What: The struggle between retail transformation and real estate monetisation intensifies as department stores like Macy's face activist pressure to unlock property value, while HBC's Richard Baker demonstrates how real estate assets can finance acquisitions but rarely produce retail success stories.

Why it is important: This tension exemplifies the broader challenges facing department stores as they balance the immediate financial gains from real estate monetisation against the need for sustainable retail transformation and long-term viability.

Department stores' valuable real estate holdings have become both an asset and a liability in their transformation efforts. Activist investors Barington Capital and Thor Equities are pressuring Macy's to create a separate real estate subsidiary to monetise properties valued at over $9 billion, while simultaneously pursuing store closures and stock buybacks. Meanwhile, HBC's Richard Baker has successfully leveraged real estate assets to finance acquisitions, including the recent $2.65 billion Neiman Marcus deal backed by $2 billion in junk bonds. However, historical examples like Lord & Taylor and Sears demonstrate that real estate monetisation alone doesn't ensure retail success. The sale of Lord & Taylor's Manhattan flagship to WeWork for $850 million in 2017 preceded the chain's eventual closure, highlighting the risks of prioritizing property value over retail operations.

IADS Notes: While Macy's faces pressure from activists to monetise its $9 billion property portfolio, HBC's Richard Baker has successfully leveraged real estate assets to finance acquisitions like Neiman Marcus. However, as seen in cases like Lord & Taylor and Sears, focusing solely on real estate monetisation often fails to address fundamental retail challenges, highlighting the need for balanced transformation strategies.

US department stores’ real estate strategies reveal divergent approaches 

What: Luxury retail faces critical workforce crisis as 51% of employees plan to leave, highlighting urgent need for industry-wide transformation in employee experience and retention strategies.

Why it is important: This workforce crisis threatens the foundation of luxury retail's personalized service model, potentially disrupting the industry's ability to maintain customer relationships and drive sales, particularly as brands report that 68% of VIC clients follow their advisors to new employers.

The luxury retail sector is confronting an unprecedented workforce challenge as a global survey reveals 51% of employees plan to leave their current positions. This crisis emerges as retail staff face expanding responsibilities, requiring mastery of both traditional sales skills and digital fluency while maintaining high levels of emotional intelligence. The impact extends beyond mere staffing concerns, as research indicates 68% of Very Important Clients follow their advisors when they change employers. Employee dissatisfaction stems from multiple factors, including lack of empowerment (40%), feeling undervalued (33%), and poor work-life balance (61%). The situation is particularly acute in the USA and France, where 60% of staff are planning departures. Industry consultants suggest a shift from pure commission-based compensation to hybrid models that consider customer satisfaction and loyalty metrics. This crisis comes at a critical time when the luxury market is experiencing its first contraction since 2008, with Bain reporting a 2% decline.

IADS Notes: The luxury retail sector's workforce challenges identified in the CXG survey align with significant industry developments throughout 2024. While the survey reveals a concerning 51% turnover intention rate, proactive responses are emerging across the industry. In January 2024, luxury brands began implementing comprehensive training programs and retail academies to address the growing shortage of high-caliber sales associates. This approach was validated by Neiman Marcus Group's successful "Magic Makers" strategy, which achieved a remarkable 34-point increase in employee engagement while simultaneously driving $1 billion in remote selling. The industry's transformation is further evidenced by Central Retail Corporation's focus on adapting to a multigenerational workforce through flexible, individualized approaches. However, the challenge extends to leadership stability, as demonstrated by multiple CEO departures across major retailers in October 2024, suggesting that the industry's workforce challenges span all organizational levels and require comprehensive solutions that balance traditional retail skills with emerging digital requirements.

Luxury brands face a retail labour crisis as 51% of employees plan to leave their jobs

What: Major department stores implement diverse transformation strategies in 2024, with Saks and Neiman Marcus moving toward a USD 2.65 billion merger, Macy's closing 150 stores while expanding Bloomingdale's and Bluemercury, and Nordstrom showing improvement amid potential privatisation plans.

Why it is important: The diverse approaches to transformation highlight how department stores are reimagining their business models through consolidation, store optimisation, and digital integration to remain relevant in an evolving retail landscape.

Department stores are pursuing varied strategies to address market challenges, with luxury retailers leading significant changes. Saks Fifth Avenue owner HBC has secured a USD 2.2 billion junk bond to finance its acquisition of Neiman Marcus Group, while simultaneously reviewing its store portfolio. Macy's is implementing its "Bold New Chapter" strategy, closing 150 underperforming stores through 2026 while investing in 350 "go-forward" locations and expanding its Bloomingdale's and Bluemercury brands.

Nordstrom shows signs of recovery and increased privatisation potential, while other mid-tier retailers like Kohl's and JCPenney adapt through leadership changes and value-focused strategies. These transformations come as consumers increasingly prioritise travel and experiences over material goods, forcing retailers to reimagine their value propositions.

IADS Notes: While Saks and Neiman Marcus near their merger with secured USD 2 billion funding, Macy's implements its "Bold New Chapter" strategy, and Nordstrom shows signs of recovery. The luxury segment particularly struggles as consumers shift spending to experiences, forcing retailers to adapt through store closures, digital integration, and strategic partnerships with technology companies.

How US department stores tried to reverse market share losses in 2024

What: Bulgari leads luxury retail's strategic pivot from China to India, launching digital operations and expansion plans as China's luxury market shows signs of maturity.

Why it is important: The initiative represents a pivotal moment in luxury retail's geographical rebalancing, as brands respond to changing consumer demographics and economic dynamics between Asia's two largest markets.

Bulgari's strategic expansion into India marks a significant shift in luxury retail dynamics, as the brand seeks to balance its portfolio amid China's changing market conditions. The Italian luxury house has launched its first digital boutique in India through a partnership with Tata CLiQ Luxury, while simultaneously addressing the slowdown in Chinese consumer spending, where luxury brands face challenges from housing market issues and growing second-hand markets.The move comes as China's luxury market experiences a notable transformation, with even prestigious brands offering significant discounts and facing competition from grey market sales. Meanwhile, India's luxury market shows promising growth potential, driven by rising disposable incomes and an expanding affluent class. Bulgari's CEO Jean-Christophe Babin emphasizes India's unique position, suggesting its potential surpasses other emerging luxury markets.This strategic pivot reflects broader industry trends, as luxury brands adapt to evolving Asian market dynamics, with India's ultra-high-net-worth population growing rapidly and Chinese consumption patterns normalizing to single-digit growth. The initiative could set a precedent for other luxury brands seeking to diversify their Asian market presence.

IADS Notes: Bulgari's strategic pivot towards India in November 2024 exemplifies a broader transformation in global luxury retail dynamics. This shift is supported by Kearney's September 2024 ranking of India as the most attractive emerging retail market , while Chinese luxury malls simultaneously face double-digit sales declines . The contrasting consumer behaviors are particularly noteworthy - while Chinese luxury consumers increasingly gravitate towards second-hand markets worth $8 billion , India's luxury market is projected to grow 15-25% annually. Bulgari's digital-first approach through Tata CLiQ Luxury aligns with India's expanding affluent consumer base, expected to reach 100 million by 2027 . This transition is further validated by McKinsey's projection of India's ultra-high-net-worth population growing 50% by 2028 , suggesting that Bulgari's India strategy could serve as a blueprint for other luxury brands seeking to diversify beyond China's maturing market.

