What: Research reveals retail CEOs are missing major growth opportunities by limiting AI to efficiency-focused improvements rather than pursuing transformative business model innovation.

Why it is important: With 87% of early AI adopters experiencing revenue increases of 6% or more, retailers who fail to think boldly about AI transformation risk falling behind competitors who are reimagining their entire business models.

Summary: The retail industry stands at a critical juncture in AI adoption, where success depends on CEOs' willingness to move beyond incremental improvements and reimagine their entire business model. While many organizations have deployed AI tools for automation and efficiency gains, only 10% successfully scale their applications to achieve transformative results. The most successful retailers are using AI to reshape core functions and create innovative new products, achieving up to 4.5% annual productivity growth compared to the industry's decade-long 0.3% rate. This transformation requires CEOs to personally lead innovation, creating focused teams and supporting blue-sky thinking while maintaining a portfolio approach to AI initiatives. The article emphasizes that success comes from viewing AI not just as a tool for optimization but as a catalyst for reinventing how value is created and delivered to customers.

IADS Notes: Recent retail developments validate the urgency of transformative AI leadership. In March 2025, data revealed that while 84% of retail executives planned increased AI investment, only 10% successfully scaled their applications. By June 2025, top-quartile retailers embracing comprehensive transformation were outperforming industry five-year TSR by 7 percentage points through integrated approaches. The stakes are particularly high as McKinsey's February 2025 report showed 71% of consumers now demanding personalized interactions. Success stories like L'Oréal's Beauty Genius demonstrate how bold AI initiatives can create entirely new value propositions, reaching over 10 million consumers and driving 30-70% higher engagement rates than traditional approaches.

CEOs aren’t thinking big enough with AI