Here’s how the European Union can make AI work for SMEs

  • DIGITAL SME has published a position paper in response to the European Commission’s consultation on its White Paper on AI, proposing policy measures to support the uptake of AI among SMEs in the EU.

  • A successful European AI strategy, policy actions and a potential regulatory framework need to consider the different needs and speeds of SMEs rather than proposing one-size-fits-all measures.

  • In a series of consultations, DIGITAL SME identified access to data and financing as key barriers to innovation for AI-developing SMEs

The AI-revolution is just starting, and Europe already seems to be behind. While the EU has a large number of AI researchers, there is a general perception that innovation happens elsewhere—e.g. in the US or China. The European Commission has addressed this concern with a “White Paper on AI”[1] published earlier this year. As the representative of ICT SMEs in Europe, DIGITAL SME has answered the EC’s consultation on this White Paper with input from our members and the SME Focus Group on AI.[2] You can find this new position paper here. The long and short of it: It is important that policy measures aimed at increasing AI-uptake be broad enough to reach the wider SME-base, but targeted enough to support frontrunners driving innovation.

“Access to data and financing” the biggest hurdles for SMEs

In a series of consultations conducted by DIGITAL SME, members of the SME Focus Group on AI identified access to data and financing as the key barriers to innovation and development of AI technology. “When it comes to financing and innovation, an aspect often brought up by our members is that the US and even China seem to be much quicker and less bureaucratic in providing cash to fund and scale innovative ideas”, remarked DIGITAL SME President Dr Oliver Grün upon submitting the consultation results to the EC. Although some SMEs are among Europe’s frontrunners in AI development, small businesses generally have less resources than larger players to invest in innovation—not to speak of learning and adapting to EU regulation, another issue mentioned by the SMEs we consulted.

Innovation policy and impact assessments instead of “one-size-fits-all” regulation

We need to foster a strong European AI ecosystem by providing the grounds in terms of data and innovation policy, but also by strengthening market forces and disruption rather than over-regulating”, Dr Grün is convinced. Any legal framework for AI would need to build on the development of a clear definition of AI as well as of a clear assessment-method of high-risk applications of the technology. In addition, any regulation should be preceded by an impact assessment to evaluate potential risks to SME-led innovation in AI.

If the Commission decides to implement regulation after such an assessment, it should be carefully tailored to address a specific issue instead of being too broad and risking innovation-stifling spillover effects. It is important that any regulatory proposal is fit for SMEs and avoids rules which are up to interpretation or require extensive documentation efforts.

Policy options to foster AI innovation proposed in the position paper range from European data spaces to industry-driven standardisation in APIs and data formats. Since the academic language about AI is often unintelligible to SMEs, there might be a need for “AI communicators” to facilitate understanding and increase innovation. Another proposal by the consultees includes an improved tax regime that incentivises investment in AI-based technology, e.g. by offering more incentives for projects with early technology-readiness levels.

Strategic dominance as a result of advanced AI: an overlooked “high-risk” problem?

When it comes to high-risk issues in AI, there seems to be an overlooked problem next to privacy and cultural bias: strategic dominance by single players as a result of advanced AI. In the long term, if complex models can anticipate trends in any field, this will provide unforeseeable and unlimited advantages to a player, be it at business or governance-level. The high risks identified in the White Paper for society are important, but high-risk may also have to be considered from a business and competition angle.

A way forward for AI and SMEs

If Europe wants to become a global leader in AI, we have to strengthen our digital frontrunners, many of which are SMEs and startups. To support these frontrunners with the best possible policy- and legal framework to innovate in AI, the Commission could install a “Multi-stakeholder group on AI” that gives a strong voice to smaller player’s needs. These and many more proposal can be found in DIGITAL SME’s newest position paper. We are glad to have contributed to the Commission’s consultation and stand ready to offer additional support.

[1] The White Paper proposes measures that will streamline research, foster collaboration between Member States and increase investment into AI development and deployment and policy options for a future EU regulatory framework that would determine the types of legal requirements that would apply to relevant actors, with a particular focus on high-risk applications.
[2]The SME Focus Group on AI is a joint initiative by the EC’s Joint Research Centre and DIGITAL SME. More info: