When it comes to meaningful use of Internet applications that drive business growth, many small-medium enterprises (SMEs) are falling behind. They are challenged to do what they should and could be doing online to grow their business. There are a number of reasons for this including a lack of time, skills, knowledge and resources to effectively to determine what, why, and how they should do more online.
This is critical as effective business use of the Internet and its applications promotes local competitiveness and growth, especially with small-medium enterprises. Community leaders with an interest in truly harnessing the power of broadband and its applications to foster innovation and growth need to help businesses overcome these barriers to better leverage broadband’s potential.
SNG’s extensive research across North America reveals that higher business utilization of the Internet has a direct and positive impact on business financials – revenues, cost savings, and earnings. In short, driving broadband utilization has a positive impact on local economies, creating more (and better) jobs, opening opportunities for innovation, and aiding in business attraction and retention.
This does not mean that the majority of SMEs do not understand the correspondence to utilization and growth. In fact, the smaller the business is. SNG research shows these businesses unclear on benefits while having barriers to adoption that are by no means insurmountable. Reasons for NOT moving forward include:
- Time and effort required to develop expertise
- Lack of internal resource with necessary skills
- Too much information – not enough time to research
- Lack of local external support resources
- Affordability of local external support resources
- Higher priorities to focus on
Lack of adequate speed further hinders full utilization, but bigger barriers exist. Many SMEs lack understanding on HOW to overcome barriers including privacy, security, and cost.
Economic development professionals have a compelling opportunity to confront this situation with activities to help businesses learn, fill the knowledge gap, and better understand just how much is to gain from a relatively low investment of time. Whether you deploy SNG’s solution, the Small Business Growth Program, or develop your own, make sure your efforts include the following steps:
- Create awareness of the opportunities and their potential importance to each business.
- Provide easy to access and easily digestible information to enlighten businesses on what is possible and reduce the fear of the unknown.
- Facilitate access to experts and others who can coach businesses through a process that provides a clear path to realizing these opportunities.
Communities across the nation are investing millions of dollars to upgrade their broadband but if they neglect to ensure that local businesses understand and have what it takes to use the transformative power of broadband, their returns on their investment will fall short. Deliberate targeted effort to driving full use of the power of broadband will fulfill the potential and maximize economic benefits.
Thoughts from Harvard’s Strategic Innovation Summit
Last month I presented at the Strategic Innovation Summit: Enabling Economies for the Future held at Harvard University. The summit proved to be extremely worthwhile as discussions with my fellow presenters and attendees left me with a new and deeper perspective on innovation and how we should nurture it.
My main takeaway was this: innovation is a process. It requires scaling and ‘democratizing’ new technologies and new ways of doing business. To accomplish this community leaders need to continuously communicate and share a vision for effective use of technology with their citizens and businesses. The process of driving adoption and effective use of broadband in a community or region is the process of innovation.
More and more communities recognize broadband as a platform for innovation. They realize how important broadband is for economic development, but they are taking a ‘build it and they will come’ approach. This has proven to be a difficult and ineffective not only as a model for sustainable networks, but more importantly in realizing the economic and social benefits from citizens and businesses effectively using broadband networks.
SNG has witnessed firsthand the challenges of fostering innovation through our work with a dozen American states. A large problem rests with how broadband is presented and that ‘speed’ is assumed to be the magic ingredient that creates innovation. SNG has found that the process of engaging people in any community or region is actually the biggest challenge because the majority of people (approximately 80%) need to understand the benefits of technology and how it can help them before they adopt – they are technology pragmatists. Getting these pragmatists to change their behaviors will require more than promoting a feature like gigabit speed and waiting for growth to happen. These pragmatists need to understand the anticipated benefits and the actual return from their technology investments (in time and money).
Communities need to develop and implement processes to move businesses to an understanding and comfort level where they are ready, able, and excited to take action. And what is “action?” Incorporating broadband and its accompanying Internet applications have the power to transform and grow businesses.
Broadband can be your community’s platform for innovation, but availability is merely the first step. Your community must find a way to foster innovation through effective broadband utilization. This requires dedicated and ongoing communication of challenges, potential solutions, and vision about how broadband will transform their lives. This is innovation. Local resources must support and continuously communicate the benefits of broadband initiatives across stakeholder groups to foster innovation.