Will Bulgari show brands the way from China to India?

What: Japan announces a JPY 2 trillion (USD 12.8 billion) stimulus package to revitalise its semiconductor and AI industries, aiming to rebuild domestic tech capabilities and support economic digitalisation.

Why it is important: This strategic investment addresses Japan's critical need for tech autonomy while supporting the retail sector's digital transformation, as Asian retailers have already demonstrated significant returns from AI implementation, with companies like Intime achieving 15% sales growth through AI adoption.

Japan's government is set to deploy a substantial JPY 2 trillion stimulus package to reinvigorate its position in the semiconductor and artificial intelligence markets. This initiative builds upon previous investments, with the government having allocated more than 4 trillion yen over the last three years under former Prime Minister Kishida Fumio. The package introduces medium-term support measures, including new bridging bonds and enhanced interest rates on treasury notes, while the Bank of Japan will utilize government bonds to support AI and semiconductor investments.The stimulus specifically targets domestic capacity building, offering continuous financial backing for new production facilities even if private sector support wavers. This approach aligns with Japan's Economic Security Promotion Act of 2022, which emphasizes stable semiconductor supply chains as a national priority. The package will support Rapidus, a coalition of eight major Japanese companies, in achieving ambitious goals including 2nm AI-enabled chip production by 2027 and the training of over 20,000 engineers in advanced semiconductor design.Despite potential challenges, including public skepticism toward digitalization and cultural resistance to technological change, the package represents a strategic move to reclaim Japan's historical leadership in sophisticated AI and chip development.

IADS Notes: Japan's ambitious JPY 2 trillion AI stimulus package aligns with successful AI implementations already transforming Asian retail. In July 2024, Lotte Department Store demonstrated the potential of such investments by reducing manual task time by 90% through AI chatbots , while Intime Department Store reported a 15% increase in counter sales after implementing AI systems . The stimulus package's focus on semiconductor development and AI infrastructure could accelerate similar transformations across Japan's retail sector, particularly relevant given the successful deployment of AI-powered customer service solutions by Shinsegae Department Store in October 2024 . This investment strategy mirrors the broader industry trend of moving away from traditional systems toward AI-driven solutions, as evidenced by global retailers' shift from Excel-based operations to intelligent automation . With Japanese department stores already adapting to demographic challenges through technological innovation , this stimulus package could provide the necessary foundation for widespread AI adoption in retail, addressing both workforce challenges and customer experience enhancement

Japan’s 2 Trillion Yen AI Stimulus

What: Visa's latest retail monitor reveals sustained growth in both in-store and online holiday sales across five key markets, demonstrating strong consumer spending.

Why it is important: These findings demonstrate how improved payment technologies and AI-driven solutions are enabling retailers to capture increased consumer spending across channels, setting new benchmarks for holiday season performance.

Visa's Consulting and Analytics Retail Spend Monitor has documented significant growth in holiday retail sales across five markets, encompassing both physical and digital channels. The comprehensive analysis reveals robust consumer spending patterns, with retailers successfully leveraging integrated payment solutions and digital technologies to enhance the shopping experience. This growth trajectory spans multiple retail sectors and demonstrates the effectiveness of retailers' omnichannel strategies during the crucial holiday period. The data underscores the increasing sophistication of retail operations, with merchants effectively utilising digital tools and payment technologies to meet evolving consumer preferences. The growth in both in-store and online sales indicates strong consumer confidence and highlights the successful integration of physical and digital retail experiences. This balanced performance across channels suggests that retailers have effectively adapted their strategies to capture spending across all customer touchpoints.

IADS Notes: The 2024 holiday shopping season marks a pivotal moment in retail's digital transformation. The record-breaking USD 74.4 billion in global Black Friday online sales demonstrates the increasing sophistication of digital commerce, while the growth in physical store visits to 126 million reflects successful omnichannel integration. This evolution is particularly evident in the widespread adoption of AI technologies, with 38% of shoppers utilizing AI tools for deal-hunting, fundamentally changing how consumers discover and evaluate offers. The projection of U.S. holiday retail sales reaching USD 1 trillion underscores the effectiveness of retailers' more nuanced promotional strategies, while Stripe's processing of USD 31 billion during Black Friday weekend highlights the crucial role of secure, efficient payment systems in supporting this growth. These developments collectively indicate a retail landscape where digital innovation, physical experiences, and financial technology converge to create more sophisticated and seamless shopping journeys.

Five global markets experience increase in holiday retail spending

What: Major luxury brands are expanding their product lines to include more items priced under USD 500, including accessories and home goods, as they face declining demand for high-end products and seek to retain middle-class consumers amid economic pressures.

Why it is important: This strategic shift highlights the growing tension between maintaining luxury brand exclusivity and the need to adapt to changing market conditions, where even affluent consumers are becoming more price-conscious.

Luxury brands are confronting a significant decline in demand for their traditional high-end products, with U.S. spending on top luxury brands falling 6% year-on-year in November. In response, companies are emphasizing products priced at USD 500 and under, such as card holders, scarves, and branded lifestyle items. Gucci has introduced items like a USD 440 pet leash and USD 200 branded sticky notes, while Louis Vuitton offers accessories like a USD 395 canvas bracelet. Burberry plans to reorganize store layouts to highlight "scarf bars" featuring items from USD 450 to USD 1,050.

This strategy aims to appeal to middle-class aspirational customers following sharp price increases, with brands like Chanel and Prada raising handbag prices by over 50% since 2020. However, LVMH's CFO warns against introducing very affordable products that could damage brand exclusivity.

IADS Notes: While the global luxury market faces a projected 2% decline in 2024, brands are adapting their strategies amid declining consumer confidence. This move to expand accessible price points comes as luxury labels seek to maintain relevance with middle-class consumers, though LVMH's CFO cautions against compromising brand exclusivity.

Luxury labels bulk up on lower-priced goods to appeal to the middle-class 

What: Gen Z's 'chaotic customisation' trend is reshaping retail through extreme personalisation and DIY-driven self-expression, pushing brands to adapt their strategies for 2025.

Why it is important: As Gen Z's spending power reaches $360 billion, their preference for individualistic expression and customisation is forcing retailers to fundamentally rethink their approach to product development, store experiences, and brand engagement.

The retail landscape is undergoing a significant transformation as Gen Z drives a new trend dubbed 'chaotic customisation' by WGSN. This movement represents a decisive shift away from minimalism and standardised micro-trends, emphasizing extreme personalization and uninhibited self-expression. The trend began with the 'Jane Birkin-ification' of bags, generating millions of TikTok views, and has since expanded to various fashion categories, from footwear to apparel. Major brands are responding strategically, with Adidas hosting customization pop-ups and Coach introducing shoe charms in their Spring/Summer 2025 collection. Notably, collaborations between established brands and innovative designers, such as Conner Ives's partnership with Nike and Chopova Lowena's work with Asics, demonstrate the trend's commercial viability despite production challenges. The movement extends beyond mere aesthetic choices, reflecting a deeper cultural shift towards individualistic expression and a rejection of mass-produced fashion. While this presents logistical challenges for brands, particularly in scaling customized products, it offers opportunities to create meaningful connections with consumers through personalized experiences and sustainable practices.

IADS Notes: The emergence of 'chaotic customisation' aligns with broader retail trends identified in recent months. In November 2024, BCG research revealed that 70% of shoppers desire personalised experiences , suggesting this trend is part of a larger shift in consumer behaviour. This is particularly relevant for Gen Z, who command $360 billion in spending power as of October 2024  and are driving significant retail innovation. The trend's success is evidenced by recent initiatives such as Future Stores' £20 million investment in Oxford Street , which creates dynamic, social media-inspired retail spaces. The movement towards customisation is further supported by successful implementations like YSL Beauty's immersive pop-ups  and Flannels' luxury personalisation services. Notably, this trend intersects with sustainability concerns, as Euromonitor's 2025 forecast indicates that 63% of consumers prioritise environmental impact in their purchasing decisions , suggesting that 'chaotic customisation' could evolve to incorporate more sustainable practices in personalisation.

Gen Zs want ‘chaotic customisation’ in 2025. How can brands tap in?

What: The disconnect between AI market enthusiasm and actual business implementation suggests a longer timeline for meaningful productivity improvements across industries.

Why it is important: The gap between AI investment and implementation reflects a crucial reality for retail strategy planning, as businesses must balance technological ambition with practical adoption challenges while maintaining operational efficiency.

Despite generating substantial wealth in the technology sector, particularly for companies like Nvidia, artificial intelligence has yet to demonstrate significant impact on America's broader economy. The contrast is striking: while AI-related investments have created enormous market value, its practical implementation remains limited, with only 5-6% of American businesses using AI for core operations. This pattern mirrors historical technological adoptions, where transformative technologies like electricity and tractors took decades to achieve widespread implementation.The current state of AI adoption varies globally, with Britain showing higher adoption rates at 20% compared to America's modest figures. However, even in more advanced markets, the technology's impact on productivity and employment remains minimal. Labour markets across OECD countries are showing record-high employment rates and sustained wage growth, contradicting predictions of AI-driven job displacement. Looking ahead to 2025, the adoption rate is expected to remain measured, with only 7% of American firms planning to implement AI solutions in the coming months.

IADS Notes: The article's cautious stance on AI's immediate productivity impact finds both support and contrast in recent retail industry data. While the broader economy shows limited AI penetration, the retail sector presents a more nuanced picture. As reported in June 2024, nearly half of retailers are already seeing increased revenue from their AI initiatives , though a November 2024 study revealed that retailers still lose 4.5% of gross sales due to inefficiencies . The implementation reality varies significantly across markets, with China reaching 230 million retail AI users by December 2024 , while global adoption faces practical challenges. Regarding employment impact, October 2024 data shows AI is primarily transforming job roles rather than eliminating them, with staff being redirected to high-value tasks . This trend aligns with the article's observation about stable employment levels, suggesting that AI's impact on retail is more about role evolution than job displacement. The evidence indicates that while AI's productivity benefits may indeed be gradual, the retail sector is already experiencing tangible transformations in specific operational areas.

There will be no immediate productivity boost from AI

What: BCG research reveals major untapped potential in women-centric offerings, with consumers willing to spend 15% more for better quality products.

Why it is important:  The findings highlight a critical gap between women's spending power and available products, presenting an immediate opportunity for retail innovation and growth.

BCG's groundbreaking research reveals a substantial USD 32 trillion opportunity in women-focused products and services, highlighting significant gaps across consumer goods, financial services, and healthcare sectors. Despite women controlling nearly 75% of discretionary spending worldwide, companies are failing to meet their specific needs effectively. The study, based on approximately 15,000 respondents across 12 countries, shows that even top-performing sectors like grocery and personal care achieve only 66% and 64% favourable ratings respectively.

Notably, women demonstrate a willingness to spend more for quality, with US consumers prepared to pay premiums of up to 15% for better clothing and safer sports products. The research outlines a strategic framework focusing on desirability, viability, and feasibility for developing successful women-centric offerings. Additionally, it emphasises the importance of female representation in leadership roles to better understand and address women's unmet needs effectively.

IADS Notes: Recent market evidence strongly supports BCG's findings about the untapped women's market potential. In August 2024, Mitchells Stores demonstrated the power of targeted women's offerings, with women's sales reaching 56% of their business through strategic category investments . This success was further reinforced in October 2024, when Falabella's Active Woman concept saw a 30% increase in women's sportswear demand . Additionally, Euromonitor's November 2024 trends report revealed premium products outpacing mass alternatives in women-dominated categories like beauty and personal care, validating BCG's observation about women's willingness to pay more for quality products.

The $32 trillion opportunity in women-focused products and services

What: Luxury retail faces unprecedented workforce transformation as client advisors evolve from traditional sales roles into tech-savvy, multifaceted brand ambassadors driving customer experience and loyalty.

Why it is important: The evolution of the client advisor role directly impacts business performance, with research showing that 68% of VIP clients follow their advisors to new employers, making talent retention a strategic imperative for luxury brands.

The luxury retail sector is undergoing a fundamental transformation in how it approaches talent management and development. Today's client advisors must master an increasingly complex role that combines traditional retail expertise with digital fluency and emotional intelligence. This evolution comes at a critical time when 51% of luxury retail employees are considering leaving their positions, threatening the stability of crucial client relationships.

The challenge is particularly acute as research shows that emotional connections between advisors and Very Important Clients (VICs) significantly impact business outcomes, with 68% of VICs willing to follow their trusted advisors to new employers. Leading luxury brands are responding by implementing comprehensive training academies, innovative retention strategies, and technology-enabled tools to support their workforce. The future of luxury retail hinges on successfully balancing traditional excellence with modern capabilities, while creating meaningful career paths that satisfy both established and emerging talent.

IADS Notes: The luxury retail sector is experiencing a significant transformation in its approach to talent management and development. As revealed in December 2024 , the industry faces a critical challenge with 51% of luxury retail employees planning to leave their positions, and notably, 68% of Very Important Clients following their advisors to new employers. In response, leading retailers have implemented innovative solutions, as seen in January 2024 when luxury brands began introducing comprehensive training academies and AI-powered staffing optimization.

The success of these initiatives is exemplified by Neiman Marcus Group's "Magic Makers" strategy , which achieved a remarkable 34-point increase in employee engagement while generating USD 1 billion in remote selling. This evolution aligns with the industry's broader shift towards managing a multigenerational workforce , emphasizing digital transformation and personalized career development paths.

CXG Report: The Client Advisor Effect 

What: Despite progress toward 2026 gender parity targets, structural barriers and traditional role segregation continue to hinder women's advancement to key operational and CEO-track positions in French companies.

Why it is important: The persistence of gender disparities in leadership roles not only impacts corporate performance and innovation but also reflects broader societal challenges in achieving workplace equality, particularly as companies face increased scrutiny of their DEI initiatives.

The landscape of gender parity in French corporate leadership reveals both progress and entrenched challenges. While 47% of SBF 120 companies have reached the 2026 target of 30% women in executive committees, significant barriers remain. Women represent less than 20% of division directors and 13% of financial directors, while being overrepresented in HR (62%) and CSR (78%) roles. The sectoral divide shows industrial and tech sectors at 21% female representation compared to 39% in real estate. Many CAC 40 companies are choosing to expand their executive committees rather than implement fundamental change, suggesting the need for more systemic transformation.

