It’s no secret that Artificial Intelligence’s (AI) colossal impact has been felt from the smallest village to the largest multi-trillion conglomerate: the question really though is where SMEs sit in the layers of the sponge cake: Are they the icing, the sponge, or the edges allowing the baker to bind both the icing and the sponge?

The reality is though is SMEs despite their size punch above their weight from an economic standpoint. As an example, Scotland’s economy alone is 90% SMEs, and going into 2024 despite ongoing economic turbulence, felt a recent study from Three Business is forecasting SME turnover to increase from £2 trillion in 2023 to £2.3 trillion in 2024 [1].

With this in mind, where does AI sit in the mix, and what’s really the feeling of SMEs adopting such technology on the ground? 

AI landscape: Holistic thoughts

The way in which AI has been implemented over the years has resulted in game-changing, efficiency-driving use cases across a broad variety of industry verticals.

The Office for National Statistics (ONS), for example, published back in June 2023 an insightful piece on the changing appetite for the said technology across the consumer and business spectrum, with the Business and Insights Conditions survey identifying one in six businesses currently implementing at least one of the AI applications outlined (ie: utilizing AI for spam filters sat at 11%, 4% using AI for chatbots) [2] with interestingly only 1% of respondents utilizing AI for personalized shopping [2]: in some ways quite unusual considering recent data showcasing a shift in purchasing from brands creating personalized experiences aligning with the consumers' values. 

Outside of the example use cases outlined above, cybersecurity is a continually increasing area of importance - and concern - with 35% of businesses keen to improve their cybersecurity mechanisms as well as another 35% keen to utilize AI to improve efficiencies [2].

Looking at the ONS to the Department of Media, Culture, and Sport (AI in Business Study) completed back in 2022, 15% of businesses surveyed adopted at least one AI technology [3], with interestingly only 2% of businesses piloting AI and 10% planning to adopt AI in the future [3].

Back in 2022 this data would raise, and continually raises a point of contention in what could encourage the remaining 10% of businesses to adopt such technology. Following along similar lines, a World Economic Forum [4] and associated Microsoft Study paints a stark picture and brings the buzz back down to earth: cyber attacks rose by 300% with 50% of these being on SMEs, which are very much like blood in the water to a shark: low risk, high reward [5].

Worryingly, 60% of these small companies report being inoperable upon experiencing a cyber attack [5]. It’s really very much a cautiously played balancing act: chasing the triple-cooked chips with rosemary and lavender at the top of the economic tree or unseasoned fries and inoperability? In other words, AI might help on one side of the SME strategy to reduce cyber attacks but introduce a host of risks on the other. 

To add to an already challenging set of decision-making, the thoughts on whether to adopt the likes of Generative AI will be additionally causing boardroom tug of wars as a result of its larger-than-life economic potential, recently detailed in a McKinsey report on Economic Potential of Generative AI, where the said technology could outpace some countries standalone Gross Domestic Product (GDP). Take the UK, for example, which had a total GDP of £3.1 trillion back in 2021 and now Generative AI is estimated to add between £2.6 and £4.4 trillion per annum across the report’s 63 use cases [6]. Whilst this is a potentially seismic impact, SMEs will continue to bring a sizeable contribution to their respective economies, with or without Generative AI. They’re a staple piece of the economic makeup. 

Balancing AI sentiment and priorities! 

In amongst the potential of AI and the nice numbers alongside it, a picture of changing motivation of priorities has increasingly woven into the technology debate: the last four years have been dominated by a mix of world events including a pandemic, political instability, and economic uncertainty.

Taking the latter and the COVID-19 pandemic, the focus very much shifted to a combination of survival, adaptation, and for some companies, riding the wave of shift in consumer habits. Zoom and Shopify for example saw record growth and their valuations rose in tow as a result of the shift of working from home and the E-Commerce boom.

Combining these with a governmental focus on pulling out stops to keep businesses afloat through varying bounce-back schemes, investment in cutting-edge technologies was looked at by a select few.

With additional political instability entering the world stage back in February 2022 which saw inflation soar to record levels, the brakes were swiftly engaged for many in rebounding from COVID-19, and instead, attention turned to tackling decreasing consumer expenditure. What’ll be interesting is monitoring how AI adoption shifts post-late 2023 as inflation still remains higher than the UK government target of 2%. 

