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Can small businesses compete against AI-assisted corporate titans?

A classic David and Goliath story is unfolding, driven by the systemic changes to business, economics, and even society that Artificial Intelligence (AI) will bring.

The Goliaths, large enterprises, possess economies of scale, strong brands, large customer bases, distribution and manufacturing capabilities, capital, talent, market power, and sophisticated risk management. On the other hand, the Davids, small and medium-sized businesses (SMEs), are agile, have strong customer relationships, are innovative, can make rapid decisions, and have low overheads. However, AI is poised to disrupt everything over the coming decade. It closes the gap, enabling any business to pursue nearly any customer and tap into the long-tail opportunity through automation and personalisation. Generative AI has accelerated adoption and democratised access to AI. The question is, who will be the first to embrace this technology?

The Goliaths: Large enterprises and AI

Large enterprises can and are heavily investing in AI, benefiting from their vast customer bases that provide them with a wealth of data, the lifeblood of AI. However, these enterprises often struggle with legacy systems, entrenched cultures, and technical debt. These factors can impede AI adoption and make integration with existing systems challenging. Moreover, their size and complexity can lead to bureaucratic delays in decision-making.

Despite these challenges, large enterprises recognize the existential threat posed by AI. In recent discussions with Microsoft AI partners, it became evident that large enterprises are rapidly responding to the potential risks and rewards of AI, unlike the slow adoption of previous technologies such as cloud services.

Even traditionally cautious financial services clients are swiftly deploying AI and creating platforms. Many large enterprises have been actively testing and implementing AI solutions for years, employing machine learning (ML), deep learning, and robotics in various fields such as autonomous vehicles, distribution centres, healthcare, and genomics. The main threat to large enterprises is the risk of being outpaced by more agile competitors. However, AI can help them overcome this challenge and create remarkable data-driven products, services, and personalized customer experiences that SMEs cannot easily replicate.

The Davids: SMEs and AI

SMEs, on the other hand, are often more nimble and adaptable than their larger counterparts. They can quickly react to new technologies and integrate them into their operations. SMEs can leverage AI to provide generative AI-driven solutions that personalize customer experiences, setting themselves apart.

However, SMEs face their own set of challenges. They may lack the resources for significant AI investments and struggle to attract talent knowledgeable in leveraging AI. Additionally, they may not have access to the same volume of data as large enterprises, which can limit the effectiveness of their AI models.

Despite these challenges, SMEs have significant opportunities to harness the power of AI. As Andrew Ng highlighted in his TED talk, SMEs can target the "long tail" of AI opportunities, inaccessible to large enterprises. The "long tail" refers to numerous niche markets and specialized needs that AI technologies can address. Traditional business models tend to focus on serving popular and mainstream demands, but AI enables businesses to target the unique needs of individuals or smaller market segments. SMEs can optimize operations, reduce costs, and grow their businesses using AI.

However, even very locally-focused SMEs risk being outcompeted by large enterprises that heavily invest in AI and possess broad distribution networks. If SMEs fail to keep pace with a changing commercial landscape driven by AI, they may lose their competitive edge.

The convergence: A new business landscape

There is another perspective on the David and Goliath battle. As large enterprises work to overcome legacy issues and become more agile, and as SMEs strive to leverage AI despite resource constraints, the two may converge. This convergence could lead to a new business landscape where businesses of all sizes compete on an even playing field, thanks to AI. The battle will then be fought in the overlapping markets worth billions in any developed economy.

Who will win?

The race is on in the realm of AI, and both large enterprises and SMEs have their unique strengths and challenges. Access to Large Language Models (LLMs) and is being democratised and over time the cost to access powerful cloud-based platforms with natural language and multi-modal interfaces will tumble. Microsoft and Google are both adding copilot agents to their productivity software which will empower employees in all sizes of organisation. As a champion of small businesses, I firmly believe that SMEs can stay ahead by embracing their creative and innovative spirit. However, it is crucial for all businesses to recognize the transformative power of AI and adopt it as a key driver of future success. The AI landscape is vast and uncertain, but one thing remains clear: today's Davids and Goliaths in the business world must fully embrace AI or risk being left behind.

By leveraging AI, small businesses can tap into new markets, personalise customer experiences, optimise operations, and drive growth. Meanwhile, large enterprises can utilise AI to enhance their competitive edge, develop innovative products and services, and deliver personalised experiences at scale. As the business landscape evolves, the convergence between the strengths of both types of businesses may redefine the competitive dynamics, leading to a more level playing field.


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