competition

As Artificial Intelligence (AI) ushers in the era of Industry 5.0, transforming every industry and every size of business, it’s impact will be most keenly felt in the realm of workflow efficiency as businesses adopt AI for productivity. Repetitive tasks, long the domain of human workers, are now being automated by machine learning driving large language learning models (LLMs) and intelligent machines, leading to significant time-savings and quality improvements. From jump-starting marketing and messaging to streamlining customer service to optimizing production lines, AI is revolutionizing how businesses operate. No matter what size of business you have, you  can do more with less and focus on higher-level work by incorporating AI in your technology stack. The result? Cost reductions, increased productivity, and stronger competitive performance.

AI for Marketing

AI can be a powerful tool in your sales and marketing toolbox. So far, much of the discussion about AI … at least in the small  business sector … focuses on AI as a content generator. Given how much has been written on this aspect already, I’m going to focus on other areas of sales and marketing benefits. (edit 2024/4/8: I recently did a short talk on AI for content generation, which you can watch here). 

Lead Generation and Qualification

AI can also transform your lead generation and qualification efforts by transforming vast amounts of data into insights you sales team can quickly put to use. Tools already exist that can crawl blogs, social media posts, and online forums to identify users interested in specific topics. It can analyze demographics and past behavior to further refine lead pools, and it can produce lead scores based on interactions with your website, email, and social media presence. This type of work would take sales and marketing teams an extraordinary amount of time, but AI tools can achieve similar results in days or even hours.

Predictive Analytics for Campaign Development

AI can also help you target marketing  campaigns by moving beyond simple demographics and past behavior. It can analyze massive customer datasets to identify hidden patterns and correlations … connections that only the most skilled and experienced data analysts would otherwise pick up on. AI tools can predict which customers are most likely to churn, which are prime for upselling, and which customers will respond best to specific types of promotions or messages. 

Wouldn’t you love to know which customers were least likely to repurchase before offering a discount? Would you love to know the best time to send a re-engagement communication to a past purchaser? These are things AI can facilitate for you.

Sales Forecasting

Forecasting is always going to be part art, part science, but AI tools can make the science aspect of forecasting much, much (much) more accurate. This is  because AI tools can factor in far more variables than traditional approaches like spreadsheets with human interpreters or even business intelligence (BI) tools like Power BI or Qlik.

AI algorithms can analyze historical sales data, market trends, customer behavior, seasonality, and even external factors like economic indicators, local weather, and local or regional politics. The tools can pinpoint subtle patterns and correlations that untrained (or even skilled) data analysts might miss. Even better? AI tools can also pull in data regarding competitor product launches, industry adoption rates, and your own lead generation data. All this adds up to better prediction of potential sales activities. 

Why do you need this type of forecasting? Because better visibility to future changes in sales will help you eliminate pipeline bottlenecks, get ahead of production opportunities, and rebalance your offerings and inventory to reflect changes in demand. 

Beyond Marketing

But now let’s look beyond sales and marketing, to topics that are being discussed extensively at the Fortune 500 level, but aren’t being given enough attention for small and medium sized businesses … even though the tools for many of the things I’m about to describe are already available and affordable for smaller businesses.

AI for Productivity in Operations and Logistics

AI tools can help you optimize and streamline your inventory, improve demand forecasting (see Sales Forecasting above), and improve your route planning, again, b y analyzing complex data. AI can take the historical sales pattern data you are probably using right now to plan your inventory, provide a more nuanced view of seasonality, add in lead times and external factors like weather and politics to predict what stock is needed and when. All this leads to better inventory and production decision-making.

For route-planning, AI can integrate with your warehouse management system, add in constantly changing real-time factors such as traffic conditions, weather, construction, and delivery time windows, and update routes automatically. 

This is already useful data for large logistics companies like UPS and FedEx. But imagine what it can do for your local delivery team or regional distribution efforts.

Data Analytics

One of the things most small and medium-sized enterprises (SMEs) struggle with is numeracy (edit 2024/4/8: Check out this snippet from my presentation on numeracy in manufacturing). Even though businesses of every size are swimming in vast quantities of data today, very few companies employ … or truly know how to use … sophisticated data analysts.