IADS Notes: French companies face significant challenges in achieving gender parity in 2024. Sectoral disparities range from 21% women representation in industrial/tech sectors to 39% in real estate. A double glass ceiling affects both management positions and strategic roles. While women dominate HR and CSR, they remain underrepresented in operational roles. Though 47% of SBF 120 companies meet the 2026 target, only one in eight reaches the 2030 goal. The tendency to expand executive committees rather than restructure existing leadership indicates the need for deeper organisational change.

CAC 40 and Rixain law: only 50% of companies ready for 2026, Press Release, english

BCG report: Quelle place pour les femmes à la direction des entreprises du CAC 40 et du SBF 120 ?

What: Digital fashion platform Syky expands its physical-digital retail model through a strategic collaboration with emerging designer Kate Barton, offering exclusive NFT-paired leather bags.

Why it is important: This initiative represents a significant shift in how designer brands approach digital transformation, combining NFT ownership with physical luxury goods to create unique value propositions for tech-savvy luxury consumers.

Syky's latest collaboration with CFDA/Vogue Fashion Fund finalist Kate Barton marks a significant development in the fusion of traditional and digital fashion. The partnership will debut on 5 December with an exclusive dusty sky blue version of Barton's popular Pierced Leather bag, available both as an NFT and physical product priced at $495. Limited to just 20 pieces, the collection allows customers to virtually try on the bag in a specially designed digital environment featuring metallic textures and reflective surfaces that echo Barton's distinctive aesthetic. This collaboration represents Syky's sixth curated project under artistic director Nicola Formichetti's guidance, building on previous successful partnerships with designers like Julie Paskal and Kunihiko Morinaga. The initiative comes amid renewed optimism in the Web3 fashion space, bolstered by recent market developments and growing consumer acceptance of digital fashion experiences.

IADS Notes: The fashion industry's integration of digital and physical experiences has accelerated significantly throughout 2024, with Syky's collaboration with Kate Barton representing a broader trend in retail innovation. In February 2024, Mytheresa's pioneering launch on Apple Vision Pro demonstrated luxury retail's commitment to immersive shopping experiences, while Zalando's introduction of AI-powered shopping assistants across 25 markets in October highlighted the industry's push toward personalized digital interactions. Mango's adoption of AI-generated models in September further exemplified how traditional retailers are embracing digital transformation to enhance efficiency and creativity. These developments, coupled with Printemps' recent acceptance of cryptocurrency payments in November, suggest that Syky's phygital approach aligns with a broader industry movement toward seamless integration of digital and physical retail experiences, particularly in luxury and designer fashion segments.

What’s next for Web3 fashion?

What: World Retail Congress has traditionally featured IADS members windows in its End of the Year report since 2020

Why it is important:  The World Retail Congress addresses a wide array of professionals worldwide, and the report has a significant visibility.

World Retail Congress reports IADS members Christmas Windows

What: The advancement of AI agents represents a pivotal shift in technological capability, requiring retailers to balance increased automation with robust governance and safety measures.

Why it is important: The paper's examination of AI agents' autonomous capabilities and governance requirements arrives at a critical moment when retailers are rapidly deploying AI systems, with only 10% successfully scaling their applications , highlighting the urgent need for structured implementation approaches.

The World Economic Forum's analysis charts the remarkable evolution of AI agents from basic rule-based systems to sophisticated autonomous entities. This transformation, driven by advances in deep learning, reinforcement learning, and transformer architecture, has created systems capable of handling complex tasks with minimal human oversight. These AI agents now incorporate advanced features such as memory, planning capabilities, and tool integration, enabling them to make nuanced decisions and operate independently across various environments.

The paper critically examines both the transformative potential and inherent risks of these technologies. As AI agents become more sophisticated, particularly in multi-agent systems where they collaborate to tackle complex challenges, the need for robust governance frameworks becomes paramount. This evolution demands new standards for interoperability and communication, while raising fundamental questions about safety and accountability. The analysis emphasises that successful implementation requires balancing technological advancement with ethical considerations, highlighting the importance of developing comprehensive guidelines for responsible adoption as these systems continue to reshape various sectors of the global economy.

IADS Notes: The WEF white paper's insights parallel significant retail sector developments throughout 2024. In September , adaptive AI began transforming UK retail operations, creating a widening gap between early adopters and laggards. Walmart's processing of 850 million data points in August demonstrated the scale of potential impact.

However, as highlighted in June , retailers face substantial implementation challenges, with the global generative AI market reaching USD 79.8 billion. The NRF's guidelines published in January addressed these concerns by establishing governance frameworks for AI deployment, emphasising strong internal controls and customer trust. These developments validate the paper's core premise that AI agents require careful oversight while offering transformative potential.

White Paper 

What: Rising living costs and environmental consciousness are reshaping retail behaviors, with 41% of consumers choosing repairs and significant regional variations in secondhand adoption rates.

Why it is important: The convergence of economic pressures and sustainability concerns is creating a fundamental shift in consumption patterns, forcing retailers to adapt their business models while presenting new growth opportunities in emerging markets.

The global retail landscape is experiencing a significant transformation as consumers increasingly embrace secondhand shopping and repair services. According to Euromonitor International's 2023 survey, 24% of global consumers are now actively purchasing secondhand items, while 41% opt to repair broken products to save money and reduce waste. This trend is particularly pronounced among younger generations, with over 40% of Gen Z and Millennials regularly engaging in secondhand shopping. The movement shows distinct regional variations, with Latin America leading in zero-waste adoption at 40%, while Europe and Asia-Pacific follow at 36%. Emerging markets are showing remarkable potential, with India leading at nearly 50% consumer participation in buying and selling used items. The trend is driven by a combination of economic pragmatism and environmental consciousness, particularly among consumers aged 45 and above, where participation has increased from 28% in 2021 to 40% in 2023.

IADS Notes: The surge in secondhand retail throughout 2024 reflects a complex interplay of economic pressures and evolving consumer values. As reported in March 2024, ThredUp's analysis projected the global secondhand market to reach $350 billion by 2028, demonstrating unprecedented growth potential . This projection is supported by significant market developments, with traditional retailers rapidly adapting their business models. In February 2024, H&M's innovative SoHo store launch featuring a dedicated secondhand section marked a turning point in mainstream retail adoption of circular fashion. The trend gained further momentum when Harvey Nichols and John Lewis expanded their resale offerings , while Le Bon Marché's luxury buyback program launch demonstrated how high-end retail is embracing circularity. By September 2024, emerging markets showed remarkable growth, with India leading at 42% consumer participation in secondhand commerce , suggesting a global shift toward sustainable retail practices that transcends economic boundaries.

Rising cost of living pushes secondhand shopping, repairs

What: As the global GenAI landscape fragments between US, China, and emerging middle powers, retailers face unprecedented challenges in balancing technology access, data sovereignty, and operational efficiency across different markets.

Why it is important: The evolving landscape forces retailers to fundamentally rethink their technology strategies, as relying solely on solutions from GenAI superpowers may no longer be viable in markets with emerging data sovereignty requirements and local AI ecosystems.

