How can the 10/20/70 rule prevent expensive AI implementation failures?

Is building in-house GenAI actually profitable for your e-commerce business?

Stop wasting budget on custom AI tools you don’t need. Discover Boston Consulting Group’s framework for the “build vs. buy” decision and apply the 10/20/70 rule to maximize e-commerce ROI. Secure your competitive edge today—read on to determine if your business meets the five critical criteria that justify building proprietary AI tools.

Recommendation

GenAI has the potential to dramatically accelerate many e-commerce activities, while helping teams increase profitability and optimize core operations. However, before e-commerce executives green-light building in-house GenAI tools, they should reflect on whether they’d be better served by third-party solutions. Guide strategic decision-making with a new framework from Boston Consulting Group that will help you better understand the role of both in-house solutions and external providers. Gain timely insight into how best to optimize the GenAI solutions of your choice, while ensuring alignment throughout your organization.

Take-Aways

• E-commerce executives should be pragmatic when adopting generative AI (GenAI) solutions.
• There are five reasons you might build your own GenAI solution.
• Harness the “10/20/70 rule” when building your GenAI solution.

Summary

E-commerce executives should be pragmatic when adopting generative AI (GenAI) solutions.

Before rushing to invest in building in-house GenAI solutions, e-commerce executives should embrace pragmatism, reflecting on whether building their own tools best serves their specific needs. Many software companies are continuously improving their platforms with GenAI, and may provide more up-to-date solutions than your in-house team is capable of. That said, building in-house solutions might make sense if what you need is unlikely to be included in leading AI models, big tech platforms (for example, Meta, Google, and Salesforce), and specialized tools from third-party companies (for example, LiveChat). If you’re offering a particularly unique experience in your industry, it’s possible you’d be best served by building in-house. Likewise, if your solution uses a lot of proprietary data, you might consider building it in-house.

“Rather than follow the over-the-top hype about GenAI, e-commerce executives should be looking under the hood of their own organization to set their investment priorities.”

GenAI can benefit your e-commerce team in multiple ways throughout your customer journey, helping you attract, engage, and retain customers. GenAI has numerous uses in an e-commerce context, ranging from more simple uses, such as accelerating content creation, to more complex uses, such as predictive analytics and dynamic pricing. As an e-commerce executive, you should encourage team members to boost productivity by leveraging the vast potential of GenAI tools, such as Google’s Gemini or OpenAI’s ChatGPT. For example, engineers can take advantage of code completion to speed up software development, while product owners can simulate different user experiences using these tools, improving their strategies. Be sure to consider more than just ROI and costs when considering which tools to use: Reflect on how well you’ll be able to scale these tools, the security and data privacy features of each, and the level of vendor support you’ll receive before making any decisions.

There are five reasons you might build your own GenAI solution.

Consider building your GenAI solution in-house if it meets any of the following five criteria:

1. A high degree of personalization — If you’re creating highly personalized content, such as marketing emails tailored to individual customers, an in-house solution can provide you with full control over the algorithms and data required.
2. Customized product design — Consider building your own GenAI solutions to offer configurable or customizable products, using GenAI to guide customers through an individualized product creation process using intelligent design tools.
3. Predictive supply chain management — Consider combining GenAI with your internal data sources, if you want to build your own predictive models to better manage inventory and optimize your supply chain. Building these solutions yourself can potentially increase the accuracy of your predictions, saving you money.
4. Intelligent cross-selling and upselling — In-house solutions can help you tailor product recommendation algorithms to your specific business goals, enabling you to better target your desired customer segments.
5. Personalized customer service — Offer personalized virtual shopping assistant experiences, creating your own GenAI solutions to make individualized recommendations to customers, making the most of your data.

Harness the “10/20/70 rule” when building your GenAI solution.

Use the “10/20/70 rule” to build the most effective GenAI solution: Spend 10% of your efforts designing algorithms, invest 20% in your data and technology, and allocate the remaining 70% to supporting the people on your team and transforming your organizational processes. Reflect on the following to enable your desired GenAI solution: Are there any “no-regrets moves” you can make to improve your proprietary data? How will integrating GenAI throughout your technology stack change the skills and competencies you require from talent and disrupt your operating model? And how might GenAI change your core operations, ranging from monitoring conversion rates to optimizing A/B testing?

“GenAI will have major transformative impacts across the e-commerce value chain. For e-commerce executives, however, the important question is: Where in the stack will these innovations take place?”

Adjust your short and long-term ROI projections to reflect the disruptive potential of adopting GenAI solutions. Identify any barriers to the successful adoption of GenAI, such as internal and external stakeholder resistance. It’s also crucial that you take a flexible approach to embracing GenAI solutions, understanding that today’s worthwhile in-house investments may become obsolete tomorrow, as third-party solutions gain in sophistication. Commit to staying agile, making the most of this new technology by continually reassessing and rethinking your strategy, pivoting when needed.

About the Authors

Stephen Robnett, Mike Evans, Olof Darpö, Robert Derow, and Karen Lellouche Tordjman are professionals with Boston Consulting Group.