After more than three decades working inside and alongside small and medium-sized businesses, the team here at Dartcell has learned to be sceptical of any idea that claims to be essential for survival overnight.
AI is the latest example of this.
Many of the business owners we work with feel a growing pressure to use AI for fear of falling behind. It’s understandable – no one wants to let an opportunity for faster, more efficient working to pass them by – but it’s one that can easily lead sensible companies to spend money without fully understanding what they are investing in and how it is benefiting them.
How AI can creep into any organisation
In most businesses, AI doesn’t arrive as a big strategic decision. It arrives in fragments. It might be introduced as:
- A marketing tool someone read about
- A sales add-on bundled into CRM software
- An AI-powered feature inside accounting or forecasting platforms
- A well-meaning experiment that turns into an under-the-radar monthly subscription
None of these appear to be expensive on their own, and because SMEs typically run lean teams, they often sit below the level of scrutiny that’s applied to how many people they’re hiring and which suppliers they’re using, for example.
Unfortunately, when we step in to review the numbers as a third party, it’s not unusual to find thousands (or tens of thousands) of pounds a year going out with no clear view of what this spend is actually delivering, resulting in significant cost drift.
Why efficiency doesn’t always equal profit
Another pattern we see repeatedly when we enter organisations as fractional finance directors is “perceived progress”.
Teams feel like they are attacking their to-do lists faster, emails get written quicker, and reports look better than ever before. But if we look at revenue, margins, and cash flow – the real-world markers of a company’s success – very little has changed.
Saving time on basic tasks has not necessarily created value. This is often because no one has decided what to do with this extra capacity or identified which new revenue streams it might enable.
In laymen’s terms, your people’s work is more polished, but it’s not actually more profitable. The true power of AI hasn’t yet been leveraged because leadership haven’t caught up with where these tools have left the organisation.
One of the biggest risks for SMEs is copying big-business behaviour
Larger organisations can afford to experiment. They have teams to govern their trials and errors, budgets to absorb mistakes, and scale to turn small gains into meaningful results.
Most SMEs do not have these luxuries, yet we still see smaller firms trying to replicate what’s going on in global conglomerates. By doing so, they often fail to:
- Work out what problem they are actually trying to solve. Naturally, leadership’s heads are turned by the newest, shiniest, most impressive-looking piece of software on the market – but will this specific AI tool help the business overcome its challenges?
- Focus on implementing one tool well, before moving onto the next. This means optimising systems, tracking effectiveness, and monitoring its tangible value to the business – and unfortunately, many smaller ventures don’t have the resources or the expertise to do this. Instead, they believe it’s best to spread the risk by spreading the reach; they invest in AI across multiple departments yet never truly get to grips with its capabilities.
- Establish clear ownership of the transition towards using AI. Someone needs to be responsible for the outcome of introducing these kinds of technologies – and whoever it is must be open to pausing the shift if they feel it’s not working as intended. It can be difficult for business leaders to admit that a certain tack isn’t yielding the results they were hoping for, especially if the board were hoping that technology alone will be able to resolve complex issues within the business.
Experience still matters more than ever
AI cannot replace the commercial judgement of people who have genuine, hard-won insights.
Artificial intelligence tools might appear to be the answer to your prayers – but though they can spot patterns in data and behaviour, they can’t understand:
- The unwritten rules of your market
- The personalities in your team
- The hidden power dynamics in your business and your industry
- Why something that “should” work never quite does
Those things come from lived experience. They are learned through years, if not decades, dealing with commercial situations; riding the peaks and troughs of business success; and developing the kind of tacit knowledge that can’t be replicated by a machine.
So, as tempting as it might be to reduce overheads by replacing staff with computers, business leaders must be cautious not to throw the baby out with the bathwater here.
How to avoid over-investing in AI
Rather than asking “Which AI tools should we be using?”, ask yourself and your teams:
- What problem are we actually trying to solve?
- Where do we lose time or money today?
- What decision would improve if we had better information?
By doing so, you’ll make sure that any investments in AI are relevant, functional, and designed to help your firm grow and thrive.
And, as we previously mentioned, you also need to make sure that whoever is at the top of your AI function is comfortable with stopping AI spend if the tool they’ve chosen isn’t delivering.
Having the discipline to say ‘enough is enough’ will serve your business far better than maintaining an investment to keep up appearances!
We’ve seen the AI trend before, in different guises
From the introduction of spreadsheets back in the 1980s to the launch of the internet and the meteoric rise of cloud software, every major technological change we’ve experienced during our time as finance directors has followed the same pattern:
- Early excitement
- Over-adoption
- Quiet correction
We believe AI will be no different. Used well, it can support good businesses, but used blindly, it becomes noise and cost. By all means, explore AI for your firm. After all, you don’t want to lose your competitive edge, and you do want to protect your reputation as a market leader.
But invest in AI tools cautiously and make sure there’s a genuine case for this technology before signing off the budget.