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Navigating the Era of AI: Implications for Small Businesses

Advances in artificial intelligence (AI) have gained a lot of attention in 2023, but AI has been operating in various applications, from predictive text to virtual assistants on phones, for years. One recent survey found 23% of small businesses already use AI in some form, with 39% looking to adopt it in the near future, recognizing its economic benefits. However, navigating the norms and a fragmented patchwork of proposed and enacted state and federal regulations on AI remains a top concern for most small businesses.

With AI technologies continuing to gain adoption in the market, it’s become the hot topic in Washington, sparking discussions on how AI benefits the small business economy while also considering ways it could impact small businesses and AI startups. Here are four implications for small businesses:

To infinity and beyond!

By incorporating AI into their operations, small businesses are harnessing its potential, especially in marketing and customer service, where it’s been most effective. AI has also been useful for small businesses when it comes to administrative automation, sales, and gathering business insights. Small business owners that use AI report that it not only helped their business operate more efficiently (82%) but has helped them to compete with larger firms (77%), limit cost increases (69%), and grow in challenging conditions (69%).

AI startups developing models, services, and products that deploy AI technologies operate across various sectors. As AI technology continues to evolve, the use cases for small businesses are endless. There are incentives today that encourage greater innovation in this space, which is why the U.S. continues to be a leader in AI. Yet, many small businesses or startups are uncertain or unaware of the benefits, creating an education and technology literacy gap that must be addressed to ensure equitable opportunities.

It’s all about the data.

While AI technologies hold great potential for small businesses, there are some common concerns with the use of AI systems, including the security and privacy of the data used, both for small businesses and their consumers. To progress, AI systems require increasing amounts of data to improve utility and reliability. This creates privacy and security concerns over the amount of personal information available and fears around possible misuse—including bias against underrepresented groups. Policymakers need to address these concerns without stifling the growth of technology.

With great power comes great responsibility.

A growing emphasis on the concept of “responsible AI” highlights the importance of safety, transparency, and ethics in AI development and application. Proponents of responsible AI believe a widely adopted, comprehensive framework of best practices will build greater trust in and increase use of AI among organizations and individuals and ensure that AI utilization is reliable and fair.

Major developers of AI products, like Google, Microsoft, and Meta, have already created their own blueprints or guidance for responsible AI. The White House and members of Congress have incorporated the responsible AI approach into their deployment of AI as well. Sen. Chuck Schumer (D-NY) has proposed the SAFE Innovation Framework to outline a responsible AI policy response for legislators to incorporate into future AI bills. The White House Office of Science and Technology Policy (OSTP) published the blueprint for an AI Bill of Rights, outlining principles for consideration in AI design and implementation.

The National Institute of Standards and Technology (NIST) also published the AI Risk Management Framework, which provides a voluntary framework and foundation for future policies and guidance for regulators.

Building the plane while flying it.

Policymakers find themselves grappling with the challenges of creating regulations that keep pace with AI’s rapid evolution in sectors such as health care, finance, creative spaces, and national security. AI governance must tackle all stages of the AI lifecycle, from design to application, so that businesses that create AI products and businesses that use AI tools are not disadvantaged by patchwork regulation. Legislators will need to consider how existing laws currently regulate AI as they chart a course for future governance frameworks, all while supporting innovation.

In addition to several policy frameworks already published, policymakers at both ends of Pennsylvania Avenue are proposing legislation and executive orders. Multiple bipartisan AI bills have been introduced this year with implications for small business owners.

President Biden’s recent executive order on Safe, Secure, and Trustworthy Artificial Intelligence addresses a range of issues from safety to privacy and equity to workforce. For entrepreneurs and small businesses developing new AI tools, as well as those adopting them, the executive order:

  • creates a pilot program implementing the National Artificial Intelligence Research Resource (NAIRR) to level the playing field on AI research and access by providing access to datasets and computing resources and testing AI practices—and expanded grants for research in areas like health care and climate change;
  • directs the Small Business Administration (SBA) to support AI innovation via the Regional Innovation Cluster program and the Growth Accelerator Fund Competition; and
  • calls on SBA to assess the extent to which existing small business programs, including capital access programs, support small businesses’ procurement of AI technologies.

Amid the ongoing dialogue, small businesses and startups can continue to leverage the opportunities presented by AI systems, provided measures are in place to mitigate its misuse and promote AI education. As legislators work to establish an AI regulatory framework, BPC is actively engaged in conversation with small businesses and public officials through roundtables and events to contribute to informed policymaking in Washington and better explain the benefits of AI technologies for small businesses. Watch our latest event with SBA Associate Administrator Bailey DeVries and our event on the future of AI governance.

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