The Demand Side of Broadband and the Jobs it Creates
While the world seems to be obsessed with the “supply side” of broadband, SNG is focused on the less considered and studied “demand” side and Internet utilization. Sometimes it seems we are a foreigner in the land of gigafyers.
It is not that we don’t support or recognize the critical need for speed, reliability, and availability – quite the contrary, it is critical infrastructure. But our research shows that no matter what the speed availability is, small businesses (according to the 2010 US census, 92% of American businesses) are falling behind.
So what do we mean by falling behind? We’re not talking Netscape browsers and AOL email addresses, as much as an inability to keep up with online business practices. Larger businesses are utilizing the Internet faster and more effectively than their smaller counterparts. There are a variety of reasons for this, including a gap in understanding the benefits of and what is required to implement Internet applications. This is occurring at both the micro (business) and macro (regional) level.
What’s needed is for businesses to see the value in adopting new Internet practices. They don’t know what they don’t know – missing growth opportunities for their business and slowing job creation in your region. Furthermore, when they do understand the benefits of Internet applications, they are often stretched too thin to choose and implement the right solution(s) for their operation.
If you are interested in economic development in your area, you’re missing out on job creation if you aren’t doing more to bridge the digital divide that exists in small businesses today.
Looking at SNG’s job creation statistics across nine states reveals that Internet utilization has been a huge driver in job creation in organizations across the board since 2010. Between 2010-12, the percentage of jobs created within small businesses was highest (33%) for businesses with less than 20 employees.
Since then, job growth within those small businesses has slowed. Meanwhile larger organizations have been faster at implementing Internet applications and are seeing a significant bump in Internet-enabled jobs. For businesses with 100 plus employees, that jump has been 18% during the past two years. In fact, the smaller the business, the slower the growth of jobs and every other business size classification is seeing slower job growth. For businesses with less than twenty employees, who were the biggest creators of jobs in 2010-12 there has only been a five percent rise between 2013-15.
If your organization is dedicated to proactive economic development by helping businesses grow – helping them better capitalize on the Internet should be a key component in your efforts. Be it through group training or a more one-on-one vehicle like SNG’s Small Business Growth Program that shows the financial impacts of broadband utilization – you need to ‘lead your businesses to water’ and show them not only new speeds of broadband, but what they should be doing to be competitive and what the ROI is from increasing their utilization of Internet applications.
Within the past 6 months SNG has conducted research across both the states of Kansas and Arkansas. Each State had a distinct interest in how their small and medium businesses were utilizing the Internet. Why? As we have previously reported, SNG has found a consistent and disturbing trend – the smaller the business, the less they are capitalizing on the benefits and promise of the Internet and its applications, or as we refer to them, esolutions.
With fewer resources, smaller businesses are less likely to truly comprehend how the Internet can benefit their business, whether they are a small retailer or manufacturer. Our research also reveals that the cost to implement an esolution (e.g. a website) can be prohibitive to deployment or utilization. What our Small Business Growth Program is doing is revealing to business owners the cost as well as anticipated revenues… and thus the ROI for each investment.
Small businesses have limited time and resources to understand whether they should be online and what that could mean for their business. These same businesses also may not have the background or knowledge to understand how numerous Internet applications can help them compete and what the ROI accompanying each application may be.
It’s illuminating to see just how limited Internet utilization is when examining the 2,200 businesses surveyed that have less than 50 employees in Kansas and Arkansas. These states are only selected to illustrate this because they are our most recent statewide studies.
Top Business Goals from Using the Internet
Increasing sales, reaching markets, and expanding reach are all goals you would expect that a business of any size would cite as reasons for being online.
It’s the bottom three that is alarming both in the research as well as on-the-ground interactions the SNG team has had with small businesses. It takes “out of the box” thinking for businesses to develop strategies to increase foot traffic, roll out new offerings, and leverage non-local resources. But the most successful small businesses we’ve come across are doing just that.
