Small business owners are agile, forward thinking and technology savvy. That’s what enables them to disrupt markets and run rings round their larger competitors. They seize the day.
That’s the theory – and it’s one that can be applied, without too much fear of contradiction, to successful, VC-backed tech startups who have disruption coded into their DNA. But does it also apply to all those small and medium sized businesses who are simply getting by month-by-month and trying to turn in a profit?
Well, accounting software company Xero has just published the results of a survey looking at SMB attitudes to the adoption of new technologies and – more particularly – exploring why owners and founders are often resistant to using solutions that could improve or enhance their performance.
Now it has to be said as a technology provider. Xero doubtless has more than a passing interest in selling technology solutions to their target customers. In that respect , the findings have to be viewed through a filter marked “skin in the game.”
But the report is made more interesting by the fact that it has been produced in collaboration with behavioural science consultancy Decision Design with the aim of exploring some of the underlying reasons why small business owners make particular decisions.
Sonya Dineva, a lecturer in business psychology at the University of East London was one of the behavioural experts who reviewed the findings of the study. As she sees it, the pandemic has undoubtedly emerged as a factor. “In times of stress requiring rapid adaptation, we have to choose between fight, flight or freeze responses,” she says. “In many cases, such as the current pandemic, fear and inertia can hamper our ability to ‘fight.”
So in essence, after a year and a half of lock-downs and restrictions, business owners are focusing on survival rather than looking ahead and/or investing in their future.
You could argue that’s a very logical response to the last eighteen months. If your main concern is keeping customers on board, you might not consider replacing your accountancy software or experimenting with a new cloud-based CRM system, at least for the moment.
And in fairness to the small business community six out ten respondents were enthusiastic about the potential of new tech.
No real problem then? Well, according to Sonya Dineva, even tech enthusiasts can be held back by deep-seated psychological barriers.
One of these is a fear of change. “Change is the only constant in life , but when we experience change, we feel we lose control and we feel threatened,” she says.
So what does that mean for small business owners? Dineva makes a distinction between sole traders – self-employed people working on their own – and those who manage larger businesses.
In the case of sole traders, decision making can be a particularly lonely process. Often there’s no one to talk over decisions with and that means relying entirely on one person’s perceptions, prejudices and past experience.
“There are mind traps you can fall into,” says Dineva. “You can begin to make cognitive errors.”
The traps include all-or-nothing thinking – the feeling that any decision has to be all good or else it is all bad – and catastrophizing. Cognitive bias – seeing what you want to see in a situation – is also common.
Those who work in larger businesses structures – companies with boards and management teams – should, in theory, be better equipped to address change as there will be different viewpoints and opinions feeding into the mix. For instance, the pros and cons of investing in new technology is likely to be discussed in-depth at board meetings. This should lead to better decision making.
But then again, perhaps not. “People can point in different directions,” says Dineva. “But what you also get is groupthink. People get used to the status quo and that leads to group thinking. “
Arguably a lot depends on company culture. Founders tend to set the agenda for the businesses they create. Until governance becomes more of an issue further down the line, they may cling on jealously to their sole decision making role. Others inthe business may simply fall into line and be reluctant to raise a different point of view.
Escaping the Traps
So how do business owners escape their cognitive errors, biases and tendency towards groupthink – assuming these are problems in the first place? Dineva acknowledges that it’s not necessarily easy. “People are what they are,” she says. She does, however, point to some key drivers of change.
One of these takes the form of the messaging received by business owners, often from external sources. That might take the form of a newspaper article saying that 70 percent of the most successful businesses have adopted a particular technology.
The messaging might also, point out that a certain level of technology adoption represents the norm or default position. After all, no one wants to miss out or feel they are falling behind when benchmarked against other businesses.
But here is the problem – who does the nudging? It could be the sellers of tech solutions It could be trade associations or government agencies. But if the businesses going to pay any attention, they must trust the messenger. Dineva acknowledges that nudging should be done with care. “There should be no manipulation,” she says.
The Xero research was focused on technology but you could apply many of the issues raised by Dineva to a whole range of decisions. Do you need to invest in new staff? Is now the time to diversify revenue streams? Is the business model fit for purpose?
Any change involves a degree of risk, but then so does remaining static. So maybe it’s time to think about the psychological factors driving decision making. Talking it through with others could be a good place to start.