How AI Is Transforming Small Businesses: Tools, Benefits, and Future Impact
The right use of artificial intelligence in small businesses can boost growth and job creation—critical needs in emerging economies. Even relatively basic AI tools can help small businesses improve their decision-making, support workforce development, and enhance customer experience.
But this technology must be applied the right way, and with consideration for accuracy and potential job displacement. Here’s how.
Benefits of AI in Small Businesses
Small and medium-sized enterprises (SMEs) account for over 70% of formal jobs and up to 40% of GDP in emerging markets. Their success is therefore critical for local economic development and job creation. But many entrepreneurs in low- and middle-income countries (LIMCs) lack the business expertise to maximize the potential of their enterprise.
As a nonprofit organization working on business approaches to solving poverty, TechnoServe has helped hundreds of thousands of entrepreneurs around the world to boost their business’s performance, improving profitability and increasing local employment. We see AI technology as useful not only for improving operations within a business, but for refining and expanding business training on a large scale.
AI for Small Businesses
Let’s take operations within a small business. AI can automate repetitive, time-consuming tasks that take up valuable human time and resources, such as data entry, invoicing, or inventory management.
And on a broader level, AI-powered analytics platforms can analyze customer behavior, market trends, and operational data. All of this can provide small business owners with critical insights to improve their business operations.
In particular, AI can support functions that improve customer service and retention–a major priority for small businesses. Chatbots can provide quick, personalized responses to customer inquiries around the clock. AI can optimize ad campaigns, personalize content, and automate tasks like social media management–all helping to make small businesses marketing more targeted and efficient.
At the same time, the benefits of AI remain out of reach for many SMEs in lower- and middle-income countries, largely due to cost and knowledge barriers. That’s where training and support–also potentially enhanced by AI–can be a game-changer.
AI’s Role in Workforce Development and Training
Improving and expanding business training for those who lack access to it is one of the most exciting applications we see for AI in small business.
For instance, we’ve learned through years of work with small business owners that they prefer guidance on the specific challenges of their own enterprise. While our (human) business advisors provide this tailored training, we are now piloting AI programs that enable these advisors to assess client business data more quickly, identify patterns, and hone their business advice accordingly.
To help them do this, we recently developed an AI application called “Tafiti,” to assess the effectiveness of business guidance delivered through WhatsApp. More than half of TechnoServe programs use WhatsApp to communicate with beneficiaries and to deliver program services and training. However, we lacked data-driven insight into the reach and effectiveness of this programming.
The Tafiti analytics tool allows program managers to improve the process of monitoring of engagements in WhatsApp groups and to evaluate results from learning assessments. We are piloting this application in programs in Mozambique and Mexico, and considering the use of ChatGPT API to do sentiment analysis for group text sessions.
We are also exploring the potential of trained GPTs for curriculum development, tailoring them by training them on our most effective adult learning techniques and the unique context of a specific target audience. Early results are promising, showing significant time savings in content creation and noticeable improvements in the quality and relevance of the training materials.
Longer-term, TechnoServe envisions AI-powered “virtual business advisors” that can provide SMEs with real-time expertise. However, these models would only complement the critical role of human advisors in building trust and understanding nuanced local contexts. This human expertise–boosted, not replaced by AI–can then be scaled and customized at a lower cost for many more people around the world.
AI and Job Displacement
The impact of AI on job displacement is difficult to foresee. At the moment, AI seems to pose the most immediate threat to knowledge-intensive industries and higher-wage occupations, more prevalent in advanced economies.
Most of the businesses we work with are in services, manufacturing, and retail. While these sectors could still be subject to workforce disruption from AI, we currently see potential for the opposite: if AI can help a small business grow, it can hire more workers and boost local employment.
For most small businesses in emerging markets, the more immediate obstacle is being inadequately prepared to take advantage of AI technology. These enterprises do not have the same access to critical skills, funding, and enabling infrastructure that small businesses do in more developed countries.
While the AI revolution will usher in winners and losers across sectors, SMEs in the developing world face a productivity gap that will only expand over time. They urgently need the right support and capacity in order to compete in this new business landscape.
Addressing Concerns and Challenges
Of course, AI is not a magic fix. We must be careful not to over-rely on the technology, especially in its nascent stage. At TechnoServe, as we test promising AI applications, we are prioritizing accuracy and privacy.
For instance–we are very cautious about using AI to advise small business owners directly. Our clients have plenty of challenges; they don’t also need bad (yet convincing) information from AI leading them to poor business decisions. So we work to understand the limitations of AI tools, then carefully test them with our business advisor staff before rolling them out further. Exposing entrepreneurs to direct AI interaction would be the last step, and will require continuous human monitoring.
To lessen the risk of inaccurate AI guidance, we’re now developing our own GPTs, based on specific documents and content that we provide. While we still need to exercise caution, training and developing a proprietary GPT can provide more tailored and accurate insights.
For our staff, we advise them to use AI carefully to improve their business guidance, prioritizing their own common sense and experience.
Data privacy is another concern. In order to provide tailored business advice, we often need access to a business’s financial and/or proprietary information. We are therefore careful to establish “walled gardens” of closed digital ecosystems that prevent outsiders from accessing this data. This is essential before deploying AI in any way, when proprietary data is involved.
Realizing the Vision
Unlocking the full potential of AI for SME development in emerging markets will require concerted efforts on multiple fronts. Policymakers must invest in digital infrastructure, promote technology adoption, and create enabling regulatory environments. Development organizations should continue experimenting with AI-powered solutions, while rigorously evaluating their impact and evolving their approaches.
Perhaps most importantly, strengthening the human capital and entrepreneurial ecosystems in emerging markets will be crucial. SME owners and workers must have access to the right skills, knowledge, and resources in order to harness AI for business growth.
Using AI in smart, careful ways, we can boost the growth of SMEs and create a virtuous cycle of job creation, income generation, and inclusive economic development. In this way, a digital tool will have a very human impact, empowering communities and transforming lives across the developing world.
FAQs
What’s on your mind?
How can AI be used in small business?
AI can enhance various aspects of small business operations, from automating repetitive tasks to improving customer service through chatbots. AI tools can also analyze data to provide valuable insights for decision-making, optimize inventory management, and personalize marketing efforts to improve customer engagement.
In addition, AI can complement human training of small business owners. It can help business advisors analyze client data and scale up digital training, expanding access to business expertise for entrepreneurs around the world at a reduced cost.
How can Generative AI help small businesses?
Generative AI, such as ChatGPT, can help small businesses by automating content creation, generating ideas for marketing, and assisting with customer interactions. For instance, businesses can use generative AI to create social media posts, draft responses to customer inquiries, or even provide product recommendations based on customer preferences.
How is AI being used in business?
AI is widely used in businesses to increase efficiency and productivity. Common applications include data analysis, predictive analytics, customer service automation, sales forecasting, and supply chain optimization. AI also supports workforce development by providing training resources and automating routine tasks, allowing employees to focus on more complex responsibilities.
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