2020 saw an acceleration of changes affecting every facet of society and the economy. Employers are now less reliant on central spaces for employees to get work done together. In-person, physical events are no longer the primary forum for businesses to engage with other businesses. Companies are more resource constrained than ever - making marketing, business development, and investment-seeking activities increasingly difficult. This is especially true for small and medium sized businesses (SMEs), the backbone of the economy, who have been forced to completely reassess every aspect of their operations. Creativity, speed of innovation and technology will play even bigger roles in determining business success now that 20th century business models have come to an end.
And yet, we are already seeing the short-comings of the digitally-oriented strategies driving the economy of the early 21st century. Technology innovations have created unprecedented opportunities for businesses to extend beyond their traditional markets, but in the push for globalization, we tend to overlook what is next door. This economic model ultimately weakens the communities that helped create it. We need to strike a better balance between local, regional and global economies and expand our definition of community so that technological advances don’t inevitably undermine one part of the community - like idea-rich, resource-poor small businesses - to advance another.
For the economy to recover and create opportunities for all, a new paradigm must emerge with different requirements for economic growth: strengthening and building new types of community to create the innovations and business practices that result in long-term, sustainable growth. The drivers of this Community Economy will enable all businesses to easily access information and resources and create meaningful connections with other businesses. And they will do so in ways that are effective, affordable and build community - at the local, regional and global level.
Two decades into the 21st century, the digital transformation of business is nearly complete. The Coronavirus did not cause the major changes in business practices we witnessed in the first half of 2020; it simply accelerated the shift to a digitally-oriented economy that had been in progress since the emergence of the commercial internet in the 1990s.
Rapid innovation in mobile technology has driven the increase in remote working. Even before the COVID-19 pandemic, according to Global Workplace Analytics, at least 56% of the U.S. workforce held jobs compatible with remote work. Given the net increases in worker productivity and cost savings - for employees and employers - a more geographically distributed, remote workforce is expected to become commonplace moving forward.
Internal face-to-face employee interaction is not the only type of connection to have gone virtual. In-person trade shows and conferences, one of the most popular methods for companies to market products and connect with their industry, have been in sharp decline over the last decade. Due to COVID-19, shows ranging from South-by-Southwest in Texas to the Geneva Auto Show in Switzerland canceled their events or went virtual. According to Wakefield Research, “show cancellations will act as a catalyst to hasten the multi-industry move toward a more virtual future.”
With nearly every aspect of human activity and business interaction having become digitally enabled, we have witnessed an explosion in data - leading to more insights, better strategies, and new opportunities. The rise of the commercial Internet has given entrepreneurs and SMEs the ability to compete in ways previously not possible and has resulted in countless industry disruptions. We must take a hard look at whether those disruptions are a net benefit for the economy long-term.
The digital economy, while benefiting SMEs in many ways, has also exacerbated long-standing challenges faced by this group, which is universally accepted to be the backbone of the economy - locally, nationally and globally. On average, SMEs make up 90 percent of all enterprises, create nearly 70 percent of jobs worldwide, and account for anywhere between 50 and 70 percent of GDP. This is especially notable given the inherent challenges facing this group: regulatory environments that favor large enterprises, less access to financing, dramatically smaller cash reserves to invest in employees’ skills, new technology, and access to new distribution and marketing channels - just to name a few.
New technologies have made it easier for well-resourced large enterprises to move more quickly than SMEs to address these challenges. SMEs face considerably more difficulty in undergoing the process of digital transformation due to their scale and the costs of undergoing such a process. According to Statista, the volume of data created worldwide increased by 3000 percent between 2010 and 2020. Still, only a small percentage of SMEs today can make data and analytics accessible to employees. This digital gap slows productivity growth and widens inequalities among people, firms and locations.
“We need a fundamental rethinking of SME and entrepreneurship policies to improve business conditions and access to resources. We need a renewed measurement agenda to understand how countries, regions and cities can capitalize on their many diverse small businesses as drivers for inclusive and sustainable growth.” - OECD Secretary-General Angel Gurría
Despite the positive impacts of the digital revolution - unlocking innovation, connecting previously disconnected individuals and businesses, and increasing efficiency - our sense of community has also been disrupted. Though we might be connected to somebody around the world, we in many cases are ignoring our neighbors.
Local economies are suffering because many of the small businesses of which they are made have fallen prey to larger, more globally connected competitors with the resources to take advantage of economies of scale. This sets off a chain reaction of outcomes that reinforce the overall trend: overlooked innovations; and a widening wealth gap between small, typically more rural communities and larger, urban population centers.
A growing imbalance between local and global communities has seemingly driven global economic growth in the short term, yet it can also erode the fundamental building blocks necessary for sustaining that growth: diverse sources of innovation and vibrant local economies.
“The combined forces of globalization, technological advances and financialization have caused a divergence between economic growth and social progress that has placed the current system under a significant strain. We need to consider how to operate in a world of increasing global connectedness while fostering local initiative.” – Colm Kelly and Blair Shepard, PwC
Given the connection between SME success and local economy health, it is clear long-term economic growth cannot be accomplished by emphasizing global over local and regional community considerations. They are inextricably linked.
We must broaden our definition of economic success. A healthy economy cannot solely be measured by GDP. We must look at other indicators: the quality of life within local communities, environmental and individual health, and the ability for SMEs to compete with larger, multinational enterprises.
We must also revise our approach to community. We can no longer build separate and distinct local, regional, global and digital communities; we must focus on one, connected, global ecosystem that equally values and supports contributions from near and far.
Governmental and financial institutions must implement equitable policies that level the playing field among businesses and communities of all types and sizes. Large companies must build community values into their DNA. And entrepreneurs must increasingly develop accessible technology that empowers small businesses, builds community and spurs continued innovation.
If we collectively build this Community Economy, which gives all businesses easy access to data, resources and connections to like-minded businesses, we will not only accelerate our recovery from the Coronavirus pandemic, we will establish a foundation for sustainable, more equitable long-term prosperity.