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Becoming A Small-Business Technology Superhero

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Small businesses are born out of passion for a product or service and made possible thanks to the creativity, ambition and true grit of their founders. They offer their customers things enterprise-size companies cannot, from a welcome personal touch to a sense of community.

Technology can help. For an entrepreneur, it can mark the difference between working in the business versus working on the business and creating jobs for others.

A survey by The Information of 400 business leaders reveals that small and medium businesses (SMBs) have a long way to go to become technology superheroes. Just a tiny percentage of SMBs are great at using technology to grow. While they understand the need to use technology for growth, SMBs are not yet taking full advantage of it.

This report will address how SMBs approach technology, what their weak spots and challenges are, and how they can go about harnessing technology—including technology they may already own—for growth.

State of Play

Technology-driven upside for SMBs

Small and medium-sized businesses agree on what it takes to succeed—83% of The Information’s survey respondents agree that SMBs (small and medium-sized businesses) need to rely on technology for future growth. But there is a huge disconnect between what SMBs know they need to do versus what they are actually doing: Just 7% of SMBs are great at using technology to grow their business. Let’s call them SMB technology superheroes. The remaining 93% of the SMBs are split between those who use technology adequately (50%) and inadequately (43%).

Becoming a technology superhero does not start with technology. “What makes a small business a technology superhero is the ability to understand who they are—what they need to best serve their customers—and then reverse engineer from there to the technology solutions that can make it happen for them,” says Ricky Engelberg, chief marketing officer at Vista, a provider of marketing solutions for small business.

Arriving at such a deep understanding of a business and evaluating technology solutions takes time, something that small business always lacks. But carving out real time to grow the business, instead of always dealing with business strategy after the “close of day,” is the only way to work on the business versus working in the business. It is the difference between working and creating jobs for others.

“Small businesses are good at the core of what they do, but not that good at running their companies,” says Yunas Reguero, co-founder and CEO of Archie, a startup offering payment systems to small business. When dealing with payments and invoicing, many small businesses are still using checks, pdfs and emails to handle such back-office issues. “They need to be thinking about what technology to use to free up their time to focus on the things that they do best,” says Reguero.

Palace Law, a personal injury and workers compensation law firm in Washington state, stands out in the industry—in which lawyers see themselves as professionals, not businesspeople—by making technology a core value and running itself as a small technology company. The firm, which employs more than three dozen people, has implemented multiple technology-driven tools to improve customer experience and employee experience and productivity.

The ability to scale up is the top way in which SMBs effectively use technology (59%), followed by outstanding customer experience (53%), and increased productivity and efficiency (53%) The benefits from areas such as customer and employee experience ladder up to macro business outcomes: revenue growth (52%).

“Whether we are 35, 100 or 500 lawyers, we can’t serve all the people we want to serve without the help of technology,” says Jordan Couch, partner at Palace Law.

Palace Law has achieved all these benefits thanks to the use of technology. For instance, technology solutions allowed Palace Law to increase the number of legal cases they take on by 20% and raise the profits of a workers compensation team by 76%, both with hardly any additional hiring. The technology solutions that make it possible include automated processes for transferring, signing and sharing documents and for drafting legal letters. Automating the intake and onboarding of new clients, which eliminated multiple phone conversations and in-person visits, shortened that process from several weeks to 15 minutes.

Technology is also helping with access to justice, a pressing social justice issue considering that up to 80% of civil legal needs in the U.S. are currently unmet. While Palace Law takes on just a third of the clients who approach it, the firm offers free online tools for everyone who is seeking legal help. For people who visit the firm’s website and input their case information, such tools will give a full assessment of their case, calculate potential damages, advise on the steps that need to be taken or draft legal letters for the doctors and the opposing counsel.

Current Priorities

Marketing leads the fray

Marketing is the top area that is most likely to be technologically advanced in a small business. “Unless you are an established business relaying on the same loyal customer base, you need to be discoverable and findable to exist. You can achieve that by having the right presence on marketing platforms or search engines, either organic or paid,” says Engelberg.

Creating the right presence means being represented on the relevant touchpoints, where the customers are most likely to find the business. That means striking the right balance between concentrating on one big social outlet such as Facebook versus trying to cover too many touchpoints and wasting time and advertising dollars on channels that will not yield any new business. Also important is to keep up with the most recent privacy developments and their impact on marketing efforts as well as changing social media preferences and trends among the relevant customer segments.

