Behavioural research by Xero uncovers barriers to small business technology adoption

Toronto – November 16, 2021 – Simple changes in habits and process could prove more effective than costly educational campaigns in helping small businesses take advantage of digital technology’s benefits, according to behavioural science research conducted by Xero, the global small business platform.

The One step study surveyed more than 4,200 small business owners in six countries (Australia, New Zealand, the UK, the United States, Canada, and Singapore). Carried out in partnership with behavioural science consultancy, Decision Design, the report found that small businesses which readily adopt new technology enjoy on average 120 percent higher revenue. They also reported 106 percent higher productivity than those which repeatedly fail to do so and were 27 percent more likely to wake up excited about their work.

Yet despite technology adoption’s substantial and well-documented benefits, and even after the pandemic drove firms to deploy digital solutions en masse, only one in five small businesses consider themselves as technology adopters – compared to nearly one in three who admit they continually delay investing in new technology.

The research revealed that this ‘adoption gap’ stems from several behavioural barriers – mindsets and perceptions about technology and change – that frequently recurred amongst small businesses all over the world. Small business leaders tended to believe that their current solutions were good enough even if new technology might help them do better; to focus on risks and short-term losses when considering change; and to freeze up when forced to compare, understand, and choose between numerous technology options.

“Our research suggests that for small businesses, the greatest hurdles to harnessing technology’s benefits aren’t a lack of information or choice, but deeper anxiety and concern about how complex and costly the change process might be,” said Rachael Powell, Chief Customer Officer, Xero. “Small businesses may know the benefits, but they’re not adopting technology because the idea of doing so feels deeply uncomfortable and even threatening.”

The study found that amongst the six countries surveyed, Canadian small businesses tended to delay technology adoption more than others (30 percent of respondents), despite seven in ten being confident about embracing new technology in their businesses. Small businesses in Canada were

• Most likely to feel overwhelmed about information about different technology options (more than 6 in 10); but
• Least likely to feel unclear about where to start researching technology (4 in 10) or stick with current solutions, even if adequate, over new technology (less than 3 in 10); and
• Less likely than businesses in other countries to worry about wasting time or energy finding the right technologies (4 in 10).

“Canadian small business leaders seem largely confident about finding and choosing the right technologies, except when they’re offered too many options – but they appear to struggle with building momentum and sticking to clear action plans around digital adoption,” said Faye Pang, Xero’s Canada Country Manager. “With only four in ten small business leaders writing down their business plans for the next 12-24 months, initiatives that break down the adoption process into smaller steps and encourage greater consideration of future benefits should have the most impact on Canada’s small business community.”

Based on its results, One step offers several recommendations for how policymakers, advisors, and technology vendors can help small businesses by presenting technology adoption in a more straightforward, less daunting way. These include:

• Encouraging smaller incremental changes to technology, rather than high-cost, high-risk investments;
• Celebrating small businesses who’ve benefited from technology adoption as examples that normalise digital change;
• Quantifying the true gap between current operations and those enhanced by technology; while also
• Measuring technology’s benefits in a way that’s more relatable to small businesses’ experiences; and
• Narrowing and simplifying technology choices to minimize decision paralysis.

The report also includes simple handles that small businesses can grasp to help overcome their behavioural barriers including decision matrices, ‘pre-mortem’ evaluations, cost-benefit analyzes, and setting aside time for peer learnings. Each activity helps to clarify the true risks and rewards of technology adoption, allowing small business leaders to overcome confusion and uncertainty to make more rational decisions about the different options they may face.

-ENDS-

Media Contact

Xero Canada | Josh McConnell | josh.mcconnell@xero.com

About Xero

Xero is a cloud-based accounting software platform for small businesses with over 3 million subscribers globally. Through Xero, small business owners and their advisors have access to real-time financial data any time, anywhere and on any device. Xero offers an ecosystem of over 1,000 third-party apps and 300 plus connections to banks and other financial partners. In 2020 and 2021, Xero was included in the Bloomberg Gender-Equality Index and in 2020, Xero was recognized by IDC MarketScape as a leader in its worldwide SaaS and cloud-enabled small business finance and accounting applications vendor assessment.

Methodology

Xero partnered with behavioural science firm Decision Design to complete an anonymous and unbranded, nationally representative market study among n=4,211 small businesses across Australia (n=1,212), New Zealand (n=170), the United Kingdom (n=1,162), the United States (n=1,165), Canada (n=341) and Singapore (n=161). This behavioural science-led study measured perceptions, beliefs, behaviours and behavioural barriers related to technology and technology adoption. Data collection by Decision Design was conducted between 12 – 26 July 2021 and study respondents are all small business decision makers for businesses with less than 50 employees (less than 100 employees in the United States).