So what are small businesses doing online? If we look at the actual utilization, we see significant under-utilization, as every tactic we asked about came in less than 50%.
This is more disappointing than surprising. And it is revealing – small businesses don’t have the resources or business case to overcome a lack of resources.
With the proper motivation, online resources, and coaching, small businesses can close their own digital divide to compete and thrive.
Even if coaching and training is available, business owners and managers need to be motivated to take the necessary steps to “get online.” That is why we designed the Small Business Growth Program – to show businesses exactly how much they have to gain from various esolutions, including online marketing tactics. More significantly, the program provides anticipated ROI based on results their peers (by industry and company size) across the nation have reported to SNG.
Connect Arkansas Looks to Drive Economic Impact, Small Business Growth
Connect Arkansas is a private nonprofit dedicated to increasing high-speed Internet implementation and utilization throughout Arkansas. As a project of the Arkansas Capital Corporation Group, Connect Arkansas is now taking significant steps in partnership with SNG to drive broadband utilization amongst its businesses.
As actual Internet utilization (beyond infrastructure and adoption) is critical for business growth and prosperity, Connect Arkansas commissioned SNG to conduct a statewide eSolutions Benchmarking Study amongst small-to-medium sized businesses.
This study will help Connect Arkansas better understand the gaps and barriers to utilization as well as the current financial impacts of broadband and its applications, including:
- In Arkansas, total job impact from broadband represents 29.4% of all new jobs.
- Current level of Internet application utilization accounts for 24.7% of overall revenues and cost savings averaging 6.6%.
An overview of SNG’s Arkansas findings as well as the potential financial impacts, quantified!
Also fascinating and consistent with SNG’s findings across the United States, there is a digital divide in utilization amongst smaller and rural businesses. The smaller a business, the lower the Internet application utilization. The same goes for the more rural an organization is (see accompanying article). This is especially troublesome given the fact that more than 90% of Arkansas’ (and America’s) are small businesses.
Arkansas businesses realize there is more they can and should be doing online. Nearly half (46.4%) say that they are not taking full/better advantage of broadband and its solutions because of a lack of in-house knowledge. Nearly a third (31.4%) are not utilizing the Internet because they don’t fully understand the benefits.
So how do we help small businesses better utilize broadband and its applications to increase revenues, jobs, and the tax base?
Connect Arkansas is currently running a pilot of its Small Business Growth Program with 100 Arkansas businesses which includes coaching, online tools, and most importantly a utilization scorecard. This scorecard compares the current level of Internet use to other organizations of similar size in the same industry. It identifies the top three Internet tools and strategies to drive new revenues and/or cost savings for this particular business.
The recommendations provided to the 100 small businesses in Arkansas averaged a financial impact (revenues and cost savings) of $225,000 per company. If all of these 100 businesses undertake these recommendations, the overall impacts would be $22.5 million aggregate positive financial impacts to the businesses. This also equates to a potential job growth of 100 direct and 250 total jobs.
Moving forward Arkansas will have the ability to drive their economy through the better utilization of broadband among all businesses who participated in the benchmarking study, carrying with it a potential of $202 million in financial impacts across the State, 900 direct and 2,250 total jobs amongst approximately 1,000 small businesses.
Infrastructure is critical and gigafying… everything… is certainly the sizzle. Utilization is the steak and we’d love to help you “feed” your small businesses the sme way we’re helping Arkansas and others across the globe.
You can find SNG’s Arkansas findings here >>
There is a high degree of awareness of how differences in Internet connectivity contribute to the “digital divide” experienced by many, if not most, rural areas. Less is understood about a very real divide that exists from (a lack of) utilization. That’s right, just as important as “speed” is how much businesses and non-commercial organizations utilize the Internet.
