Dangerous digital divide looming for small businesses

Small businesses have been critical in powering America through the greatest transformation of our economy since the Industrial Revolution. Nearly two-thirds of the jobs created during our recovery have been generated by startups and small enterprises. But as we begin the new year, those businesses are increasingly in danger of falling on the wrong side of an emerging digital divide.

Large corporations are investing heavily in data and analytics, far outpacing the investment capabilities of smaller firms. According to a recent GE Accenture report, 84 percent of executives in large companies worldwide indicated that big data analytics could shift the competitive landscape for their industry in the next 12 months. And 80-90 percent report that big data analytics is either the top priority of the company or in the top three. If the public and private sectors don’t come together to fix this imbalance, many small companies will be pushed out of the market to the detriment of the American economy. In 2016, we need a national public-private effort to solve this growing problem and ensure small businesses have the access to the modern data tools they need to thrive in the new economy.

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Data has enormous power to transform a business, identifying efficiencies across an operation and spurring innovation. With advanced analytics, companies can forecast demand, optimize supply chains, identify emerging markets, and increase exports to the world’s growing middle class.

According to a recent survey by the Boston Consulting Group, strong innovation companies are three times more likely to rely on data and analytics than their peers, and two-thirds of breakthrough innovators say they frequently generate new product ideas through information gleaned from social media and big data.

Large enterprises in every sector are using data and analytics to give themselves a significant advantage against the competition. Target, for instance, uses census data to adjust its product lines to more closely align with regional preferences. Tesco, the European supermarket chain, uses weather data to adjust its inventory. Walmart's CEO Bill Simon has said its ability to pull data from multiple sources including Sam’s Club, Walmart stores, and Walmart.com, along with data from suppliers, makes its ability to synthesize data unmatched.

In order to grow small businesses, secure the jobs they create, and enable them to expand their operations, we need to break down the barriers that are preventing them from accessing big data. Two key challenges are cost and access to skilled talent. Small companies simply can’t afford the infrastructure or find the talent needed, as can their enterprise counterparts. In addition to finances and human capital, small firms can perceive the whole concept of data as daunting.

While these are serious obstacles, they are not impossible to overcome. Indeed, if small businesses form new partnerships—with other small businesses, big data companies, and government agencies—they will be able to access the data and analytics tools that have so far been out of reach, and do so in a responsible manner.

There is a roadmap for this kind of collaboration. In the early 2000s, G-8 leaders worked with businesses and non-profits to start the Digital Opportunity Task Force, on which I represented the United States.  It aimed to bring the Internet and digital connectivity to developing countries by demonstrating the opportunity for private and government investment. The task force proved remarkably successful in both spreading access to technology and contributing to economic growth.

Today, we need a similar collaboration—call it the American Enterprise Digital Opportunity Task Force—that is a concerted effort among business, government, and NGOs to make data tools more available to small businesses through training, digital resource-sharing, development of analytics platforms, and low cost loans. Driven by vocal leaders and a large public awareness campaign, it should provide concrete actions that benefit small and new businesses.

In order to best utilize the full power of data and analytics, small businesses need to join forces with each other. One of the key factors keeping small businesses from effectively leveraging data is scale. It takes terabytes of information, not to mention teams of analysts, to effectively mine data for insights—most of which is cost prohibitive to small firms. That’s why we need to develop platforms that allow small businesses to pool data and share analytical resources. Small businesses alone can’t match the data power of big corporations—but together, they can.

And tech companies should recognize that providing data services to small businesses is a huge market opportunity. Some analytics companies are offering a new wave of affordable, yet powerful, cloud-based tools to help capture, analyze and manage data. Take Fleetmatics, a business that provides small and medium-sized companies with data-collection for every vehicle in the company’s fleet to track miles driven, location, speed and fueling. Solutions like this could prove invaluable to scores of small businesses, and can become profitable businesses themselves.

Finally, governmental agencies can continue to further expand data and analytic capacity to small businesses by opening up even more data. The recent launch of the Commerce Data Service, a public startup tasked with enhancing the contribution of data to the American economy, is a perfect example. The Federal government has a treasure trove of data—energy, geospatial, and manufacturing for example—that could prove invaluable to small businesses. For instance, The Climate Corporation, a precision agriculture company, uses open government weather data to provide insights and recommendations that help farmers maximize crop yield.

The digital divide caused by access to big data is one of the most important economic issues of our time, and it is one we must begin to seriously address in the new year. Data and analytics are as necessary to the success of a business as are a telephone and Internet connection. If we want to create more good jobs—and secure economic opportunity for all Americans—then we have to bring big data to small businesses. If we don’t, this digital divide may grow too big to cross.

Baird is CEO and president of the Markle Foundation., leader of Rework America, and co- author of the group’s collective book, America’s Moment: Creating Opportunity in the Connected Age.

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