The emergence of middle powers like the EU, Saudi Arabia, UAE, South Korea, and Japan alongside the US and China is reshaping the GenAI landscape. This evolution creates both challenges and opportunities for retailers, who must balance access to cutting-edge technology with local compliance requirements. The implications affect fundamental business operations, from supply chain management to customer data handling. As countries develop their own AI capabilities and regulatory frameworks, retailers need flexible, regionally adaptive strategies while maintaining operational consistency. The stakes are high, with early GenAI adopters reporting significant revenue improvements, making strategic adaptation to this new geopolitical reality crucial for future competitiveness.

IADS Notes: The geopolitical landscape of GenAI is forcing retailers to adapt their operations to varying levels of AI accessibility and processing capabilities across regions. Market access has become increasingly complex with new regional standards and regulations , while implementation success varies significantly - 87% of early adopters see revenue increases of 6% or more. As regional AI powers emerge, retailers must develop flexible partnership strategies, particularly given the complex data localisation requirements across the EU, China, and emerging middle powers.

How CEOs can navigate the new geopolitics of GenAI

What: India's Free Trade Warehousing Zones are transforming retail logistics by offering duty-free storage, value-added services, and streamlined customs procedures for global retailers entering the market.

Why it is important: FTWZs address critical supply chain inefficiencies in India's expanding retail market while enabling international retailers to test and penetrate the market without establishing permanent operations, supporting the country's projected USD 2 trillion retail growth by 2033.

Free Trade Warehousing Zones in India represent a strategic evolution in the country's retail infrastructure, operating as foreign territories within Special Economic Zones. These zones offer businesses comprehensive advantages for cross-border trade, including duty-free storage, rapid customs clearance, and various value-added services. With 100% foreign direct investment approval through the automatic route, FTWZs provide international retailers with a flexible entry point into the Indian market. The zones offer significant benefits, including duty deferment, flexible trade practices, and extended storage periods without customs duties. Notable features include 24-48 hour customs clearance, reduced licensing requirements, and the ability to operate without establishing a permanent presence. The strategic locations of these zones, such as the pioneering Sriperumbudur FTWZ, provide exceptional connectivity to major ports and industrial clusters, handling approximately 20% of India's container traffic. This infrastructure supports both traditional retail and e-commerce operations, enabling efficient inventory management and just-in-time delivery strategies.

IADS Notes: The emergence of Free Trade Warehousing Zones (FTWZs) in India aligns strategically with the country's rapidly evolving retail landscape. As noted in September 2024, India's retail market is projected to reach USD 2 trillion by 2033 , making efficient supply chain infrastructure crucial. This development is particularly timely, as a March 2024 study revealed that 90% of retailers face significant supply chain challenges resulting in substantial revenue losses. FTWZs offer a solution to these challenges while supporting the expansion into Tier 2 and 3 cities, a key trend identified in January 2024 . The zones' strategic value is further demonstrated by recent industry moves, such as Decathlon's November 2024 partnership with Myntra to reach 98% of India's serviceable pin codes, highlighting how improved warehousing and distribution capabilities are essential for successful market penetration in India's evolving retail ecosystem.

Free Trade Warehousing Zones in India and implications for retail

What: Japan's luxury resale sector experiences robust expansion through international tourism revival and strategic global market penetration by major retailers.

Why it is important: The trend highlights Japan's growing influence in the global luxury resale market, as retailers leverage the country's reputation for quality and authenticity to drive international expansion while capitalising on increased tourist spending.

Japan's luxury resale market is witnessing an unprecedented surge in demand, driven by a perfect storm of tourism recovery and strategic retail expansion. The sector has recently experienced remarkable growth, with secondhand clothing and luxury goods reaching ¥818.1 billion, representing 28.2% of Japan's total secondhand industry. Major players like Geo Holding and Komehyo Holdings are capitalizing on this momentum through aggressive international expansion strategies, with plans to significantly increase their global footprint. The weak Japanese yen has attracted international tourists, particularly from Asia, contributing to record-breaking duty-free sales. This growth is further amplified by sophisticated domestic operations, with established retailers like Beams and United Arrows implementing luxury resale initiatives. The market's appeal extends beyond traditional retail, with Chinese social media platforms playing a crucial role in driving engagement, as evidenced by the #JapanVintage hashtag garnering over 8.5 million impressions on Xiaohongshu.

IADS Notes: Japan's secondhand luxury market is experiencing unprecedented momentum, as evidenced by recent developments throughout 2024. The sector's growth is particularly notable in March 2024, when department stores achieved record-breaking duty-free sales of ¥49.5 billion, demonstrating the strong appeal of Japanese retail to international visitors. This trend aligns with Japan's emergence as the strongest luxury market in Q2 2024, where major brands reported significant sales increases. The secondhand market's resilience is further underscored by its ability to attract both domestic and international shoppers through digital platforms, a trend that has encouraged major players like Geo Holding and Komehyo Holdings to pursue ambitious international expansion plans. This expansion strategy reflects the growing global demand for Japanese pre-owned luxury items and the sector's evolution from a primarily domestic market to an international retail powerhouse.

Japan’s luxury secondhand sector gains popularity as tourism booms

What: Traditional loyalty programs are losing effectiveness as consumers, particularly younger generations, demand more personalised, digitally integrated experiences that go beyond points and cashback rewards.

Why it is important: With more than 35% of loyalty program members planning to cancel some memberships in the next year, retailers must urgently transform their programs to remain competitive in an increasingly saturated market.

The retail loyalty landscape is experiencing a significant transformation as consumer expectations evolve beyond traditional points-based systems. The average US consumer now belongs to more than 15 programs, representing a 10% increase from 2022, yet engagement levels are declining. This trend is particularly pronounced among younger consumers, with over 50% of those aged 18-34 planning to cancel some memberships in the coming year. Success in this new environment requires a multi-faceted approach combining personalised benefits, digital integration, and experiential rewards. Leading retailers are responding by incorporating gamification elements, mobile-first experiences, and exclusive content, while also leveraging technology to deliver more personalised interactions. This evolution reflects a broader shift from transactional relationships to experience-driven engagement.

IADS Notes: Loyalty programs are evolving beyond traditional point systems in 2024. While 48% of brands now offer experiential rewards , the generational divide is stark - 60% of millennials pay for loyalty subscriptions versus one-third of baby boomers . Digital integration has become crucial, evidenced by Siam Piwat's 102% membership growth after launching their mobile platform. Success requires combining these elements effectively, as shown by Ulta Beauty driving 96% of sales through their program . Mobile-first experiences and gamification are now essential components of modern loyalty strategies.

Loyalty programs are growing—so are customer expectations

What: US retail returns surge to US$890 billion as consumers increasingly expect seamless return processes.

Why it is important: This unprecedented level of returns is reshaping retail operations, with two-thirds of retailers now charging for returns while balancing customer satisfaction.

The National Retail Federation's latest data reveals an unprecedented surge in consumer returns, reaching USD 890 billion and accounting for nearly 17% of total annual sales. This dramatic increase has prompted retailers to implement significant operational changes, with two-thirds now charging for at least one return method. The challenge is particularly acute during the holiday season, where return rates are projected to be 17% higher than the annual average. Retailers are responding with multi-faceted strategies, including partnering with third-party service providers and hiring additional seasonal staff specifically for returns processing. David Sobie, Happy Returns' CEO, emphasises that return policies now influence purchasing decisions from the outset, especially among younger consumers. The situation is further complicated by online shopping trends and economic pressures, with GlobalData's Neil Saunders noting that financially constrained consumers are less likely to keep uncertain purchases. Despite the costs and operational challenges, retailers must maintain customer-friendly return options, as three-quarters of shoppers consider free returns crucial for e-commerce transactions.

