Decidr

Small and medium-sized enterprises (SMEs) are the backbone of the Australian economy. With 2.5 million of them making up 98% of the business landscape, their success is Australia’s success. On the surface, the economy looks strong. Growth is steady, employment levels are high and businesses continue to operate. But beneath that, there’s a growing problem.

Productivity is in decline.

An economic analysis reveals that while Australia’s economy appears stable, this is largely driven by migration. More people arriving means more spending and more workers filling jobs, but the country isn’t getting better at what it does. Productivity, measured by GDP per hours worked, is the same as it was in 2016. If that doesn’t concern you. It should. Because in business terms, we’re working more but not creating more value. And that’s unsustainable.

For SMEs, this presents both a challenge and an opportunity. The businesses that prioritise productivity i.e. generating more revenue with the same or fewer inputs, will outperform those that focus solely on efficiency i.e. cutting costs and streamlining operations. AI is a game-changer in both areas, but its greatest impact will be in unlocking productivity gains that SMEs desperately need.

The realities SMEs face today

Running a small business has never been easy, but in the current climate, it’s particularly brutal. Inflation eats into margins, supply chain issues persist and the cost of acquiring customers continues to climb. Meanwhile, regulatory complexities demand more time and resources, forcing SMEs to operate with the agility of a startup but the compliance standards of a large corporation.

Then there’s the workforce conundrum. Finding the right talent is one battle but retaining skilled employees in a world of flexible work arrangements and shifting expectations is another. Many SMEs struggle to compete with the salaries, benefits and career progression opportunities offered by larger firms.

What’s more, technology has introduced both opportunities and threats. AI, automation and data-driven decision-making can offer efficiency gains but they also require investment, expertise and a clear strategy. Too often, SMEs either overinvest in the wrong tools or underinvest, leaving them behind competitors who adapt faster.

The real issue, though, is productivity. Too many businesses are running harder on the same spot, focusing on survival rather than growth. Without a shift in mindset and the right tools, many will be stuck in a cycle of effort without impact.

The productivity and efficiency opportunity

In our workshops with SME leaders, we run an exercise to identify where businesses see opportunities to improve. We break this down into two categories:

1. Productivity: Increasing revenue through better workforce utilisation, training, reporting, rostering, recruitment, marketing and customer-facing operations.
2. Efficiency: Lowering the cost base by improving payroll, invoicing, customer service resolution times, removing repetition and enhancing data quality.

AI can drive improvements in both areas, but the highest priority should be productivity. A business that becomes 20% more efficient is still limited by its existing revenue potential. A business that becomes 20% more productive creates more value, generates more revenue and ultimately secures its future.

Growth solutions SMEs can leverage today

SMEs that embrace AI strategically can transform their productivity and position themselves for long-term success. For example:

• AI-powered workforce utilisation: AI can help businesses optimise staffing, improve rostering and ensure the right people are in the right roles at the right time. Smarter recruitment and training strategies, powered by AI-driven insights, mean SMEs can build and retain stronger teams.
• Data-driven decision making: Real-time analytics allow businesses to make faster, more informed decisions. AI doesn’t just provide reports, it offers recommendations—helping SMEs spot opportunities, predict trends and stay ahead of demand.
• Marketing and customer engagement: AI enables hyper-personalised marketing at scale. SMEs that use AI-driven content, automated outreach and intelligent customer segmentation can reach more people with less effort and drive higher engagement.
• Embedded AI in customer-facing roles: AI chatbots and virtual assistants can handle customer queries, process orders and resolve issues instantly. This frees up human teams to focus on high-value interactions that build relationships and drive revenue.
• Smarter financial management: AI-powered tools don’t just track spending, they identify risks and opportunities. Automated forecasting and intelligent invoicing reduce cash flow issues and allow businesses to plan with confidence.

The future of SME productivity

The next wave of SME technology will be defined by productivity-first solutions. Businesses that adopt these early will gain a significant advantage.

• Agentic AI: Unlike traditional AI, which reacts to human input, agentic AI can take autonomous actions based on set goals. For SMEs, this means AI handling customer service, lead generation and inventory management without constant oversight.
• No-code and low-code automation: As SMEs become more dependent on digital tools, no-code and low-code platforms will allow non-technical teams to build, customise and scale AI-driven solutions without hiring developers.
• Decentralised business models: Blockchain and Decentralised Autonomous Organisations (DAOs) will enable SMEs to operate more flexibly, access global markets and reduce reliance on traditional financial structures.
• Embedded AI across business operations: AI will move beyond standalone tools and into every aspect of business, from HR to finance to marketing. The ability to integrate AI seamlessly will be a key differentiator.

Where to from here?

SMEs that prioritise productivity will define the next era of business success. AI is no longer just a tool for the big boys at the top end of town. It’s the key to unlocking growth, increasing revenue and staying competitive in an increasingly complex landscape.