Tag: small business

Artificial intelligence and small business

Artificial intelligence promises to change small business dramatically, but are they ready for it?

How can small businesses use Artificial Intelligence? On Flying Solo, Rob Gerrish and I discuss the various ways AI is going to affect smaller enterprises.

One of the important things about the discussion is how AI is going to change a range of industries and jobs. The effect on small businesses over the next twenty years will be as great at the Personal Computer was.

The big takeaway I have for business owners is to actively think about how AI and automation are going to affect their industries, customers and individual companies.

Have a listen.

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Building the artificially intelligent business

Artificial intelligence and machine learning are a great opportunity for small business says Xero founder Rod Drury

It’s been another big year for Xero after the company passed its million user milestone, at the recent AWS Summit in Sydney founder Rod Drury to spoke to Decoding the New Economy about what’s next for the company and for small businesses.

For a company founded a decade ago, having a million paying customers is a substantial milestone and one Drury seems quite bemused by.

“It hasn’t really sunk in yet. When we did our IPO our promise was a hundred customers and I can remember when it was our first year our target was twelve hundred customers – I think we got to 1300 – so to pass a million is pretty nuts.

“What we’ve found is the accounting software market is probably one of the key industries where you’ll see the benefits of machine learning and AI. The reason for that is massive amounts of data but a pretty tight and structured taxonomy so we processed 1.2 trillion pieces of data in the last 12 months so the graph of data is huge.”

Far more modest volumes of data threaten to overwhelm smaller businesses and this is where Drury sees Artificial Intelligence and machine learning as essential for simplifying services and driving user adoption.

“One of the challenges is that small businesses might be great landscape gardeners or plumbers but they are terrible at actually coding transactions so we’re now seeing that wisdom of the crowd and all that data that we can code better than most normal people can. So the big epiphany was ‘why don’t we get rid of coding?’

“Effectively all a small business has to do make sure things like the data of the invoice is in the system and we can do the accounting for them and the accountants can check and see what’s going on.”

This automation of basic accounting tasks, and how these features are now embedded in cloud computing offerings, is changing how businesses – particularly software companies – are operating.

“You can’t run domestic platforms any more, because every accountant will have customers that are exporting and what we’re seeing now is global platforms connecting together so, for example, HSBC announced its bank feeds and what we’re doing with Stripe and Square.

All of the accountants need to be coaching the small businesses exporting. That’s what creates jobs.”

That global focus of business is now changing companies grow, particularly those from smaller or remote economies like Australia and New Zealand.

“What we’re finding now is the last generation of the late 90s and early 2000s was very much enterprise technology and normally companies would get to a certain point and then a US public company would have to buy them.

“Now we’re seeing truly global businesses that aren’t selling out quickly they’re actually creating businesses from this part of the world. People don’t have to live in Silicon Valley anymore, they can live in Sydney’s Northern Beaches or Auckland or Wellington and do world class work.

That remoteness is something that challenges Xero though as the company tries to get traction in the US market which is dominated by Intuit and fragmented across regional and industry lines.

“As you start off as a company listed in Australia and New Zealand it’s harder as you don’t get the benefit of the density in a smaller market. Now we’ve done enough to get these bank deals, we can now attract executives of the calibre that feels like long term leadership and that’s the benefit of doing the hard yards for a few years.

We’re past the beach head phase now and now we’re building the long term business. We want to be a big fish in a small pond.”

Overall Drury sees the cloud, particularly Amazon Web Services, as being one of the great liberators for business as smaller companies follow Xero’s footsteps.

“This is one of the amazing things AWS have done, they’ve created this flat global playing field.”

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Small business and the importance of design

For most small businesses and founders hiring a professional designer could be a very good investment indeed.

One thing the iPhone era has taught us is the importance of good design.

In a piece for Fairfax Small Business this week, I had a look at some small businesses that had used compelling design to launch their products.

As part of the research for this I interviewed Murray Hunter, founder of Sydney’s Design + Industry, about what businesses should be looking for when taking a product to market.

One of the interesting points about the story was the two businesses featured, Elanation and Pod Tracker, didn’t use professional designers as the founders of both had expertise in that field themselves.

But it is clear, good design matters to users and it will avoid problems down the track with manufacturers shippers and possibly regulators so for most small businesses and founders hiring a professional could be a very good investment indeed.

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Small business and cloud computing

The story of one Melbourne clothing supplier reminds us just how basic most small businesses’ IT systems are.

This blog, and its predecessor, have long maintained that computers and the internet have levelled the playing field between large corporations and small business so it was interesting Telstra’s managers say that over lunch today.

Australia’s biggest telco was showing off their cloud services for small to medium businesses with a presentation from futurist Ross Dawson on the changing technology world then real world case studies from Darwin’s Abode New Homes, Canberra’s Red Robot and Melbourne’s Cargo Crew.

