Decidr

Despite issues with access and democratisation, AI really does have the power to revolutionise the way large and small businesses operate and tackle common challenges.

In fact, AI tools are already enabling SMEs to compete more effectively, enhance decision making processes and drive growth.

A 2023 survey by the Small Business Entrepreneurship Council in the US found that small businesses using AI found it increased the quality of their decision making by 69%. It also boosted customer acquisition by 67% and improved customer service by 61%.

By embracing AI, small businesses can not only survive but thrive, driving growth and innovation in ways that, until quite recently, were either unimaginable or unaffordable.

Investors and early adopters who recognise the potential of AI to transform small business operations are well-positioned to reap the benefits for themselves and their customers.

Here are five specific ways AI is supporting businesses at both ends of town.

1. Enhancing decision making through market analysis

Small businesses often lack the resources to conduct extensive market research and analysis.

AI tools can quickly analyse large datasets in real time, identifying market trends and providing actionable insights. This is huge, because it allows smaller businesses to make informed decisions early on, minimising waste and making the most of resources.

Popular buy-now-pay-later service Afterpay uses AI to analyse consumer spending patterns and predict future trends. Since 2021 it has offered this tool to merchants on the Afterpay network so they can access and leverage customer-centric analysis.

This helps small businesses partnering with Afterpay to tailor their product offerings and marketing strategies based on consumer behaviour insights.

Similarly, streaming giant Netflix uses AI to analyse vast amounts of data to understand viewing habits and preferences. This helps the company make informed decisions regarding content acquisition, production and, of course, personalised recommendations.

In fact, Netflix has an entire subsection of its research platform dedicated specifically to machine learning.

Spotify also does a stellar job of this, taking it a step further with its yearly Spotify Wrapped event that goes viral every December, with users actually sharing and celebrating just how detailed the platform’s data analytics is.

2. Improved customer engagement and insights

Not all SMEs have the funds to sink into dedicated customer engagement and insight analysis.

This is where AI can help with customer relationship management (CRM) systems that can analyse customer data to personalise interactions, recommend products and improve customer satisfaction.

Some even take it a step further, placing insights right in customers' hands.

Sephora leverages AI to enhance customer engagement through the Virtual Artist tool in its app.

It analyses customers' facial features and preferences to provide personalised makeup recommendations. This is a highly personal way of engaging with a customer where they feel like a company is speaking directly to them, boosting repeat spend and loyalty.

3. Streamlining operations and efficiency

We know you hear this one a lot, but it’s true — automation tools are perfect for streamlining repetitive tasks. But zooming out to the bigger picture, this also applies to things like optimising supply chain management and improving overall operational efficiency.

Cloud-based accounting software Xero uses a mixture of generative AI, predictive AI and machine learning so SMEs can automate bookkeeping tasks such as categorising transactions, reconciling bank statements and generating financial reports.

This reduces the manual effort required and allows small business owners to focus on more strategic tasks.

It's also further integrating generative AI by developing a conversational interface that won’t just work across the Xero platform but also mobile, email and WhatsApp.

Similarly, Amazon employs AI in its fulfilment centres to assist with sorting and moving inventory. AI algorithms also optimise supply chain management, predict demand and automate restocking processes.

This extensive use of AI enables Amazon to maintain quick delivery times and efficient operations, something it's passing onto its own customers — including SMEs — through AI offerings like AWS simulations and digital twins.

4. Predictive maintenance and inventory management

AI-powered predictive maintenance tools can analyse equipment performance data to predict failures before they occur, reducing downtime and maintenance costs.

Similarly, AI-driven inventory management systems can forecast demand and optimise stock levels, preventing overstocking or stockouts.

Australian logistics and fulfilment platform Shippit uses AI to optimise inventory management and shipping routes. The platform forecasts demand, manages stock levels and ensures efficient delivery, helping small retailers maintain optimal inventory and reduce shipping costs.

According to the company, utilising AI has allowed it to reduce its total kilometres and time on the road between 15 and 20%.

5. Enhanced security and fraud detection

Small businesses are often targets for cyber attacks and fraud, with a recent study finding that 309,000 Australian small businesses have experienced cybersecurity issues. Of these cases, 33% said they had suffered financial losses.

And in what is becoming a familiar pattern by now, SMEs also often lack the resources to implement robust cybersecurity measures.

This is where AI can once again be a boon, detecting and mitigating threats in real time. Machine learning algorithms can identify unusual patterns in transactions or network activity, flagging potential fraud or breaches before they cause significant damage.

Australian fintech startup Airwallex uses machine learning and AI to detect and prevent fraud in international transactions. Its AI algorithms monitor transaction patterns and identify suspicious activities, protecting businesses and their customers.