The Key to Winning the AI Arms Race? Human Creativity.

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By Doug Stephens

Companies across the global retail sector are poised to become the beneficiaries of a historic windfall: an unprecedented boost to the bottom-line courtesy of artificial intelligence. It’s safe to say that few, if any, technological revolutions have reshaped retail workforces, business processes and P&Ls like the coming AI revolution will do.

While today’s artificial intelligence platforms like OpenAI’s ChatGPT4 are hardly perfect, often delivering responses that are at best inconsistent, at worst downright wrong, we’ve seen this movie enough times to know how rapidly technology can improve. Indeed, generative AI products are improving exponentially as they feed on the firehose of recorded knowledge.

From the frontlines of customer service to the murky tentacles of supply chains, AI will help retail businesses achieve extraordinary levels of efficiency. Of course, these efficiencies will come, in no small part, through the mass displacement of human workers.

Gartner estimates that artificial intelligence deployments in call centres alone will replace one in 10 workers, saving corporations $80 billion dollars in labour costs by as early as 2026. So, it doesn’t take a great deal of imagination to see the enormous financial incentives companies have to integrate AI into every possible aspect of their operations.

Now, consider the legions of employees responsible for gathering, cleansing, formatting, analyzing, synthesizing and disseminating the data necessary for cogent executive decision making and fluid business operation. If just 10 percent of them were rendered redundant by AI, the resulting job loss would be unprecedented in human history. But the coming of artificial intelligence raises less obvious yet equally crucial dilemmas for businesses.

Creative Advantage

In a future where AI becomes central to almost every major retail enterprise, how will businesses develop significant competitive advantage? If a brand has dominated primarily by making faster and more accurate operational decisions than their competitors, how will they fare when their competitors are using artificial intelligence to guide and speed decision-making?

If an apparel brand has succeeded by outperforming their competitors in understanding where society is moving in terms of fashion and style, how will they compete when every other apparel brand is employing predictive AI to mine and synthesize the same trend data?

The question becomes: if widespread use of AI eliminates existing sources of competitive advantage, where can companies look to create distance between themselves and their rivals? The answer lies in understanding what AI cannot do: create entirely new things.

Creativity is critical because problem solving alone will not carry the day in most markets. Brands must also innovate.

Problem solving and innovation may seem like two sides of the same coin, but in fact, they couldn’t be more different. Problem solving is largely an exercise in convergent thinking, a narrowing of possibilities to address a specific problem. Meanwhile, innovation is a creative exercise rooted in divergent thinking, aimed at producing original and unique possibilities.

AI is a convergent thinker, while humans have the ability for divergent thinking.

Sceptics may point to examples of AI-generated art, literature or music as signs of human-like creativity. But we mustn’t confuse programmed mimicry with genuine innovation. As with all queries, AI treats creativity as a problem to be solved, and does so by scouring existing examples and data. It is literally restrained to thinking inside the proverbial box. Sure, the box may expand with more data inputs and training but, nonetheless, it’s a box.

Genuine creativity, by contrast, remains something of a mystery but most experts agree that it springs organically from a complex amalgam of genetics, environment, relationships, experiences and emotions — things that AI lacks.

The Economics of Creativity

If you want to make the blood drain from the average CFO’s face, strike up a discussion about creativity. While most appreciate the need for creativity, few regard it as a capital investment in the same way they might regard a new warehouse or a piece of machinery. So, I’ll cut right to the no-nonsense business case for investing in creative people.

Highly innovative companies generate up to 2.4 times greater profitability than their competitors

First, it’s essential to note the ironclad relationship between innovation and financial performance. Highly innovative companies generate up to 2.4 times greater profitability than their competitors, according to McKinsey & Co. Innovative companies also demonstrate a significant advantage over their peers in adapting to crises, something that will become increasingly valuable with rising environmental, economic and geopolitical disruption.

But the best argument for investing in creativity is one of simple supply and demand. Creative thinkers are in shortening supply.

Isn’t everyone creative, you might wonder? The simple answer is no. While 98 percent of children under five years of age test as creative geniuses, that number sinks to less than 2 percent among adults over the age of 25. Some see our educational system as a creativity killer, while others see the decline as part of the “conventional” stage of a child’s development and the need to fit in with peers and adhere to wider societal norms and modes of thinking.

Now, even children are becoming less creative. Psychologists attribute this to a combination of environmental influences, including a lack of unstructured play and contemplative time to near-constant stimulation from technology.

At the same time, demand for creativity is no longer confined to roles traditionally considered “creative.” It’s increasingly clear that divergent thinking can add value across the entire organization, from logistics to IT to human resources.

Companies will therefore face a choice. Take the savings offered by AI and push them directly to the bottom line or reinvest them in what may be the primary remaining source competitive advantage: beautifully irrational, wildly imaginative and uniquely human creativity.

Doug Stephens is the founder of Retail Prophet, an in-demand speaker, and the author of three books on the future of retail, including the recently released Resurrecting Retail: The Future of Business in a Post-Pandemic World.