U.S. inflation has hit a 40-year high, leaving businesses scrambling for ways to combat diminishing profit margins. Some have been quick to pass the buck onto consumers by increasing prices, or by reducing the size of products (a practice known as “shrinkflation“). But for many, offloading increasing costs by these methods is a surefire way to drive away business. As scrappy businesses seek to defy inflation, artificial intelligence has the answer: Efficiency.
With a focus on efficiency, businesses are able to do more with what they have. Because consumers shouldn’t be the only ones looking to save money. Businesses should too.
To save money, you need to start by improving efficiency. In AI, efficiency means optimizing operations with precise forecasting, predictive maintenance, quality control and risk reduction. But it also means identifying and correcting areas of inefficiencies that cost companies. It increases productivity and maintains profit margins amid increasing costs. Simply put, it saves you money.
According to an analysis by Boston Consulting Group, AI can reduce conversion costs by up to 20 percent, with up to 70 percent of the cost reduction resulting from higher workforce productivity. But AI is also expensive, time-consuming and out of the question for many small businesses and bootstrapped startups. The good news is that startups and small businesses can use big data–without AI–by leveraging the fundamental strategies behind data science.
Focus On Useful Data
To mimic the function of AI and effectively reduce costs to offset inflation, start with data. It doesn’t mean you need to collect every bit of data possible. But it does mean you should compile the data that is available and useful to you.
As simple as it sounds, it’s not uncommon for small businesses and startups to be too busy to collect data and analyze a myriad of data points. There’s a tendency to lean on industry-standard key performance indicators (KPIs). But depending on your business and industry, those might not effectively reveal the bigger picture you’re looking for.
So if you lack data, work on getting it. And if you have data, work on finding ways of using it.
Improve Human Efficiency
Businesses are made up of people–and people, well, are not likely to be operating as efficiently as possible. This doesn’t mean you need to force your staff to work in overdrive, but it does mean you need to seek ways to make the process easier for them. Between better training to help staff work smarter rather than harder, and employing technology that makes people’s lives easier, there’s a lot the average business can do to improve efficiency.
According to research from McKinsey, for the majority of all jobs, at least 30 percent of activities can be automated using technology. For example, an advertising agency could use invoicing software, saving time by eliminating the need to manually send payment reminders for unpaid invoices.
For a restaurant, it could mean using a mobile payment processor to reduce back and forth trips for waitstaff. But it can also be achieved without any technology. In fact, the number one way to improve efficiency within a restaurant is to organize the kitchen so the chef can reduce their steps within a shift, according to the Auguste Escoffier School of Culinary Arts.
Optimize Production and/or Process
One area where AI really shines is in optimizing the manufacturing process by identifying weak spots. But you don’t have to be in manufacturing to take this approach.
Nearly every business has room for improvement when it comes to their processes. These could be the steps that are more time-consuming, more susceptible to errors, or are simply higher cost or even higher risk.
For say, a plumbing business, the answer to saving money might mean optimizing routes so that staff are not wasting time, miles and fuel by driving back and forth across town all day to various customers’ houses, according to Fleet Equipment Magazine. This can be done manually or through route optimization tools.
In a restaurant, it could be reducing the menu options. By cutting a lengthy menu, many facets of the business can be optimized for efficiency, from orders with suppliers and storing supplies to prep work, says the Motley Fool.
What it boils down to is doing more with what you have and leveraging what’s readily available to you. Find ways to improve your process, making your staff’s lives easier, and do more with what you have. Field decisions using Warren Buffett’s powerful 5-word quote, and Elon Musk’s 3 C’s Rule to make strategic decisions and build billion-dollar businesses. Increased efficiency opens the door to increased productivity–a golden ticket to save money and weather inflation.