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Kenan Institute 2024 Grand Challenge: Business Resilience
Market-Based Solutions to Vital Economic Issues
Kenan Insight
Feb 6, 2024

Artificial Intelligence for Small Business Development: Are You Ready?

Part of our series on Business Resilience

Artificial intelligence has been around since the 1950s, and over the past 70 years, inventors and researchers have filed about 340,000 AI-related patent applications.1 The evolution from concept to utility is rapidly advancing as AI technologies become more user-friendly and widely accepted. AI tools are no longer just for big businesses, with applications like ChatGPT and Google’s Bard offering benefits for the individuals and small-business owners willing to try them.

AI is credited with bringing about Industry 4.0: a period of innovation spurred by AI capabilities that has created a new industrial landscape. This so-called fourth industrial revolution is characterized by the dispensation of a wide range of technologies interacting with physical, digital and biological domains.2 Transitioning to an increasingly AI-integrated business landscape can be intimidating for many small and medium-size businesses, yet these technologies offer opportunities to reinvent and reimagine business systems, tailoring them to create greater operational efficiencies.

Annual Report of New Business Creations Since 1997

Annual Report of New Business Creations Since 1997

Source: North Carolina Secretary of State. (2023, November 1). Home Page. https://www.sosnc.gov/

North Carolina has seen dramatic increases in business starts since the COVID-19 pandemic, growing from 127,000 in 2020 to 178,000 in 2021.3 The high rate of business development continues through the present, in part attributed to increased digital accessibility. For small businesses lo oking to gain a competitive edge, AI technologies promise to enhance financial and operational tasks, free up human capacity and create efficiencies that add to the bottom line. The Small Business and Technology Development Centers, North Carolina’s statewide network of technical assistance providers, are responding to the trend of AI in small business by providing helpful workshops, such as “Digital Marketing Using AI for Small Business,” “Creating Spreadsheets Using AI for Small Business” and “How to Train AI for Your Small Business” to small businesses wanting to learn more about AI capabilities for their organizations.4 Some of the capabilities within ChatGPT, for example, can instantaneously create word processing documents like memos and marketing content. Deep machine learning processors, meanwhile, offer smart responses for customer service interactions, obviating the need for a human on the other end of the line. Increased computing capacity also supports data collection and analytical capabilities. Expanded mechanized abilities, however, come with new imperatives and concerns. AI business planning models using new computing tools must consider issues of governance, privacy and security. These issue areas remain at the forefront of AI implementation concerns for all agencies, regardless of size.

We have developed a list of seven focal points that small businesses should consider when planning for AI integration.