IADS Notes: The retail industry's returns challenge has escalated dramatically, as evidenced by the jump from US$743 billion in returns reported in January 2024 to the current US$890 billion figure. This 19.8% increase aligns with findings from September 2024 showing that 39% of consumers return online purchases monthly, with each return costing retailers US$25-30. The industry's response has been decisive, with research from August 2024 documenting a widespread shift away from no-questions-asked policies, explaining why two-thirds of retailers now charge for at least one return method. However, March 2024 studies suggest that return fees alone have not effectively deterred returns, supporting the NRF's prediction of a 17% higher return rate for the 2024 holiday season. This trend has pushed retailers toward more comprehensive solutions, including enhanced third-party partnerships and seasonal staffing strategies.

National Retail Federation reports USD 890 billion refunding problem

What: Luxury brands are fundamentally reshaping their relationship with subcultures through strategic digital engagement and physical retail transformation, raising questions about the balance between commercial success and cultural authenticity.

Why it is important: The evolving relationship between luxury brands and subcultures reflects broader changes in consumer behaviour, particularly among Gen Z, who demand both authentic cultural connections and innovative retail experiences, forcing brands to rethink their traditional approach to market engagement.

The intersection of luxury brands and subcultures is undergoing a significant transformation, driven by the need to balance authenticity with commercial success. While collaborations between luxury houses and subcultures aren't new, the current landscape presents unique challenges and opportunities. Brands like Dior's partnership with Travis Scott exemplify how luxury houses are attempting to bridge high fashion with subcultural elements, creating cultural crossovers that resonate with younger consumers. However, this practice raises important questions about authenticity and cultural appropriation. The period from 2022 to 2024 has seen an unprecedented surge in such collaborations, with brands like Gucci, Moncler, and Louis Vuitton actively seeking to blur traditional boundaries. The success of these partnerships increasingly depends on meaningful community engagement rather than mere aesthetic adoption, as evidenced by contrasting examples like Chanel's substantive support of young artists versus more superficial collaborative efforts.

IADS Notes: The relationship between luxury brands and subcultures in 2024 reflects a broader transformation in retail strategy. The digital evolution is particularly noteworthy, with luxury brands adapting to new forms of engagement through lo-fi content and social commerce, as seen in October 2024 . This shift coincides with the rise of 'chaotic customisation' among Gen Z consumers, demonstrating how brands must balance authenticity with commercial success. The physical retail space is evolving accordingly, with stores becoming cultural hubs that blend digital innovation with experiential elements, as evidenced by recent developments in experiential beauty retail . This transformation extends to brand identity, with luxury houses increasingly positioning themselves as cultural players rather than just fashion labels . The success of these strategies is reflected in the growing adoption of omnichannel approaches, where brands like Loewe and Tommy Hilfiger are effectively using both digital tools and physical experiences to strengthen emotional connections with consumers.

Are luxury brands killing subcultures?

What: Retailers face a complex balancing act in implementing GenAI, needing to address infrastructure and data integration challenges while building robust monitoring systems, as the technology moves from experimental to essential for competitive advantage.

Why it is important: The gap between successful GenAI implementers and those struggling with infrastructure and data integration challenges threatens to create a growing competitive divide in the retail industry, making strategic implementation crucial for long-term survival.

The implementation of GenAI in retail is reaching a critical phase where success requires mastering multiple technical and operational elements. Companies must carefully select between open-source and closed-source foundation models while building robust enterprise AI foundations - a challenge evidenced by only 10% of companies successfully scaling their GenAI applications. Data integration remains a significant hurdle, with nearly half of retailers struggling to make their data accessible and connected. However, the potential rewards are substantial, as demonstrated by early adopters reporting revenue increases of over 6%. Success requires not just implementation but also robust monitoring systems, with leading companies achieving 30% faster application development and 60% higher user satisfaction rates through structured evaluation approaches.

IADS Notes: The retail industry's approach to GenAI implementation is reaching a critical juncture in 2024. While retailers must navigate the choice between open-source and closed-source foundation models, with 70% planning implementation this year , the technical infrastructure remains a significant challenge, as evidenced by only 10% of companies successfully scaling GenAI applications. Data integration poses a particular challenge, with a recent Salesforce study revealing that nearly half of retailers struggle with data accessibility despite high AI adoption rates. However, success stories are emerging, with 87% of early adopters reporting revenue increases of 6% or more. The emphasis on operational monitoring is growing, with companies implementing structured evaluation approaches that have led to significant improvements, including 30% faster application development and 60% higher user satisfaction rates . Walmart's success in enhancing 850 million product catalog data points demonstrates the potential when these elements are effectively combined.

Laying the tech foundation for Gen AI success

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The Drucker Forum, held annually since 2009, is a yearly opportunity to review management practice and question the state of research, a favourite combination from “management guru” Peter Drucker (1909-2005). The IADS attended the 16th edition of the Forum this month in Vienna. The theme was “the next knowledge work," questioning how organisations can deliver new value creation and innovation levels.

AI was obviously a centrepiece of the conversations, given the impact it has had so far on knowledge and innovation. While the overall conference themes were oriented towards knowledge workers, including researchers, scholars, and academics, it was interesting to relate them to the current situation in retail, where AI is seen as a transforming force for business models. Taking on what was discussed during the conference, AI appears to be, in fact, a pretext for more radical organisational transformations.

Paradoxically, achieving such transformation also does not systematically involve ground-breaking technological or intellectual innovation, as, many times, speakers were calling for a “back to the basics”movement in an updated way.

Introduction: the concept of “next management”

The late Peter Drucker predicted that the challenge for the 21st century would be finding ways to improve knowledge work productivity like manual and factory work did during the 20th century. He was also famous for considering management as a foundational value creating capability, rather than a mere business role. However, most of the political, intellectual and cultural elites keep on considering management as a tool serving short term goals, rather than a true social innovation able to change society at large.

This is why this 2-days session started with Richard Straub, founder and President of the Forum, introducing the audience to the concept of “next management” (new to half of the room). This five-year research initiative aims to provide organisations with a holistic method to boost knowledge workers’ productivity by continuously injecting innovative practices (and not implementing them in an incremental way as has been done so far). In addition, this method aims at optimising human investments rather than increasing them in a world where resources are increasingly limited.

Due to its englobing approach, it challenges the traditional boundaries of management and questions many of the structural elements that every professional has grown to take for granted during the 20th and 21st centuries: organisation charts, hierarchy and processes.

In short, a world which has radically changed can not be seen through lenses that have not been updated, independently of any technological breakthrough such as AI. While AI is accelerating the tempo, defining the “next management” playbook goes well beyond adapting to this new technology as it is a way for companies to adapt to the realities of a new world that has become much more complex, in many aspects.

However, for the “next management” to be perfectly accurate, one needs to review first the nature of knowledge workers and understand how it has evolved in the age of AI.

Dealing with innovation and knowledge

Where does knowledge work stand today, and where is it going?

