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Can artificial intelligence close the UK’s small business productivity gap?



It is well documented that the UK’s small businesses suffer from low productivity and one of the main reasons is low adoption of technology. I made this video on the subject before generally accessible, and usable, artificial intelligence (AI) solutions hit the market.

UK small businesses struggle with low productivity due to low technology adoption

UK small and medium-sized enterprises (SMEs) represent over 99% of all UK businesses, 60% of private sector employment and 50% of UK GDP. 2 in 3 small businesses believe that technology can improve business performance, and 60% of medium-sized businesses (50-250 employees) expressed willingness to invest in technology. In 2020, UK labour productivity (output per hour worked) was 19% below the average for G7 countries. UK SMEs have an average productivity that is around 18% lower than that of larger companies and it isn't improving.


The power of AI to transform small business productivity


As the pace of change accelerates, embracing the latest technology is crucial for any businesses to stay competitive and achieve sustainable growth.

However, AI has the potential to completely transform the outlook for small businesses. AI is a type of computer technology that allows machines to perform tasks that would typically require human intelligence. Eventually (within the next decade or two) artificial general intelligence (AGI) is expected to surpass human intelligence and be able to think for itself. Then all bets are off, but let’s focus on the power of the AI available today. You have probably read about large language models and GPTs (Generative Pre-trained Transformer). These are a type of AI that is trained on vast amounts of text data to learn patterns and relationships in language. This allows the model to generate human-like responses to prompts.


AI represents a fundamental change in the power of technology and the automation of business processes, making it an ideal tool for small businesses looking to reduce costs, increase revenues, and save time – the three key issues face small business owners most commonly raise.


UK small businesses are less productive compared to other countries due to reasons including low adoption of new technology; concern about implementation cost and time; lack of understanding of the available options; products that are designed for large businesses; training and support costs; perceived risks; and solution providers struggle to market to a fragmented small businesses market .


Embracing AI: The key to boosting small business competitiveness


AI applications can be used to significantly reduce costs and increase revenues as well as save time. AI can help small businesses with various tasks, including writing content and copy for blogs, brochures, websites, apps, and product descriptions; reading, understanding and summarising long-form or even legal documents; planning, booking and forecasting; analysing information and data and extracting valuable insights; decision making from a range of options; monitoring and tracking; completing tasks once a decision has been made; interacting with other AI and GPT systems; speaking, writing and engaging in any language; artwork creation for marketing; updating customers, employees, and other stakeholders; personalising spoken content with custom voices and even avatars, and automating customer service and support. This is just the beginning.


The pace of change is rapid, and the capabilities of AI will continue to evolve at an ever-accelerating pace. Scenarios that were impossible at the end of 2022 are now a reality. A product and market can be researched in any language and an e-commerce website set up using natural language descriptions with suggested design artwork and content. Sales automation and personalised content can be created to engage new and existing customers and new APIs will provide access to information and databases to automate processes and business workflows. It will soon be possible for any business to automate sales processes, including research, engagement, qualifying leads, escalation and the booking of meetings. AutoGPT can even provide a travel itinerary and book your travel and hotel.

Embracing the power of AI can completely change the game for small businesses, as it can increase revenues and reduce costs resulting in more margin, profit, or income, or more free time. This also creates the potential for aggressive price competition, even for a fixed gross profit margin, if administrative expenses are reduced.


Small businesses are best-placed to embrace AI technology


Cloud services removed many fixed costs associated with hardware and software and turned them into variable costs in the form of subscriptions. The cloud also enabled remote working. Large organisations suffer from legacy, fixed asset investment and layers of technical debt.


Small businesses can adopt new technologies more quickly and easily creating a competitive advantage over large enterprises. The capital required to build a business will now also be reduced as the material cost of development to take a new product or service to market is falling by the day. The cost of sales and marketing should also fall although, in a world where everyone has access to AI, it could result in competition akin to that betwen algorithmic trading platforms.


AI can also be tasked with keeping technology up to date and optimising costs with ruthless objectivity and a risk assessment of cheaper solutions built in instantaneously. AI could even migrate data, accounts and billing in the background without any disruption to customer-facing services.


Reducing the costs of Brexit


Brexit has increased the costs of doing business in the EU - I know as I have co-founded a Uk-based manufacturing business (Atherton Bikes) that exports internationally.

AI should be particularly useful for small businesses to simplify and speed up the paperwork and process of exporting and importing goods. Costly errors in paperwork can be prevented as AI reduces the impact of red tape and other barriers, and costs, relating to international trade. This can help to ensure that the UK remains relevant and competitive globally.


AI further reduces the barriers of entry to starting a business


The fixed and variable costs of starting and doing business can be minimised and constantly optimised. AI and cloud-based solutions make it easier for anyone to start a business as job security continues to be eroded. By automating various business processes, small business owners can spend more time focusing on core business activities where they add personal or creative value such as personal customer service, product development, and marketing. This can reduce the amount of time and money required to get a new business off the ground, making it easier for people to start a side hustle while maintaining employment to minimise personal financial risk.


Anyone in business – of any size – should explore how this technology can be leveraged today as well as in a future that will arrive much faster than we can comprehend. Providers of capital will no doubt expect to see how AI is being implemented to reduce operational cost and competitive risks.


So, does the UK have a plan?


Obviously the UK can only close the productivity gap if our SMEs embrace AI technology faster than our overseas competition.


In an exponential arms race, even a small head start will be a permanent and growing lead over time.


Perhaps, the UK government should start thinking about financial incentives for UK businesses that consume AI solutions to close the productivity gap, while we can.

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