How SMBs and Large Platforms Can Succeed Together

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A peloton for small business

I wouldn’t say that everything I ever learned about business came to me wearing padded shorts during long training rides on a road bike. But at least one lesson holds true, and it just might answer the old question about how any small business competes with size, scale, wealth, and market presence of the bigger brands.

In cycling, that answer is the peloton. We watched the magic of that pack of riders as the Tour de France raced toward its finish in Paris. For small business, it’s a peloton of a different kind. In today’s vernacular, it’s called a platform. Think of it as an extended community of capability, help and support.

A cycling peloton is the organizing framework of individuals and teams — for cooperation, shared effort, sustained performance. It’s a beautiful thing — an organic community of purpose that creates speed, momentum, efficiency and mutual benefit.

In business, not so much. There hasn’t been much of a peloton effect in that competition, especially among small businesses. It’s typically one “rider” against the world; survival of the fittest; winners and losers in a big zero-sum marketplace with minimal cooperation, aside from some isolated instances of joint marketing or acquisitions to fill gaps in a portfolio.

That’s the way it’s been until fairly recently, when collectives like Amazon, Expedia, and Uber validated the power of digital platforms as shared, trusted venues of commerce or other forms of business interaction – including access to capabilities that would be hard or impossible to source in a strictly physical world.

That opportunity is new, it’s got vast power and potential for small businesses.

McKinsey estimates that last year $7 trillion was exchanged on these digital platforms. By 2025, that’s projected to increase to around $60 trillion, or nearly one-third of all global commerce. An Accenture study conducted with the World Economic Forum finds that platforms for business-to-business transactions alone could account for $10 trillion in socio-economic value between 2016 and 2025.

Even if those estimates are high, and high by wide margins, there’s something important happening here. These business platforms take a few forms:

For peer-to-peer interaction, like LinkedIn, Match.com, or Facebook;
As digital marketplaces — think eBay, Craigslist or Amazon;
Or as platforms of capability like the one we’re building at Xero for our small business customers — delivering support, expertise and services in a single venue that can lift the performance of every member of the community.

Why is this so relevant to small business?

Traditional wisdom says that around half of all small businesses won’t make it past five years. We know that those working with an accountant – versus managing their money with spreadsheets, file folders and out of shoe boxes — do much better. But at present, only about a third of all the small businesses in the US are getting that kind of professional accounting guidance. That gap represents an important consideration for any small business owner.

At another level, I view it as the opportunity to lift the GDP of the world — by building capability and access and connections across a community of individual “riders” with a shared purpose.

Xero was founded on a simple premise — that what we do can improve the lives of people in small business, primarily by simplifying the work of raising invoices, tracking collections and understanding at any point in time the health of their financial performance. That’s time they can reinvest in expansion, or spend time with their loved ones, or devote to improving life in the communities that support their operations.

Small businesses don’t have to go it alone. Tapping into the power of a platform of capability will increasingly be a fast path to leadership. The trick is finding your place, riding your line, and drawing speed, efficiency, and sustained performance from the community.