Using the data SNG has collected in numerous states between 2012 and February 2015, we can actually quantify this digital divide. Just as significantly, we can identify the types of organizations (industry, size, rural/urban, etc.) that are experiencing the greatest gap in utilization. To quantify utilization, SNG has developed a means to measure utilization we call the Digital Economy index (DEi) that is a reflection of how many Internet processes or applications an organization uses. We measure use of 17 applications on a ten-point scale (ten being best) to develop the DEi (e.g. an organization using 8 of 17 applications would have a DEi score of 4.7).
Collecting data in numerous states, each with rural and urban components, SNG has uncovered the digital divide that exists based largely on the size of the community businesses are located. The table on the right shows that the more urban a community, the higher the DEi score. Regardless of speed available, rural communities are utilizing the Internet and its applications at a lower rate largely because in rural areas there is less knowledge transfer amongst peers and less of a market for specialized technical services.
Beyond the notable gap in Internet utilization between rural and urban areas, SNG’s research also reveals sectors and types of organizations that suffer most from this digital divide. This is consistent with our findings that rural communities have far less local resources to support businesses looking to better utilize broadband applications.
For small towns & isolated small towns (in essence, the census terms for “rural”), local governments have the largest utilization gap compared to their metropolitan peers: with a DEi of 5.24 compared to 7.17. Libraries also show a notable utilization gaps: metro = 7.23; rural = 6.12). In contrast, K-12 schools of comparable size have very similar DEi scores regardless of how urban or rural they are.
When examining industry type, it is illuminating to see just how much variance there can be depending on industry. Ironically, one of the biggest utilization gaps is in what might be considered the most advanced sector (Professional and Technical Services) which is large, growing, and well paying but slow to adopt key Internet applications.
Larger businesses in rural areas (100 or more employees) still experience a utilization gap to their urban counterparts. Rural businesses with less than 100 employees experience a much larger utilization gap.
So while fiber, net neutrality, and FCC decisions dominate the news, the success of broadband in driving impacts is dependent on utilization.
This means that providing our rural businesses with the knowledge and support to leverage the Internet is key to maintaining competitiveness. Furthermore, in today’s landscape it is easier to live rural and work globally, as long as rural businesses have access to networks and support systems that help them thrive in the digital economy. Developing local networks and supports is a direct and significant opportunity (as well as challenge) for local business retention and growth. There are ways to achieve this, including SNG’s Small Business Growth Program. We’d love to share with you how this program can drive economic growth in your region.
In a story about Maine’s lagging economy and Internet speeds – Bloomberg TV cited SNG’s research that a third of jobs are Internet created. It stands to reason that the two are interrelated.
Michael Curri chats with Chris Mitchell to discuss measuring broadband’s impacts and how to drive meaningful utilization.
Click below to download the presentation Michael Curri gave on April 7 in Austin as part of the 2014 Broadband Communities Summit. That workshop focuses on Maximizing the payoff from a broadband investment.
Download the presentation
The Nebraska Broadband Initiative recently released the results of the study consulted by SNG among the State’s small businesses. The Lt. Governor’s office issued a press release and the complete report is available at on the Nebraska Broadband Initiative’s website at broadband.nebraska.gov/.
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Click to read on Blandin’s website.
If you were asked to give $1 and, in return, you would receive $10, would you do it? Before you opened up your pocketbook, you’d probably gauge whether or not you trusted the possibility of return on your investment. Is the risk worth the reward?
Much the same, broadband investments were akin to a game of chance. Rural communities were hopeful that their original investment would spur a healthy return. However, new research from the Strategic Networks Group (SNG) now gives communities a factual basis for planning. Yesterday at the Border to Border Broadband Conference, Michael Curri of SNG unveiled a report that applied their scenario-based approach to modeling the direct impacts of increased broadband utilization to two rural Minnesota counties, Lac qui Parle and Kanabec.
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It’’s become an article of faith that a rural community needs high-speed access to the Internet if businesses are going to thrive. But just how much difference does access to and use of broadband make?
There were two answers Wednesday at the Blandin Foundation’s Border to Border Broadband conference in St. Paul. One involved numbers and modeling and predictions. The other had more to do with bratwurst.
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