The pandemic has accelerated the uptake of digital technologies by small and medium sized enterprises (SMEs). This adoption was largely confined to simple tools, such as websites and e-commerce platforms, as opposed to more analytic systems like artificial intelligence (AI). Large firms, by contrast, are adopting AI at a much faster rate - nearly twice as fast in the EU, according to a 2020 Ipsos survey.

This is a missed opportunity for SMEs, which represent about 90% of global businesses and employ nearly half of the world’s labor force. AI is predicted to add up to $15.7trn to the global economy by 2030, including in sectors where SMEs are traditionally well represented, such as retail ($1.7trn) or transport and logistics ($1trn).

It is also a risk for the global economy. Left unchecked, this uneven AI adoption rate could widen the existing productivity gap between SMEs and large firms, which is often in the double digits – France’s average gap is 26%, for instance, while Turkey’s is around 60%, according to research by McKinsey. Halving the productivity gap could add $15trn in economic value, according to the same study.

This opportunity is not lost on the G20, whose digital ministers met on August 5th to discuss how to accelerate the digital transformation of the economy, identifying the bolstering of SMEs AI capabilities as one of twelve key areas of action.

Delivering on that objective will require addressing the barriers SME face in adopting AI. Though these are often context specific, they typically include a lack of access to relevant data or to the financing needed to implement AI solutions. It can sometimes also involve a lack of awareness of AI solutions and how these might fit into their business strategy.

Governments have tried to tackle those barriers by increasing access to finance and providing training and adoption programs. Singapore’s SMEs Go Digital programme, for instance, has helped more than 75,000 SMEs adopt digital technologies at each stage of growth, including by covering up to 80% of costs for a list of pre-approved solutions. Italy similarly incentivizes the digitization of firms via a tax credit inversely linked to the size of the firm.

Another way for SMEs to leverage AI is through the purchase of AI-powered services, often from larger third-party providers. Most large cloud computing companies now provide AI services specifically tailored to SMEs, for instance. This can prove more attractive for small companies, both because there is no need for capital investment and because it provides access to greater technical sophistication. 59% of EU firms use of this approach, for example, while another 38% hire external providers to develop AI applications.

Whether building AI solutions from scratch or using pre-packaged solutions, what ultimately matters is that SMEs leverage AI where it can help them most. And with an uncertain recovery ahead, AI-powered efficiency and predictive capacity might just be what they need.

Looking Out for the Little Guy: AI Adoption in SMEs