Giampiero Petriglieri, an associate professor at INSEAD, thought-provokingly opened the topic by stating that “knowledge work as we know it is dead, and this is not due to AI.” For him, current work organisations have killed knowledge work due to their inability to evolve past a productivity-oriented model, inherited from the 20th century using measurement tools created for the industry and then transferred to intellectual work, still in use after five decades. Not only is a mechanistic approach to knowledge work, prioritising efficiency and productivity over humanistic values such as inclusion and freedom, obsolete, but it also puts the job in danger because it creates the very wrong impression that AI is a replacement for it.

However, he points out that organisations are increasingly efficient but also struggling to innovate. For him, this relates to the fact that knowledge productivity is not so much of an issue anymore but the purpose of learning itself due to the emergence of AI. To counter this, he used the analogy of a "machine" versus a "home" to illustrate the difference between instrumental and humanistic approaches to organisations, leading him to call for creating efficient but safe and hospitable workplaces, fostering a sense of belonging. AI is not enough to enable companies to be a good “home” to knowledge workers: “The knowledge world is dead...because now we realise that even when we share those humanistic values...we often do it through an instrumental lens. Let's keep people more comfortable; let's make our culture more congenial so we can all be more productive.”

The fact that AI pushes companies to re-think their core purpose and how welcoming they want to be to their teams has become even more urgent due to AI: Alex Adamopoulos, CEO of Emergn, stressed the importance of maintaining a human-centric approach amidst the AI boom, cautioning against the hype and emphasising the need for practical knowledge and a common vocabulary around AI. This remark from a practitioner suggests that fostering home-like working environments where employees feel a sense of belonging and are encouraged to grow personally and professionally is key to dealing with all the changes AI is bringing to intellectual work in general and innovation in particular.

Such views go beyond the traditional interrogations on how to deal with innovation in legacy retailer organisations (through new business units, dedicated committees, or resorting to consulting companies…). The Drucker Forum speakers suggest that to become a truly next-generation structure, current retail players need to reinvent themselves by rethinking the value proposition they want to bring forward to all their knowledge workers to get the best from them and implement a generalised culture of innovation.

But do we have the right innovation frameworks within organisations?

All Drucker Forum speakers agreed that the existing innovation frameworks are outdated. Valla Vakili, Global Head of Innovation at Visa, highlighted that AI now questions the very notion of innovation itself in an era where organisation size does not matter to be the most innovative possible. While in the past, large organisations had an edge in innovating for a simple question of available resources, we now live in a time of potential “one-person unicorns” as coined by Bain & Co during the IADS AI Retreat from last June. AI also redefines what progress is: while in the past, innovation was often associated with disruption and a defensive, antagonistic approach (the “innovator’s dilemma), AI now allows innovation to be much more offensive and imaginative. Vaikili argued that AI offers new tools to overcome past constraints on innovation, enabling a shift from a scarcity model to an abundance model (in other words,while many companies are good at innovating in a forward-thinking model, backward thinking is often overlooked).

Jayshree Seth, Chief Science Advocate at 3M, echoed this sentiment, emphasising the need to move beyond one-off initiatives like hackathons and “ideathons” towards a culture where innovation is a foundational element. She explained that “hackathons are often internally viewed as very cool, teams present beautiful ideas to ecstatic management… and nothing happens.” Instead, she stressed the importance of employee empowerment and radical collaboration within and across the broader ecosystem, a view supported by Julie Teigland, Managing Partner at EY, who explained that true innovation could only stem from “a close connection with all stakeholders, customers, employees, shareholders.”

Organisational reinvention is inescapable

Companies have little choice but to reinvent themselves in a world shifting from expertise-based to skills-based learning, as this is the only way to ensure employees can adapt and contribute in an ever-changing environment. The implications include investing in employee training and development, fostering open communication, and promoting cross-functional collaboration. Implementation requires a concerted effort from leadership to cultivate a culture that values collaboration and continuous learning.

Going further, this framework review, accompanied by a new approach to employee empowerment, is the only way out of the current lacklustre in AI block building. Vakili suggested a shift from an experimentation-focused approach to one driven by imagination, truly leveraging the power of generative AI. Organisations need to release the constraints of legacy systems (whatever their nature) to unlock this imaginative potential. This echoes a remark made by Bain & Co during the IADS AI Retreat in Berlin last June: while they acknowledged that AI had a disruptive potential for retail, they also mentioned that, so far, all the use cases looked like the same from one retailer to another, suggesting that, due to a certain mindset, innovation capabilities were hitting a glass ceiling in all companies. Vakili concluded by stating that, from her Global Head of Innovation perspective, a radical change of business model was needed to unlock new opportunities in innovation.

What AI really changes

Timing is paramount, but identifying the right people to educate too!

Professor David Beatty from the University of Toronto was very clear on how AI was seen in North America, not just as transformative but as an existential imperative for businesses: "In the United States, we regard AI...not as transformative, but as an extinction event. If you don't get started on this as a business, you're dead.” Failure to embrace AI could result in rapid obsolescence.

He also made the very interesting statement that AI was already reshaping industries at an unprecedented pace, but this was not visible in mainstream business press. This point was echoed by Rainer Zahradnik, Country Head Switzerland at Tata Consulting Services, who highlighted the "hidden revolution" of AI, where its most successful applications are often invisible to the end-user. He cited examples such as energy optimisation in Formula E cars and compliance software for banks. He also emphasised the potential of AI to push boundaries, using the example of designing a new air plane landing gear with minimal human intervention. He noted, "It's almost a hidden revolution of AI. Nobody knows that in your American car there's software that's optimising it."

Beatty was very vocal about the hurdles potentially preventing legacy companies from embracing AI:

• The average age of directors is 68 at the board level. Walmart only has 3 directors under 40. In the US, 41% of board directors are more than 70. However, this does not prevent boards from pressurising CEOs to move forward with AI; on the contrary, they are more active than CEOs. For instance, Marriott inked a deal with Alibaba only after significant pressure from the board of directors on the CEO, Anthony Capuano. CEOs have been resisting the change due to the necessity of ensuring “business as usual” was keeping the right pace. To overcome this, Beatty mentioned that an increasing number of companies were considering independent incubators, fostering innovation separate from established structures.
• Regulation also impacts the level of innovation. Beatty contrasted the relatively light regulatory environment in the US with the more stringent regulations in Europe, suggesting that the latter might stifle innovation. However, the panellists agreed that this could not be the only reason: routine and bureaucracy are also major obstacles to AI adoption in large organisations, with a strong tendency to reinvest in existing processes. Also, for Beatty and Zahradnik, Europe's risk-averse approach stifles innovation, a major source of concern at a moment when US, China and India are moving forward.

The leadership responsibility and its needed evolution in decision-making

Beatty called for a clearer understanding of everyone’s rules: the role of any growing organisation is to create procedures helping to normalise operations, while their CEO’s role is to have a clear enough mind to be able to see what is coming and might disrupt the business if no appropriate course change is taken (AI in this case).

He also urged board directors to engage with AI actively, emphasising the need for directors with relevant skill sets to help and advise CEOs. He recommended a phased approach, starting with educating the chair, then the full board, and finally the management team. Having said that, the extensive use of AI at the management level, especially to help the decision-making process, also calls for a mindset reset if leaders want to remain honest and transparent.