Narelle Craig of Cargo Crew led with one very good reason for adopting cloud services – Cryptolocker ransomware.

After an infection that locked them out of their systems and cost the business a hundred thousand dollars, they shifted their on premise software to the cloud.

It’s easy to imagine how Cargo Crew came unstuck, a basic system that met the needs of a four person company five years ago grew into an unwieldy beast servicing 25 staff today. As the business grew, the disruption of upgrading IT systems was seen as too time consuming and costly.

Until of course something happened. A ransomware infection for Cargo Crew and for Abode a fire in a neighbouring office the evening after they’d installed a new 20,000 dollar server, where thankfully they didn’t lose anything but the scare was enough for them to start looking at alternatives.

Cargo Crew’s tale is a reminder of how basic most small to medium businesses’ IT systems are and how rudimentary their IT security is. While technology does level the playing field, there are still some things smaller businesses struggle with.

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Futureproofing your business

Having a global mindset and maintaining a lean operation are the keys to small business success

As part of the Meeting the The Future Head-on event in Sydney tonight I thought it may be worthwhile to list down the key points I’ll be making about future proofing businesses in these times of change.

Reading the Jobs for NSW report, it’s telling that 70% of the state’s jobs are in inward facing industries and for the main part they are losing competitiveness. That leaves them exposed to international competition and automation.

It’s easy think that many domestic services business – which make up the bulk of Australia’s small business sector – are immune from competition but the example of how Uber has upended the taxi industry is an example of how even the most protected sectors are still vulnerable.

Focus on the customer

Over the last twenty years Australia has sleep-walked into becoming a high cost economy and most Australians still seem in denial about just cripplingly expensive the country has become.

Four years ago this blog posted on how Sydney was only second to Zurich as the most costly place in the world to base a startup.

There’s nothing wrong about being as expensive as Switzerland or Germany or Japan, but to compete globally it means offering high value goods and services. The easiest way for a smaller or high growth business to do that is to focus on providing stellar customer service.

Being better than the bloke next door is not good enough, that service has to compare with the best in the world in your sector.

Keep the business lean

Yesterday’s post looked at how corporations are outsourcing, the same applies to smaller businesses. Anything that doesn’t directly involve customers should be outsourced or automated.

For smaller businesses, shifting to modern payment, banking and accounting systems is relatively straightforward and setting up automation within those applications is easy.

Similarly any employment should be virtual unless it is directly involved in serving, supporting or selling to customers.

Adapt quickly

Not only is it important to keep the business lean financially but also in mindset. In recent years the tech startup community has adopted the Lean methodology and adapted it to their much volatile world.

That startup thinking is useful for non-tech businesses as it encourages a company to be far more responsive to market or economic shifts along with identifying product lines or ideas that aren’t performing.

Invest in the business

One of the biggest weakness for Australian businesses of all sizes is they are undercapitalised – even the biggest businesses tend not to retain profits and give them back as dividends to shareholders.

From a small business perspective this is understandable as the high cost of living in Australia means proprietors have to pull out an income to pay their million dollar mortgages in Sydney and Melbourne.

However what this does mean is that businesses are chronically undercapitalised resulting in them not spending enough on equipment, technology or staff training.

If you’re making a profit, try to put as much back into the business as possible and if you need more find an investor who shares your vision for the venture.

Looking global

Probably the most depressing thing about Australia in 2017 is just how insular the nation’s economy has become in the last twenty years. In New South Wales export related jobs have fallen from 32% of the overall workforce to 29% and the slight growth in tradeable services is entirely due to the education sector.

Even if there’s no intention to export, understanding the global trends and benchmarking performance against international leaders is one of the best safeguards for a business wanting to survive over the next twenty years.

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The age of the curious business

Researching, experimenting and paying attention will be the keys to business survival during the coming technological wave

Last year the Committee for Economic Development, Australia (CEDA) warned over 40% of the nation’s jobs were at risk from automation over the next 15 years.

While that focus was on the risks to workers, it’s equally threatening for small business. Many companies and sole traders are facing the same disruptions from technological change.

This isn’t a new phenomenon, in the Twentieth century the motor car displaced thousands of small businesses that catered to the horse drawn economy and family run corner stores were displaced by the arrival of supermarkets in the 1950s.

Beyond the personal computer era

At the end of the last century the personal computer’s arrival revolutionised small businesses as suddenly tools that were previously only in the reach of big organisations were suddenly accessible to the most modest venture.

One of the early beneficiaries of that shift to desktop computers in 1990s was the bookkeeping industry which took off as a legion of home based contractors catered for local small businesses.

As the internet and smartphones came along, the bookkeeping market changed as features like bank feeds and receipt apps automated many previously manual tasks.

Despite those challenges the bookkeeping industry has survived and continues to grow with IBIS World estimating the overall accounting industry, which includes bookkeepers, grew 2.6% per year over the past five years.

