Otto Group.

Dr. Sebastian Walter is the VP of Digital and Consulting at Otto Group, a global retail and services corporation. He spearheads the Group's Digital Tech team and In-house Consulting arm, driving digital transformation across Otto’s 30+ portfolio companies. Sebastian oversees the development of cutting-edge solutions like e-commerce platforms, mobile apps, AI tools and data analytics platforms. His team also provides strategic consulting on digital excellence, customer experience and operational transformations.
Through this article, Walter shares his insights on the transformative potential of generative AI and the urgency for businesses to embrace it by actively implementing use cases to drive growth, efficiency and stay ahead of the competition.

COULD YOU ELABORATE ON SOME OF THE CHALLENGES YOU HAVE WITNESSED IN THE GEN AI FIELD AND HOW HAVE THEY IMPACTED THE DIGITAL SPACE?

As we embrace generative AI (Gen AI), we face several challenges. Engaging all employees, alleviating potential anxieties or threats and clearly demonstrating the immense potential of leveraging Gen AI for both personal and corporate benefit. This involves creating awareness of where we stand, what we can achieve and how individuals can harness Gen AI to their advantage.

Beyond the motivational aspect lies the challenge of equipping individuals with the necessary tools and infrastructure to seamlessly apply and use Gen AI in their daily workflows. This typically requires dedicated effort in developing the appropriate infrastructure and support systems.

After a year of extensive testing and ideation in 2022, we must now refocus our efforts on developing and deploying structural applications that directly contribute to revenue generation and bring tangible financial returns. The theme of 2024 is “go for the money”.

An overarching challenge lies in the strategic and ethical considerations surrounding Gen AI. We must carefully evaluate the implications for our company over the next 5-10 years, technology stack, business models and ethical standards. For instance, if, in a decade, customers simply instruct their personal AI assistants to find the best evening dress from their preferred brands, how would that disrupt the entire e-commerce landscape? From search patterns and marketing spend allocation to website design and functionality, the ripple effects could be profound. While this may seem far-fetched, it’s crucial to contemplate such scenarios and their potential impact on our operations.

As we approach a future where AI-generated responses become increasingly natural and versatile, we must seriously address ethical questions. Do we want our customers to be aware they’re interacting  with an AI? Or do we embrace a seamless, indistinguishable experience? How can we make sure, that all our Gen AI does meets our ethical standards and complies with the values we want to convey in all we do? These are the strategic and ethical quandaries we must navigate as we forge ahead in the Gen AI era.

WHAT ARE SOME OF THE INNOVATIVE ADVANCEMENTS THAT ARE TRANSFORMING THE DIGITAL SPACE REGARDING GEN AI?

Generative AI can contribute to growth across industries in three areas: It can enable us to do things better. It can help us do things faster and more efficient. And lastly, it can perform tasks that might not have been feasible or practical to undertake to date. This unlocks new opportunities for growth and expansion.
Especially in e-commerce or logistics the Otto Group has a very strong footprint. Gen AI can contribute to growth and improve processes. Personalized e-mail contact with content of real relevance is as convenient for the customer as it improves the odds to initiate a buying decision. A truly working, Gen AI-based fitting assistant ensures, the right clothing is being selected and reduces carbon footprint as returns are lowered. In our warehouses, the AI-powered robot-“dog” SPOT from Boston Dynamics helps conducts tunnel inspections and preventative maintenance activities.

While not directly tied to growth or productivity, Gen AI can enhance convenience–a factor that shouldn't be overlooked. For instance, the integration of Microsoft’s Copilot into the Office Suite might not yield massive efficiency gains immediately, but it undoubtedly adds an element of convenience that can improve the overall user experience – and yes, mid-term, this is of course also expected to increase productivity.

COULD YOU SPEAK ABOUT SOME OF THE PROJECTS OR INITIATIVES THAT YOU HAVE LED RECENTLY?

To help individuals get familiar with Gen AI and leverage it for personal productivity, we at the Otto Group have deployed a tool called the Otto Group GPT (OG GPT). We collaborated with OpenAI to create a secure environment where we can upload our data and information, which is then processed by their suite of models like ChatGPT and DallE. It’s a safe environment with robust access controls akin to rights management systems.

