Given that AI is entirely digital and human beings are entirely analogue, how does a business keep human agency? And what do we mean and want for that? Should there be a blend of information (AI) and emotion (human)?
SMEs are different from big business
Is emotional engagement the key to a meaningful AI solution for SMEs? Or will SMEs be lazy and use AI to produce tons of material, swamping their audience? The human centred approach is what SMEs are good at.
SME business owners often think that to compete with big business, they have to look like them.
But that removes SME’s competitive advantage. Big business can try to use AI to become more human centric, but will they do it well? SMEs can maintain their competitive advantage if they use AI to become closer to customers. If AI is mainly used for cost savings, and SME owners are lazy, then the advantage will be lost.
Can SME owners learn from other world views?
Business have traditionally come from a Western, Educated, Industrialised, Rich, Democratic (WEIRD) environment, which has lauded individual monetary and economic gain and self-interest, as shown in Rational Choice Theory. But about 80% of the world isn’t WEIRD. They have a more community-oriented, shared ethos, based on collective wellbeing and collaboration. One example is the African concept of Ubuntu – ‘I am because we are’. Pacific Islanders have a similar view of collective respect and responsibility. Can AI help us produce a more nuanced approach that taps into the collective feeling of belonging and sharedness? As that is where SMEs score – by keeping close to their customers, aware of their needs and acting in partnership to fulfil them.
When AI can be useful for SME business owners
I think that these are the types of function that AI should produce for SME owners:
Producing documents faster and more consistently
Giving the owner time to think
Searching for and gathering Inconvenient data
Quickly gathering A lot of data (although sometimes that can be too much)
Innovations and creativity – of which more later
The dangers of misusing AI
How people will manage AI all comes down to how people think
There are generally 4 levels of competence, with a bicycle example:
A young boy sees the bike and thinks I can do that. Unconscious incompetence, (you don’t know what you don’t know)
He jumps on the bike and promptly falls off. Conscious incompetence (you realise what you don’t know)
A lot of practice and he wobbles off down the road, working hard at keeping upright. Conscience competence (you do know, but you need to put effort in)
More practice and he cycles off, talking to his friends on their bikes, not thinking about the act of cycling. Unconscious competence (you have been doing this so long, that it’s second nature).
Unconscious incompetence is dangerous for business owners, and this is where AI may help by filling in knowledge gaps.
Unconscious competence may also be dangerous. Business owners may be stuck in a habit. Essentially, they have stopped being curious, so the business does not move forward.
Intuition and the need for speed
SME owners think intuitively, recognising patterns based on past experience or memory. But they only recognise a small part of the whole memory, which they ascribe to the whole experience. The context will inevitably have changed over time. Herbert Simon said “Intuition is nothing more and nothing less than recognition” What exactly is recognised? Do business owners stop and ask? I think, no, not often enough.
SMEs tend to take the first available satisfactory answer. ‘Satisficing’ is a blend of sufficing and satisfying. It has a response bias on the egocentric side of plausible answers. The Satisficers view is an anchor point which adjusts slightly with more data. But there is no big reset. Which means that opportunities, shown by a markedly different viewpoint, may be missed. And always, if your business misses an opportunity, your competitor won’t.
AI may gather all the evidence, but the SME owner will look for quick stories, known narratives, and stick to them even against the evidence. Because business owners have a need for speed, so won’t wait for all the evidence.
Are we all rational? It’s assumed SMEs business owners, indeed everybody, are rational actors. This construct works better at a macro level than micro one, as it bears little relationship to messy environments and messy people.
But the world of the SME owner and real life is messy.
We know our plans change when there is a human interaction. Owners may have failed to completely identify what the other human is thinking. It’s as though you are both actors on the stage but reading different plays. And it’s a constant surprise. People are individual, change their minds, don’t do exactly as expected and so on. SME business owners are faced with that daily and need to adjust their thinking to manage it.
Even supposed constants like numbers have different contexts when humans are involved. Richard Thaler showed this in his mental accounting example. He said you might drive to a different store to save 10 euros on a 20 euro purchase but you won’t drive to a different store to save 10 euros on a 1000 euro purchase. Why not? It’s the same drive and the same saving. Here’s an Asus and Dell example of gaming yourself with numbers, which is what this is.
How can we deal with these in-built limitations? SME owners have been good at doing things by themselves. Now, using AI gives owners time to think, so that they can bring in the team to add more ideas and balance out individual biases. Team input is also a vital delegation tool, that enables more growth opportunities for the business. The owner doesn’t have to do it all.