Matthis Bitton, a Ph.D student at Harvard University, had a fascinating exchange with Liesje Meijknecht, partner at McKinsey, on that topic. They both reminded the audience that while AI is a tool to manage complexity (which has been, in the past, traditionally outsourced to partners such as SAP or Salesforce), it is, in essence, trained on sets of data that are not neutral, objective or even fair.

From that perspective, using AI to prioritise decisions implies the acceptance that the criterium of trust does not matter at all: AI does not have any ethics and is not able to. Instead, they raised the fact that AI should be used in fields where it surpasses humans much more, such as big data, mathematics, testing. In the decision-making field, AI raises more issues than what it solves, not to mention that the more it is used, the less transparent it becomes. Bitton and Meijknecht pondered over the dangers of over-regulation (which raises the question of knowing if algorithms should be more scrutinised than humans and if yes, why) and it's contrary, i.e. granting too much power to Silicon Valley.

All in all, the panel concluded, AI creates a moral dilemma, i.e. a choice where both options are problematic. Given that AI is unavoidable, the only way for leaders to make their way through it is to define what kind of pair of “ethical glasses” they want to wear and make sure they use them. Interestingly, that also led to the conclusion that this was the opportunity for businesses and academic institutions to focus again on human sciences rather than hard sciences and data. Mattis mentioned that the Harvard Business School had not hired a single philosopher in 20 years time. It is rather ironic that AI finally pushes us into becoming more human.

How questions about AI end up reviewing the old way of seeing the world

Artificial Intelligence raises questions that go beyond it, as it actually forces us to challenge some of the visions that have shaped the business world for the past years.

Rethinking the role of offices

The expansion of remote collaborative work that was favoured during the pandemic is now ending, with many companies asking their teams to return to their office (this applies especially to knowledge workers). Giampiero Petriglieri, from INSEAD, raised the topic when discussing the fact of “humanising” the workplace by mentioning that remote working was also a trap for junior profiles, who were growing with more limited access to experience than when in the office with their co-workers. He qualified the online meeting as being “a constant reminder of each other’s absence”.

This created some exchanges between practitioners: Pierre Le Manh, President and CEO of PMI Project Management Institute, described PMI's fully remote model, highlighting the benefits of increased access to a broader talent pool and reduced environmental impact. He emphasised the importance of intentional, meaningful in-person interactions rather than forcing a daily return to the office.

In contrast, Liz Cane, VP People at Palo Alto Networks, described Palo Alto Networks' approach, which encourages a return to the office for certain roles, particularly those involving early career development, R&D, and collaboration. She highlighted the importance of in-person interaction for fostering relationships, creativity, and innovation.

The discussion concluded with a call for a collaborative design process to determine the optimal work arrangement for each organisation, considering its specific needs and goals. In other words, the topic is not so much about coming or not coming to the office but adapting physical presence according to the projects and issues currently being solved.

Redefining success

With AI allowing the phenomenon of “one-person unicorns”, the size of organisations does not matter anymore, as previously said. Going further, Julie Teigland from EY argued that this also called for a redefinition of how we measure and assess success: it might not be measurable in market shares anymore. For her, “big is no longer beautiful”, as illustrated by Tesla, which is not the largest EV manufacturer in the world (BYD produces twice as much), but generates unprecedented levels of loyalty ,or companies such as Dyson or Patagonia, all seen as market leaders in spite of them not being the largest players. She argues that large operators are under cost pressure to keep the leading position, while being smaller and more efficient, a feature allowed with the generalisation of AI, allows to be more agile.

Keiishiro Nishi, Senior VP and head of CEO office at Fujitsu, provided an interesting example of this when he mentioned that Fujitsu, a tech company, willingly decided to close its PC business and halve its revenue to launch new higher-margin businesses.

Kill “zombie ideas”

A full session was dedicated to “zombie ideas”, defined as “good old recipes” that have resisted the test of time for the wrong reasons, as they appeal to an apparent common sense that is unproven. Now that AI allows a data-driven approach, such zombie ideas should be eliminated (even though human instinct and nuanced interpretation should be kept in the loop). Michele Zanini, co-founder of the Management Lab, Tammy Erickson, Leadership Advisor at the LBS, Lenka Pincot, Chief of Staff to the CEO at PMI , and Robin Speculand, CEO of Bridges Consultancy, together reviewed the following ideas:

• “More control leads to better performance”: overemphasising standardisation, rules, and control stifles adaptation, innovation, and responsiveness to local conditions. Zanini highlighted the example of SAP riddled with 500 KPIs, demonstrating how over-standardisation can cripple a company. He advocated for mutual accountability, norms and principles over measurement.
• “Top-down changes work”: engineered, top-down change initiatives often fail due to insulation of leadership, leading to incremental or overly risky changes. Zanini advocated for syndicating responsibility for change more broadly.
• “Leadership is positional” (i.e., experience and wisdom are correlated with rank): Equating leadership with organisational rank discourages initiative and talent development outside the executive level. Zanini argued for recognising leadership competencies regardless of position.
• “Planning is everything”: sticking to rigid strategic plans in a volatile environment limits agility and responsiveness. Pincot emphasised the need for "anti-fragility" and adaptability, citing the example of athletes training for a race with obstacles. Erickson cautioned against excessive planning, which can hinder flexibility and lock organisations into outdated trajectories.
• “Strategy first, corporate culture second”: Speculand questioned the continued emphasis on strategy over culture, referencing Peter Drucker's observation that "culture eats strategy for breakfast."
• Sticking to outdated management concepts: Speculand criticised the reliance on out dated management models and frameworks, comparing it to using Windows 95 in the modern era.
• Consider that full-time employment is ideal and what all workers are looking for: Erickson suggested that work is increasingly chosen based on marketability and human asset value development rather than solely on compensation. She argued against paying based on hours worked, advocating for payment based on tasks, outcomes, and value creation. She also emphasised the need to treat employees as volunteers, recognising their autonomy and choice.

Such a conversation is not only theoretical: Speculand shared the example of DBS Bank, which successfully addressed the "zombie idea" of unproductive meetings through a structured approach, saving significant employee hours. Here, also, the panel was adamant that AI had the potential of both perpetuating and slaying zombie ideas. It concluded by emphasising the importance of thoughtful prompting and avoiding a "tyranny of data."

The 16th edition of the Drucker Forum highlighted how AI acts as a catalyst and a pretext for fundamental organisational transformations, extending far beyond technological innovation, including in the analogue world.

While AI offers unprecedented opportunities for imagination, creativity, and operational efficiency, it also underscores the importance of retaining human-centric approaches to foster innovation and adaptability. AI has an amplification effect that allows to challenge and review processes taken for granted for decades, as mentioned by Amy Edmondson, professor at the Harvard Business School. She explained that AI allowed businesses and individuals to fail more often, and take “smart risks”. AI ushered in the age of “intelligent failures” (different from “preventable failures” to avoid), which should be celebrated by “learn-it-all” teams willing to learn from every experience and learning opportunities.

As the discussions at the Forum emphasised, success in this evolving landscape will depend on adelicate balance between harnessing AI's potential and reinforcing the human values that underpin sustainable and innovative workplaces. Ultimately, redefining the role of knowledge work in an AI-driven world offers an unparalleled opportunity to shape a future that is not only more efficient but also deeply human.

Credits: IADS (Selvane Mohandas du Ménil )