Close to customers

The success of bookkeepers and accountants in navigating change is probably due to industry being close to their clients along with being early adopters of new technology, two things that caught the taxi industry out when Uber arrived.

Uber’s success in upturning the taxi industry illustrates just how important understanding emerging technologies is for smaller businesses. One industry currently facing massive disruption from robots is the construction sector.

The trades were thought to be relatively immune from automation – after all, who’s going to build a robot plumber? But now robots are moving into trades like bricklaying, as Australian startup Fastbrick Robotics shows.

Fastbrick are building a commercial bricklaying machine, Hadrian X, that automates the trade’s physical work and integrates with 3D printing technology.

In one respect the robot bricklayers are bad for the trade’s employment prospects but for older brickies with bad backs having a machine to help you is a godsend while for employers it improves productivity and reduces workplace accidents. It won’t be the end of the trade but the contractors who survive will have adapted to a very different construction industry.

Restructuring industries

That Fastbrick integrates with design software shows how the dynamics of the construction are changing. In 2014 Chinese company Winsun demonstrated how they can build ten houses in a day with large scale 3D printers.

While we may not see that particular technology in Australia, aspects of it will be used and they are going to change all the trades and professions related to the building industry.

Architects are one building industry group that have long dealt with technological change. Like bookkeepers, the arrival of personal computers completely changed their profession and those who adapted thrived.

Now with cloud computing services plugging into builders’ supply chains like Winsun and machines like Fastbrick’s, architects are closer than ever to the worksite and their customers. The ones who are adapting are the earlier adopters who are getting into these technologies further.

Disrupting the professions

Accountants and architects aren’t the only professions being affected, lawyers are facing a new wave of services using artificial intelligence to do many legal tasks ranging from a chatbot that appeals traffic fines to a program that predicts US Supreme Court decisions.

Like other sectors, it’s the early adopters in the legal sector who are adapting to a very different industry with much of the manual, lower level work being automated out.

The wave of technology we’re now seeing appear – including robots, autonomous vehicles, machine learning and artificial intelligence – are going to change our industries and workplaces dramatically in the next few years.

What the accounting industry and the architecture profession teach us is the businesses closest to their customers and those adopting technology early will be the ones who thrive in a very different industries. Researching, experimenting and paying attention will be the keys to business survival.

An open mindset

Even for the trades, survival during this wave of technological change will be a matter of watching the marketplace closely while being open to new methods and technologies.

Assuming it won’t happen to your industry is probably one of the riskiest things of all. Ten years ago the idea of smartphones revolutionising the taxi business or that robots could replace bricklayers was unthinkable. Now it’s almost expected.

The forces that are changing the workplace are also changing industries and markets, so small businesses will also be affected. It’s going to pay to be smart and curious.

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Breaking the small business drought

The small business sector is essential to the broader economy’s health and diversity but in many countries it’s shrinking. How do we reverse the trend?

In most developed countries the small business community is shrinking. What can governments and communities do to grow what should be the most vibrant sectors of their economies?

What happens when a whole industry shuts down overnight? Australia is about to find when its motor industry effectively comes to an end this week.

The fallout for the workers is expected to be dramatic with researchers reporting the soon to be laid off staff being totally unprepared for their predicament.

So worrying is the predicament of those auto workers that Sydney tech incubator Pollenizer is offering small business workshops for laid off workers.

Those workshops will be needed. One of the striking things about the research is just how few of the workers are interested in launching their own ventures despite their poor employment prospects in other industries.

australian_ford_workers_employment_intentions

While the auto workers are a group with relatively low levels of education and work experience, their reluctance to starting a business is shared by most Australians with the nation’s Productivity Commission 2015 enquiry on business innovation reporting the number of new enterprises is steadily falling.

australian-business-exits-and-entries

Despite Australia’s population increasing twenty percent since 2004, the number of new business is falling. The country is becoming a nation of risk averse employees, something not unsurprising given the nation’s crippling high property prices which puts entrepreneurs at a disadvantage.

Australia’s reluctance to set up new ventures isn’t unique, it’s a worldwide trend with most countries not having recovered since the great financial crisis.

The tragic thing with this small business drought is that it’s never been cheaper or easier to set up a venture as  Tech UK and payment service Stripe show in their list the software tools being used by ventures.

Accessibility of tools or even government taxes and regulation isn’t the barrier in Australia. As the World Bank reports, the country is the eleventh easiest place in the world to start a new venture.

In United States experience shows there’s a range of other factors at work dissuading prospective small business founders – interestingly the United States comes in at a mediocre 47th as a place to start a venture in the World Bank rankings.

A healthy and vibrant small business sector is important to drive growth and diversity in the broader economy. The challenge for governments and communities around the world is to find a way that will spark the small business communities, in a world awash with cheap capital that shouldn’t be impossible but we may have to think differently to the ways we are today.

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