About a year and a half ago we developed a set of six principles that served as the foundation for what would become the Tech Adoption Index. These principles were the reasons we believed the small business shift to the cloud would become the biggest game changer since SMBs started building websites and shifting their media spend to digital.
Of course our opinion was’t enough. To test our principles out we ran two waves of survey research, in May and November 2017, each with a sample size of 1,000 SMBs, seeking insights on their use of cloud technology in day to day operations.
The survey results plus market developments that have occurred during this time have largely confirmed the six principles. We were on to something after all.
Last week at Vendastacon in Banff, Alberta, I presented the Six Principles to make the case to those attending that the small business shift to the cloud will change the world they live in — selling digital marketing products to SMBs — in profound ways. (see below)
Here is a quick rundown of the Six Principles with some survey findings back them up. We will soon publish a longer version of the Six Principles, complete with supporting survey data, in an upcoming Tech Adoption Index Insight Paper.
Principal No. 1: Demographics Are Driving the Small-Business Shift to the Cloud
Some simple math with Census data leads us to roughly 10,000 Baby Boomers reaching retirement age every day. Millennials, that generation we so love to generalize about, is not particularly jazzed about working for “The Man.” They’d much rather be their own bosses. We’ll see if this translates into higher rates of business formation over time, but it’s pretty clear that millennials are are different breed. (We will have more on this later in the week when we post our On Target podcast interview with Cisco’s Jenn Allen).
Our Tech Adoption Index survey data shows a very clear preference for the use of cloud-based apps among younger business decision-makers. Half of small business with a decision-maker between 18-34 have moved at least one key business function to the cloud, according to the survey. The core functions the survey measures are marketing, customer relationship management, payments, accounting, HR and supply chain. By comparison, only 23% of businesses with a decision-maker between 55-64 have done the same.
Future businesses will be born in the cloud. You should probably meet them there.
Principal No. 2: Small-businesses are Starved for Time
There is a widely cited Intuit study that shows that small businesses only spent about a third of their time doing what got them into business in the first place. Cutting hair, fixing cars, making the perfect cup of coffee and so on. The remaining two-thirds is spent on the drudgery of running a small business — paying bills, ordering supplies, chasing down new customers and so on.
Our data shows that those who have moved at least one business function to the cloud are motivated by the promise of efficiency, with 56% selecting “saves time/is more efficient” as one of the top two reasons for moving to the cloud. By contrast, only 16% cited “less expensive” as a top two reason.
Give small businesses some of their time back and they will reward you.
Principal No. 3: App Overload Fuels Full-stack Demand
As small businesses take on multiple apps for different business solutions, multiple logins and the lack of integration among the apps creates opportunities for companies that can simplify the process and offer some bundled pricing advantages. Our survey found that 50% of small businesses “would prefer to work with a single company that could address most or all of these areas (marketing, CRM, payroll, etc.) for a single monthly or annual fee.”
Executing on this promise is challenging, but the message from SMBs is clear. Make it easy for me.
Principal No. 4: The Cloud Shift will Upend the Local Competitive Landscape
One of the first observations that got us interested in building the Tech Adoption Index was the fact that as SaaS companies established a strong position among SMBs with one solution, they would natural add on new solutions via natural adjacencies. Over time, companies that once barely gave each other a second thought were now in competition. Textbook example of this is Square, which began in point of sale and now does CRM, appointment booking, email marketing, lending, and a bunch of other things.
We asked which channels small-businesses were most likely to expand their relationships with via new solutions. Interestingly, ISPs and cloud software companies engender the most trust. Local media companies don’t fare as well. In the coming years this evolution may disrupt competition for small business wallet share.
Principal No. 5: The Cloud will Accelerate Online Self-purchase
The debate continues over whether small businesses will buy digital marketing services directly online. Our survey data shows they are already buying cloud software this way. In fact 60% say they purchased their cloud-based business apps directly from the SaaS providers’ websites.
There is of course a much longer debate to be had over which products will require direct sales vs which will self-service, but it’s clear that online self-purchase is already a factor in the cloud software space. And we expect its importance to grow.
Principal No. 6: SMBs Need Tools to Level the Customer Experience Playing Field with Brands
Many have said that small business owners are being “Amazoned, Wal-Marted and Starbucked” to death. The reason for this is big brands leverage data and technology to deliver superior customer experience. And it has been difficult for small independent businesses to keep pace.
One such David v Goliath scenario involves Dominos Pizza. The pizza titan is killing it with digital sales, thanks in part to its “Zero Click Ordering” app (ideal for stoners). Here comes Slice to the rescue, offering independent pizzerias (the ones with the good tasting pizza) an app promising to level the playing field.
Tech Adoption Index data shows small-businesses are definitely feeling the pressure. Among SMBs that say they compete with brands, 68% say brands “have marketing and technology tools at their disposal” that small business owners do not. There is a big opportunity for those who can offer small businesses tools to level the playing field with brands.
Schedule a briefing today to learn more about the Tech Adoption Index and how you can benefit from the small business shift to the cloud.
