Small business is in the biggest decline since the industrial revolution.
They’re losing ground to bigger businesses, who, in addition to economies of scale, enjoy a data advantage. In today’s environment, companies with the ability to collect, analyze and decide based on data win. Technological breakthroughs will soon make big data universally accessible.
That’s great news for Main Street.
In a previous role as an analyst at Bain & Company, I spent most nights and weekends analyzing huge data sets in Excel and SQL. Our goal — arm clients with game changing insights based on data.
How can we become more profitable? Who are our best customers? What go-to-market channels are most effective? Bain claims that smart use of data allow its clients to outperform the S&P 500 by a factor of four to one.
Recently, the power of data has jumped from closed-door meetings and PowerPoint decks into complex software in multiple business disciplines, driving efficiency and revenue on all sides of enterprise business.
Joe Lagunda, the head of analytics and business intelligence at Starbucks, recently reminded consumers that Starbucks “knows who you are and why you’re different.” Starbucks uses this information to send timely, relevant marketing messages that make you more caffeinated, and Starbucks more profitable.
Small Business Data Collection
While these data-driven business strategies have long been beyond the reach of small businesses, the current technological trends help end the lead that their large counterparts have enjoyed for years.
First, small businesses have limited access to data. Large firms can aggregate data from millions of consumers to better identify trends and market conditions.
An independent small business has limited information. The rapid adoption of cloud computing will eliminate this data advantage. Cloud-based platforms are beginning to aggregate data from all their small business users, providing any one business with more data than they could collect themselves, similar to how consumers benefit from Google Maps crowdsourcing traffic data.
Second, small businesses lack the people and the systems to analyze large complex data sets. Components of Artificial Intelligence (AI) will solve this.
In a recent article in Wired Magazine, Kevin Kelly argues that after a string of “pathetic failures” AI is finally ready for prime-time. Rather than just more advanced virtual personal assistants, real AI according to Kelly will be “more like Amazon Web Services — cheap, reliable, industrial-grade digital smartness running behind everything”.
Right now, AI is behind everything from self-driving cars to Facebook’s news feed, to business tools like RelateIQ that analyze data and predict the best sales approach. Not only does AI have the potential to replace the activities of a Bain consultant, it will make complex enterprise software simple enough for a corner pottery business.
Finally, even with the right insights, small businesses often lack the resources to act. This is where automation comes into play. An easy consumer example in home automation is Nest’s thermostat which shuts off when it senses that no one is home. And enterprise businesses are benefiting from an abundance of automated solutions in the fast-growing field of sales and marketing software. While automation helps corporations be more effective, it actually enables small business owners to use the software in the first place because current solutions are too complicated.
The volume of behavioral and transactional data produced and tracked by small business is exploding and small business owners need help to take advantage of it.
Very soon, your small neighborhood coffee shop will have the same high tech tools that Starbucks enjoys today. They’ll know who their customers are, the last time they visited and, perhaps most importantly, when is the right time to offer a loyalty incentive, ask for a referral, or remind you to leave a review on their Google+ page.
When small businesses can manage and leverage complex data just as well as corporations do, they will once again gain a competitive edge.
Big Data Photo via Shutterstock