Australia’s economic and political environments have endured much transition over the past twelve months. We’ve moved from a mining-led economy to one which is increasingly driven by technology and innovation.
The changes are filtering down to small businesses and a number of trends are emerging which entrepreneurs need to be ready for this year.
1. Marketing intelligence everywhere
We’ve been talking about business data for a while, but there is now so much information available to businesses of all sizes that it’s enabling entrepreneurs to make highly informed and strategic decisions.
One example is the increased use of beacon technology and location services in retail which are being used to track in-store customer movements, push mobile offers and figure out floorplan hotspots. All this buying data can be used to present customers with more targeted offers, improve conversion rates and loyalty programs.
2. Small business outpaces big business on technology adoption
Thanks to the cloud, small businesses are migrating to enterprise grade technologies faster than their corporate counterparts for the first time in history.
We’re now deep in the cloud adoption curve and small business owners are using cloud-based applications to run everything from accounting and storage, to payroll, job management and marketing.
By automating tasks which were once a time drain on business owners, there’s more space to work on growth activities. Small businesses are the engine room of the Australian economy, they generate more than 40% of GDP and are major job creators. By enabling them to grow more sustainably, we should see a nice economic boost.
3. The growth of Australia’s technology industry will become a key policy platform
All things being constant, the next most important trend in 2016 is the structural shift to optimism in Australian politics. Politicians have recognised the need to have a long term plan around driving the small business sector and using the plight of startups, and the tech industry, as an important platform for new policy initiatives which will attract votes.
We’ll see more discussion around coding in schools, R&D tax incentives and talent sourcing, as the government looks to build a sustainable and viable technology industry in Australia.
The Turnbull factor is also driving Australians away from the stigma of failure to a more US-centric paradigm, where business failures are celebrated. His $1 billion innovation package last year shows the government is heading in the right direction, providing support to small businesses and startups through tax deductions and investments.
4. The rise of purposefulness
Consumers are more educated than ever. Their buying decisions are increasingly based on what a business stands for and who its activities align with.
The improving commercial viability of sustainable business practices also means there is an opportunity for small businesses to meet these demands. We’re seeing companies that prioritise staff and community achieve significant goodwill and hence return on their investment.
Staff working for these community-focussed companies are also delivering a more authentic customer experience which is aligned with the business’ purpose. In the market it creates stark contrast to a competing brand that is hollow or unaligned.
Increasingly, the story behind a business, its origins, and its owners becomes as important as the logo, the products, and the customer service. It’s also an opportunity to build a community of consumers around a small business which can significantly amplify its brand.
As a result, the “head in sand” approach towards social media’s impact on a brand will no longer be viable for small businesses in 2016.
5. The cost of capital will reduce for small business
The use of cloud software in the financial web will reduce information asymmetry between small businesses and capital providers.
This will be across all providers of capital: covering debt from financial institutions, to mezzanine debt from alternative debt providers, to unlisted equity.
Cloud software used in small businesses will enable capital providers to have increased visibility on the risk of their investment. Traditionally, the small business owner had more information about their business than their banker or investors and a risk premium was applied in compensation.
New financial products will emerge that match a lower risk premium issued by the capital providers to small business in return for greater access to real time information.
As a result, costs will reduce in similar industries – like insurance – where there is payoff between information, risk and price.
For small businesses, one of the most pertinent reasons for failure is lack of cashflow. By improving access to capital, we should see survival rates improve.
6. Machine learning gives rise to automated personalisation
Advances in machine learning are driving better real time analysis that, in the past, would have been done by people (not in real time).
It means experiences based on behaviour can be automated and personalised. Software is getting smarter and it’s delivering a more accurate experience where the product does more of the heavy lifting.
Businesses that understand how to use data to drive action will come out in front.
7. Security is everyone’s concern
Security breaches are increasing, offenders are getting smarter and companies are investing more in protection to stay ahead.
With more of our lives playing out on the internet, online applications and companies need to be much more proactive. As a result, the security responsibility has risen from the depths of the back office tech team and landed on every single person – whether it be client or company side.
There’s no room for complacency among users and we’ll see companies invest heavily in security protection and education this year.
Trent Innes is the Managing Director at Xero Australia.