Michigan small businesses begin to experiment with artificial intelligence

• Nationally, about 1 in 20 businesses are using artificial intelligence for operation purposes
• Experts say that if small businesses don’t invest, they’ll be left behind 
•  Businesses who invested in AI have found increased efficiency, but also potential for job loss

The introduction of artificial intelligence tools at LaFleur Marketing in Grand Rapids last year encapsulated both the hopes and the fears of the groundbreaking technology.

CEO Chip LaFleur recalls his anticipation that AI could make his company more efficient and profitable. His employees, though, were anxious about what it would mean to their jobs.

Since then, LaFleur said he’s watched productivity levels increase “by one thousand percent.” And while he hasn’t reduced staffing, he acknowledges that greater efficiency makes that possible in the future.

In the past year, artificial intelligence use has exploded. The market is expected to grow by 37% annually in coming years, and by the end of 2024, the AI market is estimated to reach $305.9 billion.

Initially the plaything of large companies, AI is now filtering into Michigan’s small businesses and mom-and-pop operations that employ nearly half of the state’s workers.

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That transition can be jarring for businesses with small staff.

“Most small businesses are unprepared to take AI,” said Michael Marchese, CEO of Tempesta Media, a company based in Indiana working with businesses to increase their revenue. He estimated that small businesses are about a year behind larger businesses in AI use, which can be attributed to low AI expertise and fewer resources.

While “everyone is familiar with ChatGPT,” Marchese said business potential to use AI “has moved beyond that.” 

Corporations like Sam’s Club are rolling out AI-powered technology. Customers would previously wait in long lines for a worker to count groceries in their carts to see if it matched a number on their receipt. Now, at more than 120 branches of the club, including stores in Michigan, the retailer uses computer vision technology to capture images of items in customers’ carts and verify payment. 

An estimated 5.4% of firms nationally used artificial intelligence for business purposes in February 2024, according to a Business Trends and Outlook Survey. This figure is expected to grow to about 6.6% by early fall 2024. The financial services, legal services and health-care industries are seeing the highest rates of AI usage.  

Replacing workers

About a third of businesses using AI are using it to replace workers, according to the census. But another 30% expect to use AI for worker substitution in the next six months, which would reassign employees to areas that aren’t as easily done by AI. 

Understandably, U.S. workers report AI anxiety, with about 75% reporting fear of job loss due to lack of technical skill, unethical decision-making by AI or just seeing their job replaced with AI, according to the AI Anxiety in Business Survey. 

In LaFleur’s eyes, the increased efficiency means worker replacement is a likely reality. While his marketing business hasn’t laid off any employees, LaFleur said his company’s “improved efficiency should equate to a reduced need for net new hires.”

“Everything that I hear … is always that AI is not going to replace people. It's going to make more valuable people — it will become more valuable and more efficient,” LaFleur said. “And I kind of think that's bullshit, because what is greater efficiency than a reduction in the number of people that need to deliver on something?” 

Michigan’s labor shortage

That’s potentially good news to many businesses in Michigan, which is experiencing a crippling worker shortage across many fields. There is a labor shortage in the United States, according to the U.S. Chamber of Commerce. For every 100 open jobs, Michigan has 85 available workers. 

To Brian Calley, CEO of the Small Business Association of Michigan, more businesses using AI could be the solution because it “opens another door to ensuring that the work gets done in the face of fewer people (doing) it.”

As LaFleur continues to expand his operations with AI, job applicants with proficiency in applications like Adobe Illustrator, Photoshop and InDesign become increasingly attractive, although open minds regarding technology have always been an important quality in hiring. 

Businesses “can do more with less,” LaFleur said. 

Increased productivity

LaFleur noted the greatest areas of improvement since incorporating AI into his business: more efficient data analysis, more quickly written reports, and stronger project management. In the past year, he’s invested in Thoughtspot, as well as other tools like ChatGPT, Claude.ai and CoPilot. The company has spent about $300,000 on AI tools so far in 2024.

LaFleur Marketing analyzes data more quickly through Thoughtspot, a platform with a business intelligence platform. After capturing as much data as possible from clients, LaFleur ties this data to Thoughtspot. In turn, he can figure out things like why exactly his business traffic has increased much faster than before AI. 

Small businesses “have the ability to punch above their weight by utilizing AI,” LaFleur said. Smaller groups of people can adjust operations much more quickly while larger businesses must go through more people and levels of decision-making. 

Knight Watch CEO Ryan Bailey works to improve building security. Founded and headquartered in Kalamazoo, the business now has offices in Grand Rapids, Lansing and Troy. This past year, Bailey started to incorporate AI into business operations. He has his staff work to improve video surveillance, gunshot detection and running marketing analytics. 

Since introducing AI to the business, Knight Watch has grown “four times the company in a quarter of the time that it was in existence.” 

But Bailey still sees the risks of using AI. First off, it’s brand new, and people should be cautious of how they use this new technology, Bailey said. “There’s a lot of stuff going on (with AI) that’s ill-intentioned.”

With the upsurge in AI use, malicious use and threats pose a challenge. 

“If you don't consider (these risks) to be valid, then you're probably putting yourself at risk,” Bailey said. 

Daily operations can be disrupted. LaFleur said that as a small business owner, he needed to restructure the way his business operates in order to find the best uses for AI. 

LaFleur encourages small businesses “to embrace the disruption and get behind it and create solutions that utilize the disruption.”

Going forward

“The time is now. Things will move (at) different paces in different regions and different industries,” SBA’s Calley said. “Business owners should at least be evaluating opportunities and risks straight away.”

He recommended businesses consider if a task could be performed in a way that’s AI-driven and automated, then predict how AI might have a role in business operations. 

To Marchese from Tempesta Media, now is the time to learn about AI. “Every CEO of every small business needs to take a one-hour, two-hour AI overview class or webinar to understand what it does and what it doesn't do.”