Small businesses that rely on their gut feeling about what their customers want or where they are risk building their futures on wrong assumptions. Considering that SMB budgets, if they exist, are on the small side, having the right customer data is key to understanding how best to allocate the money. Surprisingly, competence at customer data analytics, which is necessary for success at digital marketing, is significantly lower in the ranking of the areas that small businesses are technologically advanced at, with less than a third (30%) of The Information’s survey respondents believing that competence is adequate.

The good news is that data analytics ranks much higher (second) as a technology that SMBs should be prioritizing (67%), and that it is considered the most important application that SMBs need (55%), which points to an understanding of the importance of data-driven decision making. Marketing measurement is one area where Palace Law is continuing to look for new technology solutions. The firm tracks how their customers learnt about them and which advertising channels were decisive for the client’s hiring decision.

“We are working to improve the strategic use of technology in our marketing systems to invest the marketing budget in the best way possible,” says Couch.

Payment software is the top technology that SMBs should have (68%). Payment software, always crucial for the ability to close the deal, has been undergoing intense innovation during the pandemic. This innovation includes contactless, cashier-less, omni-channel and embedded payment solutions (e.g., Uber or Amazon Prime). The adoption of digital payment methods has been spurred by customers who opted for contactless payments during the pandemic.

Digital payments can have a big impact not only on closing customer transactions but also on improving customer experience. For example, at Palace Law firm, improving the payments experience for their clients involved creating an automatic email updating system to let clients know when their settlement checks came in.

For Archie’s Reguero, making digital payments more efficient is a core business. He considers payment processing part of the back-office operations that small businesses need help with. Archie targets small businesses that rely on freelance work. Having a technology solution to handle payments to contractors is cheaper than hiring people to do that; also, being able to pay freelancers digitally and on time helps with talent retention.

The Information’s survey rankings cast doubt on the ongoing discussion about how good customer experience depends on good employee experience. The Information’s data shows that SMBs are much more focused on technology relating to customers than to employees. Just 5% believe that SMBs are likely to have technologically advanced employee data analytics. Just 39% believe that remote working and collaboration are technologically advanced. One bright data point for employee experience is that project and task management tools are ranked as the most important technology solution (55%). That means that SMBs recognize the importance of using technology to create efficient work processes.

Employee experience has been gaining in importance in the era of The Great Resignation, skills shortages and the ongoing kerfuffle about whether employees are to return to the office or continue working mostly remotely. Further complicating the talent landscape are high inflation, stock market volatility and fears of recession, which are already causing some hiring freezes and layoffs, meaning that fewer people will have to do more with less—an area ripe for technology solutions.

Employees at Palace Law can do much of their work from just about anywhere, being able to access clients or draft and share documents on their mobile devices. Apart from productivity, it improves the quality of life. For example, Couch has participated in virtual court hearings with a judge while on his fishing boat.

What SMBs prioritize is as telling as what they don’t prioritize. The latter includes maintenance and security. Eighty percent of survey respondents believe that SMBs tend to underestimate the importance of cybersecurity, 73% that they underestimate the need to upgrade software, and 56% that SMBs typically underestimate the need to upgrade hardware.

In this lack of attention to security and upgrades, SMBs are akin to politicians, who are more likely to focus on building new bridges than repairing crumbling infrastructure. But just as old bridges and roads can lead to grave consequences, inattention to cybersecurity and software upgrades leads to breaches and crashes. And that has grave consequences for business, as it translates directly into loss of customer trust, brand reputation and ultimately, revenue.

Room for Improvement

Level the playing field

SMBs are not on a level playing field with larger competitors in terms of their access to artificial intelligence and other technologies, according to a majority (60%) of The Information’s survey respondents. However, there are ways for small businesses to level that playing field. “Increasingly, the tools that were once available just for big companies are becoming democratized for all companies. It’s how you best use those tools that is the challenge,” says Engelberg.

The best way to use technology tools starts with understanding everything they can do. The Information’s survey reveals that SMBs are not learning about all the bells and whistles of the technologies they have purchased (45%) and that they lack awareness of what technology companies can offer them (42%).

