - July/August 2018 - 35

By Jim Harris

Business

T EC H TACT I C S

AI, How it will Transform
Business Models

M

ore data has been created in the last two years than in
all of human history combined. Companies are awash
in data, but how can you derive strategic advantage
from it? That's where artificial intelligence (AI) comes in.
Google, Facebook, Amazon and Uber
are data-driven companies. AI is central
to their business models, top line revenue and profitability.
Google looks at the sites you visit, what
you discuss in Gmail and predicts which
ads would best serve you. Facebook knows
your interests, your network of friends and
predicts which ads you are likely to click on.
Amazon knows your purchasing history
and predicts what you want to buy next.
Uber and Lyft know customers' travel patterns and predict the number of drivers
needed to meet anticipated demand.

much data as they can with devices like
the Echo. The more it knows about you
the better it predicts what you'll buy.
Amazon's "Subscribe and Save
Service" automatically delivers thousands of frequently purchased items to
subscribers who get 15 percent off. What
was ever fun about buying toothpaste,
anyway? Globally, the logistics and supply chain industry move trillions of dollars of goods. What happens when AI so

accurately predicts what customers want
that the supply chain management
becomes irrelevant?
Digital companies benefit most from AI
because they collect vast amounts of information about customers, like the time
spent researching products online, which
reviews they read, which photos they
download and which competitive sites
they visit. All this feeds the predictive AI
engine: 87 percent of people who spent
more than 60 minutes reading flat-panel
TV reviews bought one. More specifically,
your own personal pattern is such that if
you spend an hour on reviews, you overwhelmingly intend to buy that product.
AI will create trillions of dollars of value
for strategic companies.
Companies need to experiment with
AI now to see how it will impact their
business and profitability.
Jim Harris is the author of Blindsided.
Follow him at @JimHarris.

Adrian825/Getty Images

AI Knows What You Want

As AI's predictive power improves, it will
transform industries and business models. Imagine that Amazon's AI gets so
accurate that it knows what you intend to
order before you've ordered it - and preemptively ships it to you. If you choose to
keep it, you get a discount or you can
return it at no cost.
Sound crazy? This is Stitch Fix's model.
Customers pay $20 for a personal shopper who reviews your Facebook feed and
photos and then predicts which clothes
you are likely to wear. Five items are
shipped and if you keep all of them, you
get a 25 percent discount. Stitch Fix was
founded in 2011, but is already changing
online fashion retailing. Today, it is worth
more than $2 billion.
But imagine when AI becomes so
accurate that it can replace a personal
shopper. If Amazon used such an AI, it
could ensure you stay committed to only
buying products from its online store.
This is why Amazon wants to collect as
C TA . t e c h / i 3

IMPROVING AI ACCURACY VIRTUALLY
Another changing business model was
discussed at CES 2018 by NVIDIA CEO
Jensen Huang. He described how AI in

car on a road to see how it performs, why
not observe it in a virtual world - like a 3D
driving game - where the car has to pre-

video games - or virtual worlds - can train
autonomous vehicles (AVs). NVIDIA's
GPUs (Graphic Processing Units) - are the
chips that drive the 3D graphics in video
games. Rather than put an autonomous

dict the movement of pedestrians or children chasing a ball. The autonomous
program using AI can improve its driving
over millions of virtual miles before it
drives on the real road.
JULY/AUGUST 2018

35


http://www.twitter.com/jimharris http://www.CTA.tech

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