As with all forms of emerging tech, the primary question on our minds is how it applies to SMBs. And do they actually care about it? There tends to be an assumption that SMBs think like us geeks in the tech & media worlds, and get excited about emerging tech. In many cases, they’re unaware or ambivalent.
This is especially the case with AI. It’s less a matter of unawareness, as AI is buzzy enough to penetrate most circles of society. It’s more about AI’s connotations. Is it a positive or negative force in SMBs’ minds. It has the potential to be the former, given automation benefits, which often resonate with SMBs.
So we decided just to ask them. In collaboration with Duda, Localogy fielded a survey to 750 U.S. SMBs to take their temperature on AI. Do they want it? Have they used it? Is it valuable? Do non-users plan to adopt it anytime soon? And finally, per the above, does the term AI have brand equity or brand baggage?
We answered these questions during a webinar last week (see video embed below). And Localogy L25 attendeees back in March got an early exclusive preview of the data. Now, we have the full data set, and you can see our summarized takeaways below. You can also download the full report anytime from Duda.
Power Users
Diving into the results and starting at the top, 57 percent of SMBs have been offered software that is or contains AI. This includes existing software that added AI features. Of those, 69 percent have adopted and used AI tools. But only 31 percent report that the presence of AI influenced them to adopt or buy.
In other words, 69 percent have used AI in their SMB SaaS – everything from bookkeeping to CRM, as we’ll cover shortly – but only 31 percent care enough to the point that it influenced their decision to adopt a software package. The opportunity is to close that gap and turn users into power users.
Drilling down into a value judgement, among those who have adopted AI, 62 percent report that it’s valuable to their business operations. We’ll get into the reasons in a bit, but for now, this is a mostly positive result, given that a majority of users like AI while there’s still some headroom to grow into.
Before continuing into more results, we’ll pause to contextualize the above with an important procedural note. To avoid translation bias and perception bias, we anchored our definition in AI to something concrete. We asked SMBs if they’ve been offered software that’s explicitly labeled by its creators as AI.
That’s an important qualifier, as just asking SMBs if they’ve used AI is too vague. Survey results would be skewed by varying perspectives and connotations. Every SMB may have a different idea of what constitutes AI. So anchoring the definition in explicit software-provided attributes normalizes the results.
Low Stakes
Back to the software categories where AI is happening, it runs the gamut of SMB SaaS (see graphic above). But in our observation, it tends to gain the most traction where there are three factors: functions that are rote/mechanical, dreaded by SMBs, and low stakes. These attributes speak to AI’s current state.
Breaking that down, rote tasks are where AI does best (e.g., expense labeling in QuickBooks). Dreaded tasks are where SMBs most welcome AI (e.g., drafting email marketing via prompts). And low stakes is all about the fact that AI isn’t yet completely trustworthy (no one is letting it run their payroll just yet).
In fact, that trust factor was a key theme throughout the survey. For those who reported AI adoption, some of their follow-up sentiments indicated they aren’t ready to let it access sensitive business info or financials. And some SMBs expressed that they fear they’ll spend more time than is gained, fixing errors.
Speaking of time savings, that’s the headline for the positive sentiments that SMBs reported. For those who have seen value from AI, most report that it’s all about time savings. This is often a top criterion for SMBs. They want more time to be chefs, nail artists, and dentists… not doing marketing work.
The strategic takeaway is that AI proponents and providers should work on a few things in their framing and messaging. For one, stress AI’s time-saving benefits, and speak SMBs’ language (plain spoken, not techy). Second, emphasize the software’s trustworthiness and address that objection directly.
Words Matter
Speaking of AI’s trustworthiness and its reputational issues among SMBs, we decided to do something sneaky in this survey. After asking several AI-related adoption and sentiment questions, we went back and asked the same exact set of questions but substituted the word “AI” with the word “automation.”
The point of this exercise was to separate the benefits from the buzz. The outcome is essentially the same in each case, but using “automation” instead of “AI” isolates some key framing and reputational issues. It also answers the question posed above: Does AI have brand equity or brand baggage?
Our hypothesis going in to the survey, was that it’s more of the latter when it comes to SMBs. And that hypothesis was mostly validated. For example, when asking adoptive SMBs if they found the technology valuable, the answer was 62 for “AI,” while it shot up to 86 for “automation,” all else being equal.
Other metrics had a similar effect. Time savings was the top-reported benefit for both AI and automation. It was 62 percent for AI, as noted above, but 72 percent for automation. And the trust issue noted above was reported by 47 percent of respondents for “AI,” but only 17 percent for “automation.”
One takeaway is that “automation” has more tenure and street cred. AI is younger and still has a sort of burden of proof to validate itself. That’s further challenged by its (deserved) reputational dings from hallucinations and other issues. This will be a gradual process of redemption and reputation-building.
Interested in learning more about Localogy’s Research Services, please let us know.
We’ll pause there and circle back with more analysis and excerpts from the report. Meanwhile, you can see more in the webinar below, and the full report from Duda…
