There clearly is a new mentality developing that the widespread use of AI technologies as a core part of business operations is inevitable. I think I can remember Mr. Smith telling Neo in The Matrix that it was not an impossibility but rather an inevitability that would lead to the death of his species! So inevitability is the theme, and from what I can see, that is true, which leads to another thought that I want to address in this article. Many people have the idea or fear that companies that fail to adopt AI technologies will fail, whereas the ones that successfully diffuse the new technologies will survive. I heard someone yesterday use the example of Kodak to provide an illustration of this point.
Kodak’s Adoption vs. Evolution
However, that is not a good comparison because Kodak did adopt the new digital photography using CCD; in fact, one of their engineers held the original patent. Some have erroneously said that Kodak decided to downplay digital photography and preferred to stay with their quite successful film business instead. That is only partially true because I know for a fact that Kodak was trying to stay competitive in the Digital Photography market because I have one of their late 80s version of a digital camera sitting in my garage (I dug it out of a box this weekend, and sure enough, the logo KODAK is on the front). The question is not whether Kodak adopted the new technology; the question is if Kodak successfully evolved. To state that you need to invest in AI or your company will fail is not correct. Adoption of AI technology is inevitable; the question is whether or not the company will evolve along with all the changes that AI will bring. Clearly, Kodak did not evolve. Even though they invented the technology and were one of the first to market, the company as a whole did not evolve and, therefore, was not sustainable. Kodak remains today as a largely B2B-focused company on print and motion pictures.
The Sears Story: Adoption and Evolution
A better example is Sears. I know this story well as I lived it. My generation was probably one of the last to buy most major household goods from a Sears Catalog. Although there were stores in our community, the Sears catalog was in every home. It was the primary method of getting many of the common household goods delivered to your home. It was the Amazon of its time. Sears capitalized on this business to bring their top-selling items to your community in the form of a retail department store, and that was the primary method for most people to buy essential wares. I remember the day that Netscape came out and we were able to display graphical HTML pages from the World Wide Web. I was working by this time, and more than one person started to get the bright idea to sell things online. That did not take very long to happen at all. However, e-commerce as we know it today was not commonplace until the late 90s.
Early Adoption by Sears
Amazon and eBay are probably the beginnings of mainstream e-commerce. The period from 1995 to 2000 would mark the launch period for commercial sales on the Internet, specifically household items. Amazon would not turn a profit in this business until late 2001. Now, Sears was not slow to adopt. They were not trying to be old dinosaur relics; they were trying to adopt this new technology as fast as they could. They launched their first e-commerce site as early as 1997, three years before the likes of Walmart, Target and Best Buy would. They even had an exclusive agreement with American Online (AOL) for a co-branded shopping site on that platform. Before 2000 came along, most of their catalog was now online, and in the year 2000, they made major upgrades to their website. In terms of reach, catalog depth, and features, they might have rivaled any online retailers of the time.
Adoption vs. Evolution: The Sears Struggle
So, this was not an adoption issue. They were adopters, and in fact, they were one of the first major retailers to have this level of adoption. They did not have their heads in the sand, as many people like to think. They had leadership assigned to this, their CIO took an active interest, and they were taking advantage of new innovations to bring the online shopping experience to their customers. The problem was evolution, not adoption. Sears lost this fight, not because they were slow to adopt, but because they did not evolve well. After the .com bubble burst, companies like Amazon used this as an opportunity to gain market strength. They acquired Egghead and Alexa for example, and many more following this time period. Sears had acquisitions but not in the e-commerce space. They gained more diversity and retail market share but were not evolving their strategy.
The Evolution of Amazon
The story continues: Amazon built massive consumer confidence with Prime and doubled down on the shopping cart experience, making purchasing easy and with a look and feel that people began to get used to. Amazon also adopted mobile sales and lightweight purchases from any device. Sears struggled in all these areas and was always playing catchup. The company with more resources, more money, more customers, a larger catalog, and a greater initial investment was soon overwhelmed by the company that evolved.
The Core Issue: Adoption vs. Evolution
You can look at many of these examples like Sears and Kodak. Nokia, Blockbuster video, Blackberry, and even Toys “R” Us. All of these have the exact same story. They were not behind in the adoption; in most cases, they were ahead of everyone else. I use this as a proof point to explain that the issue is not whether or not companies will adopt AI; that is inevitable. The question is whether companies will evolve to the new changes that are going to come along with this widespread adoption.
