Want to gain an advantage over your competition? Data and digital are the key

With larger businesses leading the pack in digital transformation and data-led marketing, giving small business owners the tools to have an outsized impact in their industries has never been more important, writes Darren Smith, chief product and technology officer at MYOB.

In a modern economy, Australian businesses are competing in a big market and they are not only coming up against other small businesses. Increasingly, larger organisations in Australia and abroad are after a stake in the hyper-local customer segment – one traditionally owned by small and medium sized enterprises (SMEs).

Looking at the market size, the Australian Bureau of Statistics reported that as of June 30 2021, there were 2,402,254 actively trading businesses in the economy and more than 100,000 new businesses opened in the SME segment.

The competition, coupled with mounting pressures in the wake of lockdowns and an often non-existent physical retail or service presence, mean the stakes are high for small and medium businesses.

The competitive advantage for big businesses

Competition is undoubtedly healthy for customers, but when it comes to data, larger businesses are ahead of the pack.

A restaurant chain, for example, can use various data sources across hundreds of sites to create and maintain personalised experiences. Experiences that give customers a ‘local’ feel. They can track purchasing behaviour to pivot, change products in line with micro-trends, or forecast geographical implications.

For a small business, being insights-led in these areas could dramatically improve revenue and new customer prospects, tighten cashflow, and more accurately control staff resources – to name a few.

However, the gap in digitalisation poses hurdles for SMEs in obtaining or using data. MYOB calculates 466,062 small and medium sized businesses – approximately 20 per cent of the SME sector – are not engaged with digital tools across any area of their business workflow. In December, MYOB’s Business Monitor revealed 37 per cent of small or medium businesses don’t have an online presence at all.

So, how can small and medium businesses take some initial steps to use data and create a competitive advantage?

1. Utilise mass data sources

It starts with the company you keep. For example, if a small business owner looks to their banking partner – all of which in Australia release ongoing macro trends and predictions impacting various business sectors – they have data informed by a large pool of sources. Value metrics to focus on include consumer spending trends, online shopping trends, what consumers buy in Australia vs overseas, and what consumers are expecting from a shopping experience.

It’s not about reading a 100-page report, rather asking your representatives where and how you can get what you need quickly, and tracking that ongoing. Put a note in your calendar if it’s an annual whitepaper so you can look at the year-on-year comparisons.

It could support a smaller business to go cashless in their business, or make product decisions based on large scale trend forecasting.

2. Look inward for valuable insights

It’s not solely about access to mass data; SMEs can succeed and be competitive by knowing how to use their own. Small business owners have a lot more information to hand than they might realise, however without digital adoption, it’s difficult to make the most of it.

For example, lodging your incomings and outgoings in a digital tool will bring a small business foresight over potential issues with cashflow, where they may need to upscale or downscale staffing, or flexibility to manage vendors with late payments. Another example could be adopting a customer relationship management (CRM) platform to create a central repository where you can track, manage and at its core, make the most of your valuable customer base and relationships.

3. Avoid trying to predict the future … too much

While setting goals and having future aspirations is at the heart of running a business, there are pitfalls in trying to predict what is to come if you don’t also focus on what is right in front of you.

Be aware of who you are and what customer problems you are best positioned to solve right now. It’s impossible to be all things to all customers, so narrow your focus – understand your customer needs (by talking to them directly), understand what you are uniquely good at, and connect the two.

This research doesn’t have to be an expensive process. In fact, small, fast feedback loops – like social polls or customer feedback surveys – are what we should all strive for.

4. Set your sights on the benefits

Data shows us the pandemic has accelerated the move to digital, with 26 per cent of businesses moving more of their business online since the pandemic hit.

Setting aside the time to adopt technologies in your business may seem like a big ask, but once it’s up and running, you’ll see more than just time and accuracy benefits. The rewards will extend to depth of business understanding and control over your business – especially in uncertain times.

Over the past 24 months, the spotlight has been on Australian small and medium businesses. We’ve seen family restaurants pivot to takeaway, hairdressers create DIY packs, and personal trainers monetise via online sessions — among thousands of other stories that showcase the tenacity of those that lead them.

We often speak as though everything will go back to normal as we come out of the pandemic, but the reality is, some business models will change for the long term.

The priority needs to be making sure small business owners and operators have access to the most data and foresight possible, so they can focus on creating success.

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Behavioural data: what it is, why you should be collecting it and how it will help your business