As small business use of AI increases, entrepreneurial support efforts must as well

By automating routine tasks, improving data analysis, and enhancing marketing efforts, AI can revolutionize how small firms conduct business—and that should impact the type of assistance technology-based economic developers offer their innovation-driven entrepreneurs. Understanding how small business owners perceive and utilize AI is crucial for developing strategies that support their growth and competitiveness. 

One possible tool for aiding a reassessment of entrepreneurial support services might be a recent report by the Initiative for a Competitive Inner City (ICIC), AI in Business: How Small Business Owners Are Learning, Using, and Navigating Challenges with AI Tools. It delves into how small business owners are learning, using, and navigating the challenges associated with AI tools. 

Over the past two years, AI tools have become more accessible, allowing small businesses to streamline operations and boost productivity. However, adopting AI is not without risks, particularly seen in concerns about information privacy. 

The ICIC report reveals that AI use is widespread among small businesses, with about 89% of business owners indicating that someone at their business currently uses AI tools. Sixty percent of small business owners who have adopted AI report positive effects, including increased employee job satisfaction and productivity. These firms primarily use AI to automate routine tasks such as data analysis, creating marketing materials, drafting emails, and summarizing web content. While more complex uses of AI are currently less common, business owners report considering using AI for strategic planning, product design, and editing in the future. 

Several barriers prevent small businesses from fully embracing AI technologies.  The report highlights that most business owners report a medium or high level of comfort using AI, but significant differences exist based on gender, race, and age. Older business owners, women, and minority business owners generally report lower comfort levels with AI than their counterparts. And among small business owners whose businesses do not use AI, nearly three-quarters cite a lack of knowledge about new digital tools as a major barrier. Other reasons include the belief that AI presents a data security risk for their businesses. 

The AI topics that business owners most want to learn about include how AI can help their businesses grow, data privacy and security, and how to get the best results from AI tools. In addition to trial and error, they try to learn more about AI through podcasts, videos, online forums, social media, online courses, and webinars. Interestingly, in-person courses, industry conferences, and professional networks are less commonly used, perhaps due to the substantial planning required. 

The authors of the study suggest several recommendations to support small businesses in adopting AI responsibly and effectively:

• Offer flexible AI-related educational programs designed to fit the schedules of entrepreneurs and be accessible on demand and in multiple formats, including online, in-person, step-by-step guides, on-site training, podcasts, videos, and peer learning groups. Programs should also be tailored to address differences in AI comfort levels based on race, gender, and age.
• Small business owners should involve employees in decisions about AI use.  Collaborative approaches can improve the efficacy and efficiency of AI tools and enhance productivity.
• Small business assistance providers should be candid about AI tools: the privacy, intellectual property, and social bias-related risks. They should educate business owners on how to avoid or minimize these risks and improve trust in AI. 

By documenting the perspectives of small business owners on AI adoption, the report provides insights that can help economic development professionals and policymakers develop strategies to support small businesses in leveraging AI effectively.

This article was prepared by SSTI using Federal funds under award ED22HDQ3070129 from the Economic Development Administration, U.S. Department of Commerce. The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the Economic Development Administration or the U.S. Department of Commerce.