Australian SMEs rush into AI adoption without clear strategies
Australian small and medium-sized enterprises are adopting artificial intelligence without formal strategies or roadmaps, according to a new research report from Decidr.
The National AI Readiness Index Report 2025 found that 76% of SMEs have yet to develop a clear AI strategy, even though 83% anticipate that AI will significantly impact their business within the next year. The report also revealed that 44% of respondents consider AI an urgent priority for their organisations.
Lack of clear strategy
The research, conducted in partnership with strategic insights consultancy Nature, suggests that a majority of SMEs are "trapped in the shallow end" of AI adoption. Most businesses are using basic AI-powered tools to help staff work more efficiently rather than more complex systems capable of transforming business operations and creating new revenue streams.
Decidr Executive Director, David Brudenell, commented on the findings: "Almost 70% of SME decision makers believe they understand the AI capabilities required to develop or maintain a competitive advantage, but this data shows actual choices being made reflect a fundamental misunderstanding of how value can be delivered from AI."
The study highlighted that AI tool usage among SMEs is widespread, with 92% of businesses reporting the use of platforms such as ChatGPT and Microsoft Copilot. However, only 19% of businesses reported using advanced AI systems intended to drive tangible business outcomes.
Barriers to adoption
The report identified budget constraints (28%) and security concerns (29%) as the major challenges facing SMEs in their efforts to implement AI. These issues have resulted in businesses focusing AI initiatives on cost-cutting and efficiency, with 57% of respondents prioritising efficiency improvements, while only 25% are seeking to use AI for revenue growth.
Mr Brudenell continued, "Too many businesses are treating AI as an expense to manage rather than an engine for growth. When three-quarters of SMEs are making urgent AI investments without a roadmap, many run the risk of not seeing the forest for the trees when it comes to long term, sustainable and secure adoption of AI that gives them a competitive advantage. Instead, they are rushing to meet immediate needs. What's most alarming is that only 25% cite competitive pressure as an AI driver at all. Many businesses don't realise their competitors might already be pulling ahead through smarter AI strategies."
The survey also found that confidence among SMEs in implementing AI was limited, with only 39% reporting they felt assured in their ability to roll out AI technology across their operations.
Focus areas and missed opportunities
When questioned about where AI was expected to deliver the most benefit, marketing and customer support ranked equally highly, with 46% each. According to the report, these areas are mostly being targeted for efficiency improvements and cost reduction, rather than enhancing growth or customer experience. Human resources was the least cited area for AI benefit at 27%, which the report indicated as a missed opportunity for workforce optimisation.
Decidr's research also noted that sectors such as technology and professional services expressed the most urgency in adopting AI (52%), but still faced significant implementation complexities.
Mr Brudenell added, "The market is absolutely ready for transformative AI, but budget and security concerns are pushing businesses toward basic tools that don't deliver competitive returns.
"This creates a dangerous cycle where SMEs invest in AI but don't see real advantages, making them hesitant to pursue the strategic solutions they actually need."
The report segmented SMEs into four categories based on their AI adoption journey. 'Trailblazers' (17%) are leading with clear strategies focused on growth; 'White knucklers' (24%) are under pressure to act but hampered by complexity; 'Tinkerers' (36%) are experimenting without coordinated leadership; and 'Sleepwalkers' (23%) have minimal exposure, often in sectors like natural resources and public services.
When presented with integrated AI concepts that could be implemented alongside existing systems, 48% of Trailblazers and 39% of White knucklers indicated they would implement such solutions immediately, signalling interest in more strategic applications of AI.
Methodology
The National AI Readiness Index Report 2025 was based on a survey, conducted by Nature, of 1,042 decision-makers in Australian businesses with between 20 and 500 employees and revenue in excess of AUD $200,000. Results were weighted to reflect national business trends by size, industry, and location.
