Advertising is a fickle beast. Small businesses will move quickly in and out of advertising products, churning out if value isn’t perceived, or proven. Small businesses are less likely to switch providers for the tools they use to run their day to day business — the reservation software or point of sale hardware, the accounting system and so on.

This notion that selling platforms rather than leads is a much better business to be in is of course a fundamental premise behind the Tech Adoption Index. It was also the subject of a panel this morning led by my former colleague Mike Boland here at the Street Fight Summit in New York. The session featured three companies that offer different takes on the notion of the “Small Business Operating System.”

  • Ilir Sela, CEO, Slice
  • Angus Davis, CEO, Upserve
  • Nadine Paz, Strategic Account Manager, Cisco

Slice exists to help independent pizza shops level the playing field vs. what founder Ilir Sela calls “Big Pizza” (e.g., Dominos, Poppa John’s). These pizza conglomerates don’t make better pies. And according to Sela, independent pizza restaurants outnumber Big Pizza locations by 3:1, and account for two-thirds of pizza sales.

However Big Pizza is crushing Little Pizza in terms of revenue per location, largely the result of much higher digital sales.

“At the big chains, 60% to 70% of their orders are processed via digital,” Sela said. 

Slice offers SMBs an app that allows them to compete with Domino’s et al on digital orders. But along the way, Slice has layered on additional services to helps independent pizza parlors run their businesses more effectively, via marketing services, data analytics, workflow management and more.

Upserve is essentially an OS for full-service restaurants, of which CEO Angus Davis says there are about 280,000 in the United States.  Starting with it’s Breadcrumb point of sale system, Upserve’s offering extends into employee management, ordering and supply chain. The company recently partnered with Resy to connect the restaurant reservation and POS systems, which to date have been notoriously disconnected.

And finally, while Slice is focused on the customer acquisition stack, Upserve the POS and HR stack, Cisco represents the IT stack of the SMB OS, offering technology solutions like wifi and network security for SMBs. Cisco sells its solutions to SMBs in packages via a network of value added resellers.

One of the big ideas behind the SMB OS is that as a vendor builds a relationship with the SMB around a single mission critical app (like point of sale, or accounting, or IT) it can extend that relationship into additional adjacent services until it moves from being a point solutions provider into a partial stack or a full stack partner. Then the relationship becomes far more difficult to dislodge than a single solution, and certainly stickier than an advertising relationship.

Upsere’s Davis noted that advertising or lead generation purchase decisions involve revenue that is easily shifted among multiple vendors. Not a great place to be if you are one of the vendors. And this is reflected in the high churn rates seen in online advertising.

“If you have the operating system, that is a big decision,” Davis said. “Small businesses are not going to try a new operating system every three months.”

Following the SMB OS panel, Street Fight’s Research Director David Card presented some data on small business demand for the SMB OS during his State of Hyperlocal report, which included survey data from 300 SMBs conducted in Q1 2018.

According to StreetFight’s research, the notion of “integrating marketing with the back office” was deemed “important” or  “very important” by 53% of respondents. Card noted that larger merchants were far more likely (+10 points) to take this view. Card said he considered this finding that bigger merchants value the full stack more than smaller ones “counterintuitive.”

Data from the Tech Adoption Index also shows that larger SMBs are a bit more likely to prefer an all-in-one solution for marketing and back office solutions than smaller. For example, only 42% of solo operations preferred the full-stack, compared with 55% for businesses with 10 to 49 employees.The figure rises to 61% for businesses with 50-99 employees.

One possible explanation for this is that as businesses get larger, they use more software and the need for integration becomes more pressing, while very small SMBs use fewer apps and feel less of a need for simplification.

 

 

1 Shares
Tweet
Share
+1
Share