Small business owner celebrating a win over a larger competitor

I recently read an excellent article on the advantages of small businesses over big businesses, notably customer service, communications, speed, and flexibility. To understand why small businesses are stronger in these areas, let’s look at the disadvantages and weaknesses of being a larger company.

The weaknesses of a large company.

Big businesses tend to be extraordinarily bad at customer service.

They spend a lot of time training customer service staff on rules and regulations, product features, what to say when a customer complains, etc. But they give them very little authority to actually solve customer problems.

Large companies are slow to act and communicate ineffectively.

Internal and external communications are intrinsically difficult at large organizations mainly because there are so many people to communicate with. Speed is almost always a problem — partly because of multiple management layers, inefficient processes, or even geography (our plant is in China, but this customer is in Peoria). Flexibility is even more difficult, due to the huge scale and resulting inertia (it takes a lot more time to revamp a 500,000 square foot distribution facility than it does to ask Bob to pick up some more ABC widgets and send them to Sally).

Why do small businesses ignore their strengths?

Small businesses, which clearly face many disadvantages compared to larger businesses, have some excellent competitive advantages at their disposal. But far too few small businesses actually use them effectively. Why is that?

Maybe the best way to describe it is “corporate envy”.

Far too many small business owners want to be just like the big guys. Instead of playing to their real strengths, they play to the strengths of others. For example, many small businesses rely too heavily on technology to solve their problems. Instead of investing in their people, they invest in technology. They treat employees like liabilities instead of assets. People are expensive. They can cause problems. They ask too many questions. They get sick. They want benefits. They want time off. But they are also the lifeblood of every business.

They take the wrong approach to customer service.

Want to provide better customer service? Then automate self-service, set up online chat, add more explanatory videos, and cut back on your customer service people. Let the technology handle most of the work. Besides, you can sell technology, but it’s hard to sell people.

They fail at communicating effectively.

Want better communications? Just add more technology. Add more social media channels. Add more monitors and displays in the workplace. Set up automated text alert systems. But don’t hire good communicators, because they are expensive.

This often backfires, and the consequences can be painful. Instead of attracting bright, innovative people who love coming to work, over-reliance on technology and automation can lead to apathy and disinterest. The best people leave and the robots stay. That leads to poor customer feedback, which leads to lower revenue, which leads to more apathy.

While a well designed software system can potentially cut processing, distribution, or reporting times down by an order of magnitude, only a fool would rely on software to make strategic business decisions without any human involvement. The same goes for customer service, technical support, and most other important business functions. Furthermore, while good software can improve performance, it can also become a crutch. Software, dashboards, reporting systems, analytics, and big data are all the rage. They can be very powerful when used correctly, but they can be constraining when they are misused. In the end, no matter how good your technology is, you still need good people.

Small businesses have the potential to be much closer to their customers than larger businesses. They can beat the big guys at communications; they can be more transparent, they can work faster, and they can adapt more readily to market changes. But to do so you need to know who’s in charge.

Is your technology working for you, or are you working for your technology?