Mumbai: The adoption of Artificial Intelligence (AI) in small and medium enterprises (SMEs) has the potential to transform business operations, enhance productivity, and drive economic growth. However, despite its promise, the integration of AI into SMEs remains slow, hindered by challenges such as limited awareness, financial constraints, and a lack of accessible solutions.
A report titled Transforming Small Businesses: An AI Playbook for India’s SMEs, by the World Economic Forum in partnership with IndiaAI, the Office of the Principal Scientific Adviser to the Government of India, and BCG X, emphasises that accelerating AI uptake will require a coordinated effort. This includes active participation from policymakers, industry experts, technology providers and the SMEs themselves.
Creating awareness is a critical first step in encouraging SMEs to embrace AI. Many business owners are aware of AI’s potential but struggle to understand how it can be applied to their specific operations. Establishing dedicated experience centres in SME clusters can help bridge this gap. These centres can showcase real-world use cases, provide demonstrations of sector-specific AI applications, and offer tools to calculate return on investment. By presenting tangible benefits and fostering peer-to-peer learning, experience centres can build trust and confidence among SMEs, encouraging them to take the first steps towards adoption.
Another effective strategy is the creation of AI sandboxes within industry clusters. These environments allow technology providers to develop and test AI solutions tailored to the unique needs of SMEs in specific sectors. By using local expertise and operational data, these sandboxes can produce pilot-ready solutions that address real challenges faced by businesses. This approach not only reduces the cost and risk of implementation but also ensures that solutions are relevant and practical for SMEs. Collaboration with research institutions and industry associations can further enhance the development of these tailored solutions.
Workforce capability is a key factor in successful AI adoption. SMEs often face a shortage of skilled workers and resistance to change among employees. Comprehensive training programmes can address these issues by equipping workers with the skills needed to operate AI systems and by demonstrating the technology’s potential to enhance, rather than replace, their roles. Reskilling initiatives delivered in regional languages can make training more accessible, while partnerships with trade unions and welfare boards can help build trust and reduce apprehension. For SME owners and managers, targeted workshops and tailored roadmaps can provide the knowledge and confidence needed to lead their organisations through the AI adoption process.
Equipping SMEs with the tools to assess their readiness for AI is another important step. An AI maturity index can serve as a self-assessment tool, helping businesses evaluate their current capabilities and identify gaps. By providing a clear roadmap for digital transformation, the index can guide SMEs in prioritising use cases that align with their strategic goals and operational needs. Integrating such an index into existing platforms, such as the Indian Government’s Udyam portal, can streamline the process and provide SMEs with tailored recommendations and benchmarks.
Access to affordable and user-friendly AI solutions is essential for widespread adoption. Many existing AI technologies are designed for large enterprises and are often too complex or costly for SMEs. Developing plug-and-play tools that integrate seamlessly with legacy systems can lower entry barriers and make AI more accessible. An AI solutions marketplace could serve as a central hub for SMEs to discover validated tools, compare costs, and access user reviews. Integrating this marketplace with platforms like India’s Open Network for Digital Commerce (ONDC) could further enhance accessibility and visibility.
Financial support is crucial to overcoming cost barriers, which remain one of the largest obstacles to AI adoption in SMEs. Governments can play a pivotal role by offering grants, subsidies, and tax credits specifically for AI-related investments. Cluster-based financing, where groups of SMEs pool resources to procure solutions, can also reduce individual costs and increase bargaining power. Partnerships with larger corporations can provide additional funding, while specialised lending products with flexible repayment terms can make AI investments more feasible for SMEs.
Recognising early adopters of AI can inspire confidence and encourage broader adoption across the SME ecosystem. Programmes that identify and celebrate SME pioneers in AI can showcase success stories and provide mentorship to other businesses. By highlighting tangible benefits and sharing lessons learned, these initiatives can build trust and create a supportive environment for AI adoption.
Accelerating the adoption of AI in SMEs requires a coordinated effort from all stakeholders. Governments must act as facilitators, providing infrastructure, financial support, and policy frameworks. Industry leaders and technology providers must develop accessible solutions and collaborate with SMEs to address their unique challenges. SMEs themselves must take proactive steps to assess their readiness, invest in skills, and engage with local ecosystems.
As SMEs form the backbone of many economies, their transformation through AI is not just an opportunity but a necessity. By addressing the barriers to adoption and fostering collaboration, stakeholders can unlock the full potential of AI, driving innovation, competitiveness, and growth in the SME sector.
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