Even with excellent BI tools, most companies fail to optimize their data insights for better decision-making, because the typical IT, accounting, or even marketing team member doesn’t really know how to structure the data models that will give them better insights.

AI tools can help with this. AI excels at extracting valuable insights from massive datasets. Machine learning algorithms wade through all that data to uncover the patterns, trends, and correlations that help you make better decisions. Even better, AI data tools can convert those insights into effective graphics to help your management team “see” the data similarly and get on the same page.

These tools can also assist with fraud and anomaly detection. By establishing baselines for typical behavior within your data, AI can flag deviations and suspicious activity. 

This same anomaly detection is useful for manufacturers, which can use AI to analyze sensor data from machines, detect subtle anomalies in vibration or temperature patterns, and signal equipment malfunctions before they cause costly breakdowns or isolate quality problems before you throw more labor at them.

Administrative Automation

How much time and money does your company waste in administrative tasks? From duplicative data entry to unnecessary printing to missed opportunities, admin is an area ripe for disruption.

AI accelerates document processing, automates routine tasks, and minimizes the tedium of data entry. Using tools like Optical Character Recognition (OCR), AI-powered tools can extract text from images or PDFs, making them searchable, editable, and indexable. AI can then classify documents based on content, route those documents to the right people or departments, or trigger specific activities.

In email management AI can draft responses to common inquiries and free up time for other, more valuable tasks. It can even interpret the intent of emails to suggest meeting times (and share a meeting link to keep you out of the “what time is good for you” back-and-forth), dropping those meetings right into your calendar for you. 

In data entry you can use AI tools to analyze forms, invoices, or receipts, extract information from them, and directly populate your databases or spreadsheets.

Of course, accessing these AI tools assumes that you have at least begun the work of modernizing your tech stack (need help with that? Book a consult now to find out how StrategyWerx can help). 

Competitiveness in 2024 and beyond will hinge on your ability to automate more of your business processes. We are nowhere near the peak of effectiveness for AI-powered software yet, but the tools you can use to begin this process are already available and affordable. If there’s one thing that SMEs should be thinking about right now, it’s how to automate processes beyond marketing. Implement any one of the ideas in this article, and you’ll increase your competitiveness immediately.

The strategy of one of my business units* is in conflict with the strategy in one of my other business units and creating a major cultural problem. Weird insight, but I think I’m relieved. I’ve certainly learned something new.

Perhaps you have read Treacy and Wiersema’s 1995 book, “The Discipline of Market Leaders,” in which they introduced the concept of choosing a primary value proposition and sticking to it. The three value propositions are Customer Intimacy, Product/Process Superiority, and Operational Efficiency. Anyway, the theory is that you have to deliver on all three at a minimum standard necessary to compete, but then you have to select one – and only one – to excel in.

Following Treacy and Wiersema’s instruction (with a lot of Michael Porter and Balanced Scorecard thrown in for focus and tracking), I have kept a very steady hand on the Customer Intimacy throttle the past 10 years. And it’s worked. Our customers reflect our brand back to us as a Customer Intimacy brand. But we have one equipment division that never manages to get out of the chute. It’s fraught with tension and misalignment at every turn. And I haven’t been able to figure out why.

Finally Alan, one of the brothers who owns the company I run brought back some materials from a speaker he’d listened to named Edgar Papke from CDG. CDG’s premise is that for each value proposition there is actually a cultural proposition, and that if you inappropriately align culture and value proposition you’ll end up with lack of effectiveness. The culture for Customer Intimacy is Collaboration – and that’s what our company has. A strong team-based culture that demonstrates and benefits from extensive collaboration. The culture for Operational Efficiency is Control, and the culture for Product Superiority is Competency/Competitiveness. Alan said that it seemed to him that there was value proposition misalignment – and when we started evaluating it, there was. His brother (who is the engineering lead for the troubled division) definitely has a Product/Process Superiority value proposition in mind for that division. Their sister, the Product Manager for the division, has a Customer Intimacy bias. And of course the division shares nearly all its resources with the greater corporation (the division represents about 5% of total revenues), and the management style and philosophy of the corporation is Collaboration, supporting a highly dominant value proposition of Customer Intimacy.