Furthermore, Savanta back in October 2023 surveyed 1000 businesses about their AI usage and noted a sizeable gap: 34% of medium/large businesses are already utilizing some form of AI compared to 14% of businesses under 250 employees [7].

With 29% of SMEs focused on prioritizing cash flow and 26% identifying a drop in customer demand [7], AI for some is just one of many tech tools they’d rather they’d rather skim over and glancingly read about, and most importantly, that's okay.

The beauty of technology is the choice: not solely the choice of tools and frameworks available, but the choice of whether it’ll really add value for the end consumer. Unless the SME has unicorn potential and major capital backing from the biggest player, the technology for some needs to be put on the agar plate and looked under the microscope.

However, what really puts things sharply into perspective is the future appetite for AI: 48% of organizations with less than 250 employees haven’t plans to use AI in the next year and instead are more focused on survival [7].

Whilst this is one of a number of pressing priorities for smaller businesses, the figure throws into the spotlight people waking up to the differences between the music-producing harmonies and the noise resulting in sour notes: AI isn’t there to solve every problem, it’s not there to be universally liked and more importantly, it’s not mandatory.

Final thoughts

Technology is often a field that’s guilty of showcasing itself as a magic wand: a simple flick paints a picture of effortless simplicity. Sure, to the consumer it may look like that, but the recent developments to regulate AI have released a cauldron of knowledge industry are grappling to understand both opportunities and implications.

There’s some wickedly cool stuff going on across AI right now, but there’s a danger that hype and priorities are going to get badly mixed up. Irrespective of how advanced AI gets, the sentiment of AI will continually shift, and in some cases, human decision-making on whether AI really is a value driver for SMEs will outsmart machines. 

Bibliography

[1] Three Report on Forecasted SME Turnover: Three Media Centre. (2023). UK SMEs expect a bumper 2024, looking ahead to next year with renewed ambition and optimism. [online] Available at: https://www.threemediacentre.co.uk/content/uk-smes-expect-a bumper-2024-looking-ahead-to-next-year-with-renewed-ambition-and-optimism/ [Accessed 11 Jan. 2024].

[2] Office National Statistics AI Appetite: www.ons.gov.uk. (n.d.). Understanding AI uptake and sentiment among people and businesses in the UK - Office for National Statistics. [online] Available at: https://www.ons.gov.uk/businessindustryandtrade/ itandinternetindustry/articles/ 

understandingaiuptakeandsentimentamongpeopleandbusinessesintheuk/june2023 [Accessed 11 Jan. 2024].

[3] Department for Media, Culture and Sport AI Activity in Business Report 2022: Evans, A. and Heimann, A. (2022). Acrobat Accessibility Report. [online] assets.publishing.service.gov.uk. Available at: https://assets.publishing.service.gov.uk/ media/61d87355e90e07037668e1bd/ 

AI_Activity_in_UK_Businesses_Report__Capital_Economics_and_DCMS__January_2022 __Web_accessible_.pdf [Accessed 11 Jan. 2024]

[4] World Economic Forum: AI Cyber and Sentiment Article: World Economic Forum. (2023). Generative AI for small and medium-sized businesses: Chaos or empowerment? [online] Available at: https://www.weforum.org/agenda/2023/07/generative-ai-small medium-sized-business/ [Accessed 10 Jan. 2024].

[5] Microsoft AI SME Cyber Security Study: Jakkal, V. (2022). Microsoft launches Defender for Business to help protect small and medium businesses. [online] Microsoft Security Blog. Available at: https://www.microsoft.com/en-us/security/blog/2022/05/02/ microsoft-launches-defender-for-business-to-help-protect-small-and-medium-businesses/ [Accessed 10 Jan. 2024]).

[6] McKinsey Economic Potential of Generative AI: Mckinsey (2023). Economic potential of generative AI | McKinsey. [online] www.mckinsey.com. Available at: https:// www.mckinsey.com/capabilities/mckinsey-digital/our-insights/the-economic-potential-of generative-ai-the-next-productivity-frontier. [Accessed 12 Jan. 2024].

[7] Attitudes towards AI Survey: savanta.com. (2023). Small businesses face hurdles in embracing AI - Savanta. [online] Available at: https://savanta.com/knowledge-centre/view/ small-businesses-face-hurdles-in-embracing-ai/. [Accessed 16 Jan.2024]