Transforming Small Businesses 2025

2.2 Key challenges to AI adoption identified from stakeholder perspectives The AI transformation journey from an SME perspective FIGURE 5 Phase 1 AI benefit-indifferent I do not know why I should adopt AI/ cannot see the benefits it could bring to mePhase 2 Curious but uninitiated I am aware of AI’s potential and that its deployment could benefit me but know nothing morePhase 3 Seeking a roadmap How should I go about my journey? What are the high- value use cases? Where do I begin?Phase 4 Mapping the resources What are the enablers to get to where I want to be? People, data, tools and equipment... Source: World Economic Forum To determine where an SME should start with AI, it is necessary to determine where it currently is on its journey. Every SME goes through four phases, as shown in Figure 5. Interviews indicate that most SMEs are at the second or third stage of their journey – aware that AI deployment could benefit them but they are not sure how. They have not studied high-value use cases nor have they been able to identify partners for implementation or tools that could help them start out. In addition to being unaware of solutions, they are also unsure of the value proposition and returns for each solution. Furthermore, another problem faced by SMEs is the lack of inspiration, success stories and mentorship. Many SME owners hesitate to invest in AI due to the lack of clear visible proof of success within their industry ecosystem. Further, the lack of structured mentorship programmes means that SMEs struggle to understand the real implementation challenges. Addressing this gap by creating mentorship programmes and promoting local success stories can inspire SMEs to introduce AI into their organization. SMEs also lack the expertise to implement AI solutions in their business operations. Implementation partners/vendors can help SMEs bridge this gap by undertaking technology integration and implementation at reasonable prices. Connecting SMEs to a network of these partners can make the process easier and thereby increase adoption. Nurturing an ecosystem is as critical as enabling it. SMEs need a platform where they can learn about AI, its implications for small businesses and the value potential of implementing different AI use cases. In order to do this, SMEs at different phases of their AI journey need to be brought together. Enterprises at advanced stages of the journey can act as mentors and guides for other SMEs in the early phases. A peer network can be used to share experiences, challenges faced and opportunities unlocked. Most SMEs are aware that AI deployment could benefit them but they are not sure how.The perspectives shared by SME entrepreneurs, workers, industry bodies, start-ups and government stakeholders reflect a diverse but consistent set of concerns. Drawing from these ground-level insights, the team has synthesized the findings into four major categories of challenges that hinder AI adoption among MSMEs. These thematic areas form the basis for the framework and recommendations that follow. 1 The knowledge imperative – AI awareness 19 Transforming Small Businesses: An AI Playbook for India’s SMEs19