No time to think
You don’t have to be brilliant to be a success, just stop making stupid decisions. Most of us don’t stop to think, and we do make bad decisions. The smaller the business, usually the worse the decision-making process. This is mainly because business owners are predominantly stuck in their technical discipline and don’t explore the other business disciplines except to solve immediate issues. Marketing, finance and so on don’t appear to contribute to sales, so they are poorly understood, and are treated as costs. This is a major reason why micro business stay as micros.
An important business limiting factor isn’t money, it’s time.
SME owner’s time. In our practice, I spend a lot of energy on finding ways to save clients even small amounts of time, helping them to use that time better. AI can buy time. And, if used properly, can help a business scale, shown in these 5 steps to scaling your business. In short, the business needs to
- Workout the workflows
- Workout the procedures to ensure that the workflows happen
- Organise training so that people follow the procedures.
- Design a monitoring system
- Set up their measuring and accounting system
To use AI effectively, these steps must be in place. Most SMEs don’t have them all. If these building blocks are not in place, and understood, AI can cause major issues in implementation through poor appreciation of how the business works.
AI can’t simply be bolted on. To be effective, it has to be pervasive through the organisation.
Use AI instead of original thought, and SMEs will lose advantage and make life worse for themselves. Also remember that AI is historical and has implicit biases and inequalities. SME owners can use it to reinforce their thinking. So, they need to sense check; in other words, use the time that AI has bought them to think about their business.
AI is all about known facts and opinions, and usually lacks originality, so SMEs need policies and procedures to refresh and manage the data.
Last year’s AI is not this year’s AI
More data has been added. Decisions will need to be regularly revisited to check that the data that supported them is still relevant.
SME owners need to learn to ask the right questions. Asking AI the right questions means getting better answers. The business owner’s job is to solve problems, or manage tensions. Problems can be solved, these are one-offs. But most issues are tensions, they are ongoing and need managing. For example, KPIs, hospital waiting times and sales targets are usually tensions. SME owners must realise that AI can only help tensions when it is refreshed as the issues change.
Done well, AI is a valuable tool for creativity and innovation.
Good questions take time, thought and curiosity. SME owners must constantly ask why, why why…
Frame questions better
To frame questions, you can either use zero shot or few shot questions. Examples:
Zero-shot question – “AI, produce 15 original startup ideas that are good for Y Combinator ” (the startup accelerator in California)
Few-shot question – “AI, here are 400 recent Y Combinator startups, come up with trends and generate 15 original ideas from these concepts.”
This is better tailored. Both will produce 15 original ideas, but the few-shot question will produce 15 that Y Combinator are more likely to support and fund.
Also use constraints in questions, as AI works best with constraints, as do humans. Maybe produce a persona for your AI question e.g. “AI, you are an expert at solving problems and idea generation. You come up with novel and creative ideas. Here is your task…”
And for creativity – AI is great at patterns and finding unexpected connections. This can lead to new combinations, and hence innovations. After all, most new ideas are variations of old ones.
Which jobs are at risk from AI and which won’t be impacted?
Anything that is rules or information based, basically any mundane activity, is at risk. That includes a lot of professional services, some engineering and some marketing activities.
Personal services will not be impacted so much, as we will still need human jobs like carers, hairdressers, therapists, trades people.
But every sector, even personal services businesses, will have AI impacted disciplines, such as HR, office admin, bookkeeping, payroll etc. These are all information heavy, rules-based activities. AI will produce cost savings, but little creative input in these areas.
Office admin and professional services, whilst impacted severely by AI at the junior and intermediate levels, can use AI to enhance senior level work. We have moved from Peter Drucker’s knowledge work to judgement work, a term I coined in 2016 at the Global Peter Drucker Forum. SMEs and self-employed service providers can use judgement, empathy, and engagement at a personal level to cement customer relationship and succeed. AI can only give us the tools to make better judgments. In this way SME business owners can score heavily by ensuring a personalised approach that will resonate with customers.
We embrace this at Hixsons. We know that 90% of our practice work will disappear in 5 years, so I am upskilling the team into judgement work. That is, after all, what clients need and want.
Let’s round up
AI can provide plenty of opportunities if the limitations are understood and it’s not used as the hammer where every problem is a nail. Be lazy and AI will accelerate your business’ decline. That will happen to some. Others will have a good future if SME owners use the time that AI buys them to think, enable the team, make better judgements, and test their decisions.
More than anything else, please stop and think.
This blog is a summary of Nick Hixson’s presentation at the 19th International Entrepreneurship Forum, held under the auspices of Essex Business School and the University of Padova, September 2023.
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