It’s so simple, really, and should have been clear sooner. But of course, it wasn’t. I kept chalking the frustrations up to difficult personalities and perhaps bad product ideas, and therefore didn’t follow my own dictum of “first you solve the process, then you solve the people.”

Anyway, I’m now on a rousing mission to figure out how to achieve two different value propositions while fully cognizant that we can’t expect people to function in two different cultures. Knowing that this is the problem is highly instructive, and while I don’t have the answer yet, at least I’m working on something likely to yield results. I guess it’s time to be conscious about all my business tools. Given that this is a business conflict in the true meaning of the word, maybe I should give Eli Goldratt a nod, dust off my Evaporating Cloud skills, and see if there’s a simple solution in here somewhere.

I enjoy bird watching. We have created a bird sanctuary of sorts on our land in Wisconsin, and we pay attention to how to attract a variety of birds and how to keep them healthy.

Business Lessons from Birds

One of the things we learned early on is that birds are opportunistic feeders. We were constantly worried that we would fail to provide enough food or put out the wrong food, and that as a result our little friends would suffer. But that is not what happens. When a food supply dwindles, birds don't sit around waiting for it to reappear. They move on - quickly - in search of a new food source.

Your customers are also opportunistic feeders. If you fail to attend to the reasons they do business with you, they will move along quickly in search of another source.

We also learned that we could attract the kinds of birds we wanted to observe by putting out the right types of food in the right places. We studied and planned, because we love being surrounded by colorful birds, playful birds, and song birds. By defining the birds we wanted to attract and then studying their preferences, we created an environment that delivers birdwatching pleasure every day.

You must also define the specific customer you wish to attract. If you don't, the results will not please you. Early on we attracted too many sparrows - which annoy the birds we wanted to attract - and raptors, which ate them. Bad planning or no planning can have miserable consequences.

Finally, remember that birds are evolved from some of the oldest species on our planet. They clearly have staying power. This is due to many factors, but being opportunistic feeders is one of their strengths. Opportunistic means more than just taking advantage of opportunities as they present themselves. It also means being on the constant lookout for opportunities. When food sources dry up, birds waste no time feeling sorry for themselves. Because even when times are good and food is bountiful, they scout for other nearby food sources constantly.

Apparently, success is for the birds. Let's learn from them.

Microsoft recently announced that Windows 10 will be the last Windows version. Don't get all excited you Microsoft haters - Windows isn't going away. But Microsoft is choosing to go with a cloud model for all future Windows development.

The best analogy for what will happen is to compare Gmail or Apple Mail to Outlook. If you use Gmail or Apple Mail, you know they are updated all the time. New code is developed and released when it's ready. If you're an Outlook user, you know that you get a new version of Outlook any time you buy a new version of Windows Office, update your PC, or pay for an upgrade. For some of you that may mean every year, but for most of you that means every two - four years. 

Considering the current pace of technology innovation, two years is a long time to wait for updates, and four years is far too long. Apple knew that when they standardized their operating system with OS X, and now Microsoft seems to know it too. So the future of Windows will be a future of updates and improvements delivered whenever those updates are ready for market (or released, because sometimes ready and released are not the same thing).

This one announcement doesn't affect you if you're not a Windows user, but it is still important to you. Microsoft is making a massive shift in the way they develop software and make money. They are betting their bottom line on the premise that yesterday's technology may already be obsolete, and that technology from two years ago certainly is.

So. How old is the software you are using for your business? Do you have a Point of Sale system that was written in Access? Is the version you're using of Quickbooks pre-2007? How up-to-date is your internet browser? And how old is the technology your competitors are using? If your competitors are committed to staying current on software, there's a good chance they have operational and marketing capabilities you do not have.

Software companies have been moving their development to cloud platforms for roughly a decade now, and in the past three years that pace has accelerated. What this announcement by Microsoft means to you is that the writing is on the wall. Businesses need and want software innovations from their chosen software providers as fast as they can get them.  If your business is committed to a software provider that is falling behind, the time to reevaluate that relationship and commit to software that's ready for the next phase of business development is now.

Every couple of years, McKinsey does one of these surveys where they ask big investors (the kind managing billion-dollar portfolios) what makes a company attractive. And every time, the answers reveal more about the state of business than just “what investors are looking for.” They tell us where business owners and executives should be aiming their attention.

