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In November 2019, the Committee on Small Business at the House of Representatives held a hearing titled, “A Fair Playing Field? Investigating Big Tech’s Impact on Small Business” where the stakeholders deliberated on how Big Tech companies have greatly impacted the small firms who are now essentially relying on their business models.
The then-chairwoman, Nydia Velazquez, pointed out the market dominance held by the big tech companies. In his testimony, Dharmesh Mehta, Vice President of Amazon explained how “Amazon lowers barriers to entry for entrepreneurs, helps make retail even more vibrantly competitive, and continues to delight customers with new innovations.”
Many tech giants often claim that they give startups and small and medium enterprises (SMEs) what they essentially need, like instant access to vast markets, cheap and reliable infrastructure, efficient ads and more. Notwithstanding these benefits, they also get in the way of SMEs’ success in many ways. At times, the big firms acquire the small ones to root out competition. For instance, shortly after Instacart (an online grocery delivery business) partnered with Whole Foods (a supermarket chain), Amazon launched its own grocery delivery service and acquired Whole Foods. Similarly, Google acquired the satellite navigation app ‘Waze’ which was once a potential competitor of Google Maps.
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In other instances, these tech giants seem to neglect the small businesses in favour of large enterprise customers who have adequate resources to afford the services offered by big techs. Consequently, small businesses lose out on the innovative digital products and latest technologies the big tech players extend.
Does that mean small businesses can never realise their potential for success? Or that they are doomed to be perpetual losers in want of resources? Not necessarily.
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Large tech companies can indeed help small businesses thrive significantly in a resource-efficient manner.
Product-led growth strategy
For the past few years, tech leaders have been routinely discussing Product-led growth, a go-to-market strategy where the “end-user product experience is the primary driver of growth.” Product-led growth (PLG) strategies help founders build their brand, allow them to set prices based on market demand and attain better customer satisfaction by demonstrating more customer input into product development.
It is the PLG approach that led to the success of ‘Zoom’ and ‘Dropbox’, applications widely used during the pandemic. At the time of its foundation, Zoom was anticipating competition with Microsoft, Cisco, Adobe and other well-known firms. Success in competition with such established leaders comes rarely to SMEs. However, a well-executed PLG strategy directed Zoom’s massive success. The first version was released in January, 2013. By the end of the month since their launch, Zoom had 400,000 users which then rose to 1 million users by end of May, 2013. By 2015, Zoom’s customer base touched 100 million users. Founder and CEO Eric Yuan invested heavily on customer centric features, like one-on-one meetings, group video conferences, screen sharing, the ability to record meetings and have them automatically transcribed and integrated with Slack and other softwares.
The story of Dropbox, a file hosting service, is similar in some measure. Officially launched in 2008, a product-driven approach led the brand to its early success. By April 2009, it had reached a registered user base of 1 million. In 2021, Dropbox crossed 700 million registered users. Dropbox’s product-led approach led the founders to design a product that made file sharing easy and accessible for end-users. Additionally, the founders incorporated certain features that enhanced the appeal of the product among prospective users. For instance, the moment a user sends another user a Dropbox link, the user in receipt of the link is able to open it to access shared documents hassle-free.
When tech companies prioritise product-led growth and deliver swift and easy-to-use products, small businesses are able to access the technology they need through self-service. Heightened focus on smaller businesses benefits the bottom line by expanding a company’s addressable market and incentivising better products.
Tech giants have come up with dedicated programmes for startups in an effort to handhold them in their initial growth years. This practice is of utmost importance considering the failure rate of small businesses in their formative years. According to the Bureau of Labor Statistics’ Business Employment Dynamics, approximately 20 per cent of small businesses fail within the first year and 50 per cent eventually face failure within five years.
An example of such a programme is ‘NVIDIA Inception’, a free programme designed with a focus on startups. The programme provides startups with access to cutting-edge technology, NVIDIA experts, connections with venture capitalists and co-marketing support that increase their visibility and help them evolve faster. The programme supports all stages of a startup’s life cycle. Under NVIDIA Inception, members are provided with the best technical tools, latest resources, and opportunities to connect with investors. The success of this programme is reflected in its vast memberships. Earlier this year, Inception surpassed 10,000 members across 110 countries.
Another such sought-after programme is the ‘Google for Startups’, a Google initiative to support thriving, diverse and inclusive startup communities around the world. Under this programme, Google helps startups connect with the right people, the right products and relevant best practices that consequently help startups thrive and grow.
The statistics reflect the success of Google’s initiatives.
Startups have created more than 100,000 jobs in the Google for Startups campuses and raised USD 6.7 billion in 2020. The Google for Startups programme has aided numerous startups in their ventures. For instance, the Google for Startups Accelerator programme helped the co-founders of ‘Hypd’, an India-based creator-driven marketplace, in perfecting the business idea and form of their product. Hypd enables content creators to set up online stores that match with their content.
“We understand from the Google Analytics team how to understand the content creator’s journey, the key features they need from the product and which priorities to build on. That has shaped our product”, says Akshay Bhatnagar, co-founder, Hypd.
The tools that big tech giants provide as a part of their dedicated handholding programmes impact SMEs’ performance in a noteworthy manner. The following infographic demonstrates the scope of their impact on SME performance.
(Infographic source: Deloitte)
SMEs usually have less access to capital and cash reserves which renders it difficult for them to access cutting edge technologies. Big techs have come up with innovative ways to help small businesses access funds. For instance, in the wake of the pandemic, Google came up with an initiative called ‘Ad credits for Google Ads Small and Medium-sized Businesses’. These ad credits could be used by SMEs to offset payments for advertisements on the Google Ads platform to attract online customers to their businesses or make new digital offerings.
The Information Technology Industry (ITI) Council, a global advocate for technology that includes some of the most prominent tech companies across the globe like Amazon, Apple, Adobe, Google, Meta, IBM and others, introduced the ‘Paycheck Protection Program’ for startups and small businesses. Through this programme, small businesses were able to obtain the required funding. Additionally, ITI members have developed tools to provide small businesses with software and online tutorials to apply for and obtain funding with more ease.
Power of the small
In the report, ‘The Power of Small: Unlocking the Potential of SMEs’, the International Labour Organisation (ILO) deliberates on the global prevalence of SMEs and their relevance in socio-economic and environmental developments. SMEs might appear too small for big tech firms to collaborate with and aid in the development of their capabilities as they would with larger enterprise customers. However, understanding their level of maturity and their specific needs in every country and across market segments while providing solutions is pivotal.
“A deeper focus on small businesses empowers underserved and underrepresented groups, ensuring their ideas and their innovation can become a part of our socioeconomic fabric too”, notes Gabe Monroy, Chief Product Officer at DigitalOcean.