To borrow from a fellow presenter at the summit, “technology does not cause change – it enables, facilitates, and accelerates changes we already aspire to.” Communities that communicate their vision and mobilize stakeholders will create opportunities and success. This includes keeping and growing existing businesses, as well as attracting new businesses.
SNG has a program that helps numerous communities foster innovation among small businesses, where innovation lives in growing regions. Almost 90% of businesses in the US have less than 20 employees and do not have the technology staff or advisors to guide them through this process. Find a way to help these businesses innovate and your community will reap the rewards.
Download white paper from event, “Enabling Economies for the Future” >>
Partnership with Strategic Networks Group helps businesses leverage broadband for business growth
Today, the City of Kansas City, Missouri announced an exciting partnership with Strategic Networks Group (SNG) to provide local business owners with the tools they need to leverage online resources for business growth resources and guidance. The partnership will grant business owners with access to SNG’s Small Business Growth Program, which is designed to educate small business owners on how to use the Internet and how to best direct limited online resources for maximum effectiveness.
“Thanks to Google, we have the infrastructure in place,” said Mayor Sly James, Kansas City. “It’s time to show our businesses how to capitalize on it and all the Internet has to offer in terms of growth opportunities.”
As part of the program, small business owners will complete a self-assessment which will provide SNG with important data about the company’s internet usage and business goals. Using this information, SNG will provide the business owner with a customize roadmap to help guide the small business to better utilize the Internet to drive revenues and reduce costs.
“We see this program as being incredibly beneficial for our local businesses,” explains Scott Taylor, City Councilman for Kansas City’s 6th District at Large. “We have been incredibly fortunate to see significant investment in our City’s broadband infrastructure recently. Now is the time to help businesses capitalize. With this program we are able to show businesses just how to do so by revealing what their direct peers and competitors are doing online.”
SNG has surveyed tens of thousands of businesses across the nation regarding their Internet use and accompanying financial benefits. Using this data, SNG is able to compare how a business in Kansas City is leveraging the benefits of broadband connection in comparison to their peers and competitors. For example, a participating manufacturer with 10 employees will receive a customized report that shows the top three Internet applications (in terms of revenue and cost benefits) that they should be undertaking – along with the average financial impact their peers are realizing.
“We’ve found that small businesses across North America are notoriously slow to adopt Internet applications,” explains Doug Adams, VP of Communications for SNG. “Research in more than a dozen states shows us time and again that small businesses either don’t understand how Internet applications are relevant to their business or lack the will to take the time to deploy them. The smaller the business, the more significant this is, which is especially disconcerting considering a vast majority of businesses are small.”
Digital Economy Industry Insights Barometer Gives Businesses Better Understanding of Online Activities that Impact Their Bottom Line
Strategic Networks Group rolled out a new tool for small businesses to assess their digital effectiveness at America’s SBDC 35th Anniversary Annual Conference in San Francisco, earlier this month. The Digital Economy Industry Insights Barometer will be available on America’s SBDC ( www.americassbdc.org) and at sngroup.com/barometer.
Starting today, SBDC’s business clients can take a two-minute survey to uncover how the most common Internet applications and platforms financially impact their bottom line. The potential revenues and cost savings are based on SNG’s proprietary database of impacts reported by nearly 40,000 businesses from across the United States. Results are reported based on company size and industry to ensure relevance and businesses are provided a basic utilization score to help then gauge where they stand against their industry average.
“Intuitively, building out broadband networks across America will afford small businesses an advantage in growing and sustaining their businesses. However, providing SBDC small business clients with actual ROI numbers for Internet applications empowers them to make decisions regarding the online business activities that will impact their businesses the most,” explained Donna Ettenson, VP of Operations at America’s SBDC
“We’re looking to help businesses understand the financial impacts they can realize online no matter their size or industry,” said Michael Curri, president and founder of SNG. “America’s SBDC’s stand at the intersection of Internet and small businesses and have a unique opportunity to help drive real economic impact through these yet-to-be-adopted applications.”
About Strategic Networks Group (SNG)
Focused on economic advancement through broadband utilization, SNG is a group of broadband economists who develop strategies for most effectively leveraging broadband investments. SNG addresses broadband utilization from the individual organization level all the way up to working with more than ten American states. SNG looks to help make the most broad-reaching and transformational impacts that broadband can bring to enable businesses, communities and regions by delivering the data and analysis decision makers need to maximize broadband’s potential. Learn more about SNG online at www.sngroup.com
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.