Small-to-medium sized businesses have an AI adoption problem.
In companies under 500 employees, 20% of workers say they rarely or never use AI, and only 16% use it every day, according to our latest research.
Justin Massa is an AI consultant who works with SMBs to implement AI, and he says a big part of the problem comes down to SMB leadership. From his conversations, he says there are four main factors standing in the way of AI ROI for small businesses:
- Many SMB leaders don’t know how to use AI at all (or even know what it is)
- Those who are using AI are using it for its most basic use cases
- Leaders also don’t think AI can transform their work (just their subordinates’)
- AI hasn’t been rolled out officially, so workers are resorting to “shadow AI”
In this week’s newsletter, he shared how SMB leaders can get ahead on AI by correcting a few simple mistakes and misconceptions.
Problem 1: SMB leadership is way behind in basic AI proficiency
SMB leaders score an average 39/100 on AI proficiency, making them what we call “AI novices” – people who have only a basic knowledge of AI, rudimentary prompting skills, and limited AI use cases.
Justin says a lot of the SMB leaders he works with are significantly behind. They’ll ask him to stay on the call for five minutes, then reveal they don’t know how to use AI at all.
“The CEO will say, ‘I’m a little embarrassed to say this, but I’ve never used generative AI. Is it a website? Is it an app?” Justin says. “This sounds unbelievable, but it happens to me a couple of times a month.”
Problem 2: AI is only being used for its most basic use cases
Justin gives his clients a framework to think about how AI can be used in their work:
- Cogs: Executing simple, repetitive, one-step tasks that require minimal human oversight (e.g. straightforward data entry, summarizing meeting notes, or generating routine email responses)
- Interns: A subordinate that executes specific tasks under direct step-by-step human supervision (e.g. offloading research, drafting initial versions of content, or organizing data)
- Collaborators: A strategic partner capable of engaging in dynamic, back-and-forth interactions (e.g. rehearsing tough boardroom pitches, providing counterarguments and identifying potential flaws etc.)
Justin says most SMB executives still see AI as a cog or an intern, because that’s all they’ve ever heard it used for. In other words, they might be using AI to summarize emails or generate performance reviews, but that’s it.
Justin sees almost no leaders currently using AI as a thought partner – even though this mode holds the most strategic value.
Problem 3: SMB leaders don’t actually believe AI can transform their work
Justin says SMB leaders don’t see the transformative potential for AI in their business, because they don’t think it can do their work as CEO.
Since most execs haven’t tried AI in their strategic use cases (if at all), they’re stuck in the belief that it’s a task-based tool – and therefore, just a resource that helps their subordinates get things done faster.
“Execs tend to say, ‘AI can be neat for my employees, but I don’t do that kind of work, so why should I care?’” Justin says.
Their lack of knowledge around AI ends up being the biggest bottleneck to their company’s ability to get real ROI from it.
Problem 4: AI hasn’t been rolled out officially, so employees are resorting to “shadow AI”
Justin says many of his clients delayed their implementation of AI due to privacy concerns. They banned tools like ChatGPT – and then found out employees were using them anyway, in secret.
This type of usage is called “shadow AI,” and according to our research, it’s widespread. According to our research, 32% of employees in companies that have explicitly banned AI still use it in their work.
Justin says SMB leaders generally recognize that a few people are using AI – but they have no idea how widespread AI usage is.
“When I talk to leaders, they say, ‘Yeah, we know we have a few people using it,’” he says. “But there are also five more people that the leadership team had no idea about.”
Justin says that once “shadow” AI use is out in the open, employees feel relieved to be able to talk about it.
“Most employees think, ‘Finally, it’s safe to talk about this and I can tell everyone what I’m doing,’” Justin says. “And usually it turns out many other people have been experimenting with AI too.”
Top AI advice for SMB leaders
Based on Justin’s work with SMB leaders, here are the 3 things he wishes they would do:
1. Use AI in your work every single day. "My advice to every executive: you have to use this directly yourself. There's no excuse. You cannot outsource this. You cannot hand this off to anyone. As a leader, you should be spending multiple hours a week working directly with generative AI in your work. And nobody's doing that right now."
2. Get clear on the capabilities that drive your business. “The first thing I tell every executive leader is you need to get really crisp on your strategy. What are the capabilities that drive your business? How differentiated are those capabilities and how do they contribute to your ability to win? And then you need to obsess over the relationship between AI’s capabilities and your business’s differentiating capabilities."
3. Bottoms up, top down and side to side. “It’s my hokey joke: Do the AI square dance – It needs to come from all sides, all at once. You can't say only one department gets AI access. You can't say only one team gets it. You can't say only one level of the organization gets it. Deploy your AI to everyone."