As of now, around 26,000 of our employees have access to this OG GPT, enabling them to use Gen AI capabilities in their daily work routines. Well over 80 percent of users report that it actively assists them in their tasks while ensuring all data remains entirely confidential. Similar to Microsoft Teams, we can create dedicated rooms for specific projects or companies, allowing controlled access to confidential materials.

An example of a very practical use case: Imagine, you have a large on long-running project going on, and want to embark new team members. Simply by having all past documentation being processes by OG GPT, this enables new team members to quickly get up to speed by querying the system about past decisions, project details, or even internal processes and compliance rules. This is a far more efficient alternative than sifting through volumes of documentation manually. Employees can also leverage the OG GPT for data analysis tasks, such as uploading Excel files and requesting insights into top-performing products.

Another example of our Gen AI deployment is an inspirational search feature we’re currently testing for our customers. Users can enter prompts like ‘show me what I need for a beach vacation’ or ‘show me what I need for a wedding in Spain,’ and our system, powered by Gen AI, will curate and present all relevant items–dresses, shoes, sunglasses, sunscreen and more–without the need for multiple separate searches. Initial tests indicate this feature leads to increased basket sizes and conversion rates.

Internally, we’re also harnessing Gen AI for product description generation and SEO optimisation, particularly for long-tail products. While hero products may still warrant human-crafted descriptions, for the vast majority of products, Gen AI can swiftly generate relatively good descriptions at scale–a task that would be prohibitively resource-intensive for humans alone. This enhances product discoverability on our platforms and drives significant traffic from Google searches.

HOW DO YOU THINK GEN AI IS GOING TO TRANSFORM THE DIGITAL SPACE?

We don’t know the full extent of generative AI’s impact yet. I firmly believe it is one of the biggest, if not the greatest, technical inventions we will witness in our lifetimes. We are at the very precipice, and it’s incredibly difficult to fathom where this could lead in the long run. I am confident that generative AI will profoundly change the world as we know it.

Just think a few years ahead when the current limitations and flaws of generative AI are overcome: What if halluzination is almost eliminated? What if voice input and output work seamlessly, via your smartwatch? What if users voluntarily “turn the switch” and grant a personalized Gen AI access to their current data, stored by the largest internet corporates such as Meta or Google? We are bound to experience seismic shifts that could restructure entire sectors and redefine how we approach tasks and challenges. This revolutionary technology’s full ramifications are still unknown, and we must ensure we govern it well and enforce our ethical standards. At the same time, we must brace ourselves for this transformative wave and be open-minded to the changes it will inevitably bring.

WHAT ADVICE WOULD YOU OFFER TO OTHER LEADERS IN THE SECTOR BASED ON YOUR EXTENSIVE EXPERIENCE?

Given Gen AI’s immense potential, I would encourage everyone to start implementing individual use cases step-by-step. It’s time to move beyond just acknowledging its importance and begin realising its tangible benefits, whether that’s driving growth, boosting productivity, or unlocking cost savings. Every business leader should be going full throttle on this front–get external advice if needed, but make this a top priority to stay ahead of the curve. Start step by step – small use cases are easier to implement than what we’ve known on software improvements in the past.

Unlike many other technologies, those who fail to embrace generative AI risk being left behind and overtaken by the competition. A recent study by Deloitte highlighted, that about 30% of german retail companies are not planning to leverage any Gen AI tools in the future. This is a highly risky strategy, since we have seen seismic shifts happen before with the rise of smartphones and mobile shopping.Who could have predicted a decade ago that 50 percent of e-commerce would happen on mobile devices? That customers would be able to track parcels, reroute deliveries and resolve issues seamlessly through their phones? It was unimaginable, but those who didn’t prepare for that paradigm shift lost substantial revenue, turnover and customer engagement as the world evolved around them. And for sure: smart phone and mobile shopping are a much smaller tech invention compared to Gen AI.
Today, we face intense competition from Asia, with players like Timo and Shein aggressively entering the European market. Advertising landscapes are shifting with the rise of TikTok and other disruptive platforms. There are enough threats on the horizon that we should ensure we belong to the early adopters of generative AI, leveraging its full potential. Fortunately, implementation is much easier and faster than we anticipated– not all a five-year program anymore.
The time to act is now.