What Investors Are Looking For: EBITDA

This year’s survey (August 2025) put financial performance right back at the top of the priority list. Specifically, EBITDA — earnings before interest, taxes, depreciation, and amortization. Thirty-one percent of the investors said it was their primary lens for deciding whether a business is worth their attention. If you’ve been in the trenches of a small or midsize business for any amount of time, you know that EBITDA isn’t some fancy Wall Street metric. It’s the clearest way of showing whether your operations actually make money once you back out the tax math and other things accountants add in. EBITA is how you can see what your business actually earns.

In a world that is buzzing non-stop about AI, the loudest message from investors is still, “show me the profit engine.” Not just the profit … but how you’ve engineered your company to continue earning that profit. And that’s a reminder small businesses can use. AI might get you in the conversation, but healthy cash flow is what keeps you in the game.

Competitive Advantage Still Matters, But...

In this survey, competitive advantage came in second place. About 19 percent of investors said they look for businesses that have carved out and defended their market position. Interestingly, that number has dropped since McKinsey’s last survey. Which tells me that in an environment of inflation, volatile interest rates, and an uncertain economy, the big-money people are less impressed by differentiation for its own sake. They want evidence that your advantage translates into consistent financial performance, not just a clever story about why you’re different.

That doesn’t mean competitive advantage is dead—competitive advantage always matters. It means you have to prove your advantage works. It’s insufficient to say “our product is unique” or “our service is unmatched.” You have to show how that uniqueness translates into higher retention, repeat buying, or better margins. If your competitive advantage claims are just confetti and canned applause, investors, bankers, and your own customers will see it for what it is.

Don't Underestimate the Value of Leadership

The third most important factor in the surve is leadership. This is one area where small and midsize businesses often underestimate themselves. Investors don’t just look at whether the numbers are good; they look at whether the leadership team is aligned in what it says to investors, employees, and customers. When leaders send mixed signals about mission, culture, or strategy, it’s a big red flag.

I wish everyone understood that this is just as true outside the investor world. Customers pick up on misaligned leadership. So do employees. Even your supply chain partners can sense it. Alignment isn’t about everyone repeating the same slogans. It’s about clarity of intention, how well what you say lines up with what you do, and whether or not every decision points in the same direction.

Which brings us to something McKinsey highlighted that I think is useful far beyond the investor space: the equity story. Investors want a narrative that ties together your financial performance, your competitive position, and your long-term vision. They want consistency across every touchpoint, whether it’s a quarterly report, a pitch deck, or a just conversation over coffee.

Should SMBs Care What Investors Are Looking For?

Of course, most SMBs aren’t pitching billion-dollar investors. So why does this matter? Well, your equity story is still incredibly important. It’s just that your audience might be a bank, a prospective customer, or the people you’re trying to recruit. Your equity story isn’t just about ambition; it’s about showing who you are, what you do that makes you different, why you matter, how you’re planning to grow, and how your numbers and strategy fit together.

What About AI?

In case you’re wondering, AI showed up in the survey results too. Thirty-one percent of investors said AI or technology utilization was part of what they’re looking for. But that’s an important sentence. “AI or technology utilization.” That’s a huge jump from just two years ago, when it wasn’t even on the list. But it’s also not the hype-y demand for AI at all costs. Still, it’s important. If a third of investors now expect AI as part of the baseline, then “we use AI” isn’t a differentiator anymore — it’s table stakes. But the real question is if you’ve implemented AI in ways that actually change your economics or your customer value.

So if I were to boil this survey down into guidance for small and midsize business leaders, it’s this:

• Get your financial house in order and know how to talk about it in plain terms.
• Show that your competitive advantage creates tangible outcomes, and that it’s not just a good slogan.
• Keep your leadership team aligned and clear, because consistency builds trust way faster than charisma.
• Build your equity story like your future depends on it, because it does.
• And if you’re touting AI, be ready to explain how it changes the game for you. If it’s just a box that you’ve checked, that’s going to be obvious.

The investors may have been talking about billion-dollar portfolios, but these lessons cut straight to the heart of what keeps a business attractive at any size. And that’s in every business’s interest.