Insufficient budgets that SMBs have at their disposal are seen as the biggest challenge to making more headway with technology (55%). Engelberg points out that the issue is not just the size of the budgets, but the way that small businesses tend to allocate them. Often, small businesses make investments when they have a good month or quarter, but they don’t set a budget on an annual basis. Such an ad hoc approach does not give the business enough time to test which technology-related investments are working or continually update or upgrade technologies.

“You learn enough to get going, but not enough to truly master something,” says Engelberg.

Digging deeper into the data, it turns out that SMBs are overlooking some things that they can control that would help them even the playing field with larger competitors. The main reason technologies fail—and 33% say that at least half of all projects do fail—is by far the lack of focus on adoption (59%). “If you forget the process and people [when implementing technology], even the coolest, most useful technology will fail utterly,” says Couch.

Granted, technology adoption is tough for companies of any size, with employees afraid that new technology solutions may lead to job cuts or not wanting to adapt to new ways of doing things. But SMBs may be in a better position here. They have fewer employees and typically less job specialization, which means that employees have to handle many different tasks. This makes them harder to replace with technology, and it calls for technology to make their lives easier—all the more reason to focus on adoption.

The main mistake when it comes to adoption is not taking enough time to train, says Couch. Palace Law has asked its technology vendors to train the employees, which made all the difference in terms of adoption. “A lot of small companies miss an opportunity [to improve adoption] when they don't know that the training [by vendors] is very easy for them to get,” says Couch.

Future Focus

Investing in customer experience

Customer experience will continue to be the top area of technology investment for small business. Whether it’s video tools, email marketing, social media management or e-commerce, the range of possibilities can be overwhelming. Even large companies, which have technology departments dedicated to technology and employ consultants to guide them through the ecosystem of technology vendors, consider selecting the right technology to invest in a major challenge to succeeding at digital transformation.

In small business, the decision about technology investment belongs mostly to the owner (68%), and it depends on the financial resources of the business and the cost of technology (58%). Considering all the possible technology choices and lack of time, the best way for owners to make the right decisions is to network with other small business owners and research online resources.

“Learn from other people’s mistakes,” says Reguero.

While customer experience is a higher priority than back-office operations, Archie is on a mission to change that. The number of freelancers in the U.S. is expected to reach 86.5 million by 2027 and become the majority of the workforce, according to Statista. “The current payroll infrastructure, set up for a one-on-one relationship between employee and employer, does not support for that shift,” says Reguero. Archie offers a payment management system for small companies employing freelancers, with the ambition to become a full stack financial platform for small businesses.

Technology investments relating to product innovation and manufacturing are at the bottom of the list. Technologies related to industrial innovation (IIoT) have been traditionally lagging behind information technologies across all industries and company sizes. However, the pace of IIoT is picking up, and it should also happen among SMBs.

Adopting a technology-driven mindset

Technology is a key ingredient that can improve SMBs’ efficiency and spur their growth. In a world where technologies are constantly advancing and customers and employees are continually raising their expectations, how can a time-challenged small business make the right technology moves?

Be intentional. Start with your goals—what you want to solve with technology and not the technology itself—and work backwards from there. Spend time to investigate and test available solutions so that you master what you have.

Use technology to evaluate what works. Data doesn’t lie. Too often SMBs rely on their gut instincts when evaluating what works. Data analytics tools are much more precise and accurate and will give an SMB a clearer picture of where it stands and what it needs.

Work with your vendors. Make sure you are aware of everything that your vendors can offer, in terms of both products and services, and training. Some of these offerings are free and can make or break your technology adoption.

Learn from others. Network with other SMBs who are similar to you. Seek them out and engage them in conversation. Learn from their mistakes. Also, look for them online and listen to what they have to say.

Focus on efficiency. The back office may be less exciting than the front lines and dealing with the customers. But efficiency benefits from back-office technologies will add up and free up time and energy for the front office as well.

About the Survey

The Information’s survey was conducted in June 2022. The 401 respondents to the survey represented all major industries, led by technology (32%), business and professional services (25%), the financial sector (11%), and media and entertainment (10%). A majority (51%) were managers or owners, followed by marketers (16%) and IT (14%), and they came from companies with fewer than 100 employees (62%).

Design

Haejin Park