Medium-sized businesses are where the GenAI opportunity is greatest

Picture this: A business owner excitedly tells me about wanting to use AI to predict customer behaviour.

"Fantastic," I say, "How many customers do you have?"

There's an awkward pause.

"Well... we're not quite sure."

This real conversation from last week captures perfectly why the UK's latest GDP figures (showing just 0.1% growth in Q3 2023) shouldn't surprise us - and why the road to AI-driven productivity gains isn't quite what we think it is.

Finding the Goldilocks Zone

Let's look at the UK business landscape through a different lens. Yes, we have 5.3 million micro-businesses (0-9 employees) making up 95% of all businesses, and yes, large enterprises (250+ employees) dominating headlines generate 47% of turnover. But here's where it gets interesting:

I'd argue that the real opportunity for AI-driven transformation lies in what I call the "Goldilocks Zone" - businesses that are neither too small nor too large. Here's why:

Large businesses (0.1% of all businesses) are like oil tankers - they have resources but are often too established to change direction quickly. Many have already optimised their operations and reached a natural equilibrium. Getting another 10% growth from a £1 billion revenue business is a monumentally difficult task.

Micro-businesses (95% of businesses) often lack the foundational processes and data infrastructure needed for meaningful AI implementation. When you're a team of five people juggling everything, sophisticated AI transformation isn't your most pressing need.

But in the middle? That's where the magic happens. Small and medium-sized businesses (collectively about 5% of UK businesses) are big enough to have established processes and data, yet agile enough to transform. They have the complexity to warrant AI solutions but aren't so large that change becomes insurmountable.

The Sweet Spot for Transformation

The government's AI initiatives - from the AI Opportunities Unit to the £900m compute investment - are vital. But to drive real economic growth, we need to focus these resources where they can have the most impact: businesses in the Goldilocks Zone.

These are companies that:

• Have moved beyond survival mode
• Have established basic digital infrastructure
• Face enough complexity to benefit from AI
• Retain the agility to transform
• Have headroom for significant growth

Reality Check: The Implementation Challenge

At QuantSpark, our experience shows that successful AI implementation is about 20% technology and 80% transformation. For businesses in the Goldilocks Zone, this is actually good news - they're large enough to have the resources for change but small enough to execute it effectively.

Consider a 100-person manufacturing business: They have enough data to make AI meaningful, established processes that can be optimised, and the organisational structure to implement change - but they haven't yet hit the complexity that makes transformation exponentially harder.

The Path Forward

While the IMF suggests AI could boost UK productivity by up to 1.5% annually, achieving this requires targeting our efforts where they'll have the most impact. This means:

1. Recognising that not every business needs advanced AI right now. A startup might need basic digitalisation first, while a global corporation might need internal process alignment more than new technology.
2. Focussing support programmes on businesses in the Goldilocks Zone - those with the right combination of size, maturity, and growth potential.
3. Understanding that the best candidates for AI transformation aren't necessarily the ones making the most noise about it.

A Call to Action: Target the Transform-Ready Middle

For policymakers: Consider creating targeted support programs for businesses in the Goldilocks Zone - they're your best bet for driving economic growth through AI adoption.

For technology providers: Design solutions that address the specific needs of these mid-sized, growth-ready businesses.

For business leaders: If you're in this sweet spot, now is your moment. You have the perfect combination of stability and agility to make AI transformation work.

Moving Forward

At QuantSpark, we're focusing our efforts on helping businesses in this crucial middle ground - large enough to need sophisticated solutions, small enough to implement them effectively, and positioned for genuine growth.

Are you in the Goldilocks Zone? How are you thinking about AI transformation? Get in touch.