AI: THE HYPE IS REAL – FOR THOSE WHO GO ALL THE WAY

At Pinewood.AI, we firmly believe in the potential of AI technology to transform our industry. I mean, the clue is in the name. Equally, we hear the claims of hundreds of companies within our sector about AI and the noise is deafening. In an industry where many executives feel their technology investments have not delivered an ROI, I respect their wariness, their concern that we are in yet another hype cycle.

That’s why I wanted to hear from an independent expert, someone who has spent most of his professional life working with AI from its infancy. Dr. Robert Plant is the Department Chair for Business Technology at the Miami Herbert Business School and our discussion focused on two key questions: are we really at an inflection point that will transform business, and what are the specific implications for the automotive industry?

His answer to the first question was unequivocal. Yes, we are at a genuine inflection point. He compared it to the adoption of the PC, ERP and the Internet and the way they transformed business models. He believes AI progress had been held back by a lack of data and a lack of processing power. Now we have the data and the chips.

At the same time, he observed that at every inflection point there will be industry players who get it and ones who don’t. IBM didn’t invent the PC and SAP didn’t invent ERP, but both became the dominant players. Equally companies such as Blockbuster and Kodak didn’t get it and are now widely regarded as cautionary tales. The latter are examples where it’s more difficult for market leaders to pivot with the necessary speed because it’s hard to tell your shareholders you’re going to scrap the business model that has made them so much money for a leap into the unknown.

We also discussed how many, both in our sector and in others are focusing their AI investment on functions such as customer service. His view is that this makes sense as an initial learning experience, but if your strategy is to use AI primarily to cut costs then you will never leverage its full potential. He made the comparison with companies outsourcing customer service and IT to lower cost countries, it helped their bottom-line short term, but many are now bringing those functions back in-house because it weakened the customer experience.

His core point is that AI should not be regarded as a standalone technology but part of a new ecosystem, and the winners will be those who embrace it across their entire value chain. So, what does that mean for the automotive industry?

We talked about the potential of ‘Small Language Models’. As the name implies these are trained on smaller data sets, are quicker to learn and require fewer computational and energy resources. That doesn’t make them inferior however to the Large Language Models. Think of them as specialist ‘experts in a box’. One who could know far more about every model, every option and accessory that an OEM manufactures, and a dealer sells, than any human salesperson. One who could deploy that knowledge 24/7 to multiple customers simultaneously.

Finally, we discussed RAG systems that integrate generative AI with business data in real time. The most obvious advantage of these is their ability to consider e.g. customer enquiry and vehicle history and stock availability to make personalized recommendations. More broadly they can bring in additional external data sets to more accurately predict customer buying patterns. For example, in the United States, regional variations in climate mean that drivers in Chicago will have very different servicing requirements in winter than drivers in Florida. The AI can use the data to predict when drivers in Chicago will want to get their car or truck winter-ready.

My time with Dr Plant left me in no doubt that as a company we are heading in the right direction. But equally we must deal with a lot of noise that is high on artifice and low on intelligence. When we can cut through that noise and take the time to help both dealers and OEMs understand the true potential of AI then the opportunity for transformation is real, and it is there to be seized.