  1. Mindset: Similar to adopting an entrepreneurial mindset, having an AI mindset is imperative to move businesses beyond the existing processing and maintenance infrastructure norms. An AI mindset begins with a willingness to take risk, seek out opportunity, and become proactive in the exploitation of new tools. A mindset shift is a necessary first step and involves understanding the fundamental idea of change that AI technologies present. Business owners must be willing to envision and embrace that change and the implications for the organization, specifically changes to workforce development and task distribution. This inclination means adopting a growth mindset, one where employees are encouraged to reskill and upskill and where workers are motivated to work though the challenges AI integration presents. Some questions to consider: What higher-value contributions could my employees make if certain tasks were delegated to AI? What could I learn about my customers and business operations through AI-enhanced data and analytical capabilities? Where might there be opportunities to prioritize customer needs with the information AI generates? How can the organization support a transition mindset to help the workforce embrace AI? What resources exist to support an AI-enhanced business operations journey?
  2. Workforce Readiness: At the heart of many AI-related conversations are discussions of workforce readiness and retooling. People commonly view AI as a threat to the current workforce. Rather than approach AI as merely a threat, it is important to think about the workforce-enhancing capabilities AI offers. Technology should not be seen as a replacement of human skillsets and interaction, but as a point of integration to meet higher levels of human efficiency. AI will require both social and technical abilities, or “hard and soft” talents. Managers adept at integrating AI will comprehend the complexity of their business and communicate a clear vision to every person within the organization.5 Educating employees about technological changes and integrating institutional knowledge through AI capabilities is the best integration protocol. Free resources exist to support AI integration, with LinkedIn Learning, Coursera and Udacity offering topics including “Introduction to Artificial Intelligence,” “Machine Learning” and “AI for Business.” These resources offer a suitable starting point for organizations beginning their AI workforce preparedness efforts.
  3. Enhanced Operations: Small businesses seeking to improve business operations with AI often ask, “What task can innovative technologies enhance?” The answer varies in depth and scope depending upon the business and its available resources. AI can be used to enhance data analytics by improving customer information capture and response mechanisms; providing cost comparison on merchandise to increase profit and reduce cost of goods sold; creating organizational communications such as email, letters and marketing tools; providing data management and case management efficiencies; and improving organizational accessibility through the use of automated response bots, among myriad other applications. Speech recognition, machine learning and deep learning have also made it easier to substitute human engagement. This innovation can help small firms automate typical communication functions. AI algorithms can also help organizations without staff or with few employees develop content for sales, marketing and promotion.
  4. AI Technology Governance: Organizations adopting AI technologies need to establish organizationwide rules of engagement. The rules are necessary to ensure clear responsibility structures. In small business operations, for instance, problems and breaches need an established pathway to the responsible party. It is not helpful to blame technology when facing organizational mishaps. The buck usually stops at the CEO level. Governance also extends to establishing data and security standards for the entire organization. Creating an enforceable code of ethic is paramount to ensuring that both customers and employees are protected from opaque managerial structures as AI becomes embedded within the organization. A clear set of policy and procedures needs to be established early in the process of incorporating AI tools.
  5. Data Privacy Protection: Data privacy and the need for data protections are especially vital when AI technologies are used. According to Forbes article, data is considered a pseudo-legitimate asset – although it is intangible, it can be defined, regulated and manipulated by the market.6 Unfortunately, cybercriminals also see data as valuable. These criminals threaten organizations of all sizes with phishing schemes, malware and cyberattacks that can be difficult for small businesses to recover from. The average cost of a data breach in 2021 was $21,659 per incident.7 Small and medium-size businesses are considered easier targets for hackers because of their limited resources, with 45% of surveyed businesses acknowledging their current business processes as inadequate for mitigating attacks.8 Data privacy and protection should remain a top priority for all businesses, and especially as AI automation integration increases. Although resources for small businesses can be difficult to find, companies like North Carolina’s Cybershield Security and RipRap Security educate firms on the dangers of cyber-exposure and offer affordable cybersecurity options for small businesses, helping them to keep their customer and business data secure. Business owners must stay vigilant in the fight against cybercrimes and be willing to fund data safeguarding services as an essential element of asset protection.
  6. Capital Investment Planning: As AI advances, businesses should expect to dedicate more resources to process automation. This includes upgrading equipment and process mechanisms to include machine learning, deep learning and robotics. Upgrading outdated technology infrastructure, prioritizing IT projects and increasing security were the three top drivers of organizational budget increases according to a 2020 report by Spiceworks.9 Having a capital investment plan that includes short- and long-term investments in AI makes it possible for smaller companies with limited resources to invest in future technological improvement. Starting the planning process early can also position small businesses to take advantage of technology improvement grant programs like the Small Business Administration’s Small Business Innovation Research (SBIR) Grant program, which support technology exploration in small business organizations.
  7. Youth Involvement: Being a small-business owner demands flexibility in how problems get resolved. One often overlooked resource is youth – employees who may require more training than their more experienced counterparts and may be dismissed as too immature to manage a business task. One advantage of incorporating young employees in a small business, however, is that they are agile when it comes to technology adoption, having lived most of their lives online. Creating opportunities for youth to participate in small business models can help shift more tenured employee mindsets toward embracing AI integration for the entire organization. Youth typically are not intimidated by modern technologies, and gaming and social media are part of their everyday experiences. Youthfulness additionally implies embracing risk. Tempered with the right guidance and leadership, extending opportunities to youth can promote forward thinking about AI integration tools. Business owners should lean into teaching the next generation of the workforce . Youthful employees can give established business owners the courage to navigate an increasingly technological world. For small-business owners with limited resources, pursuing a collaboration of this type makes the best use of everyone’s talents and experiences.

Increases in AI technology uptake raise lots of questions for small businesses, and much of the noise stems from a fear of the unknown. Leveraging existing knowledge assets and understanding workforce requirements in the AI world will position small-business owners to work smarter. Taking these initiatives is the best way to be prepared and stay competitive.

This article is part of our Grand Challenge series on business resilience.

1 WIPO (2019). WIPO Technology Trends 2019: Artificial Intelligence. Geneva: World Intellectual Property Organization. https://www.wipo.int/edocs/pubdocs/en/wipo_pub_1055.pdf

2 Schwab, K. (2017). The fourth industrial revolution. Currency.

3 North Carolina Secretary of State. (2023, November 1). Home Page. https://www.sosnc.gov/

4 Small Business and Technology Development Center (SBTDC). (2023, November 1). Home Page. https://sbtdc.org/

5 Tamayo, J., Doumi, L., Goel, S., Kovacs-Onarejkovic, O., & Saaun, R. (2023). Reskilling in the Age of AI. Harvard Business Review, 101(5), 56–65.

6 Toscano, J. (2021, December 1). Data Privacy Issues Are the Root of Our Big Tech Monopoly Dilemma. Forbes. https://www.forbes.com/sites/joetoscano1/2021/12/01/data-privacy-issues-are-the-root-of-our-big-tech-monopoly-dilemma/?sh=19fd216b3cfd

7 Patterson, D. (2021, May 19). Cybercrime is thriving during the pandemic, driven by surge in phishing and ransomware. Money Watch CBS News. https://www.cbsnews.com/news/ransomware-phishing-cybercrime-pandemic/

8 Brooks, C. (2022, January 21). Cybersecurity in 2022 – A Fresh Look at Some Very Alarming Stats. Forbes. https://www.forbes.com/sites/chuckbrooks/2022/01/21/cybersecurity-in-2022–a-fresh-look-at-some-very-alarming-stats/?sh=c86895d6b616

9 SpiceWorks. (2020). The 2020 State of IT: The Annual Report on IT Budgets and Tech Trends. https://www.spiceworks.com/sw-marketing/state-of-it-2020/

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