The global economy is increasingly driven by digital infrastructure; yet, a persistent gap remains between large corporations and small to medium-sized enterprises (SMEs) in terms of technology adoption. A comprehensive 2023 OECD survey across seven countries reveals both encouraging progress and concerning challenges as millions of small businesses navigate their digital transformation journeys. Download Full Report MSME-report-OECD
The Stakes Are Higher Than Ever
For SMEs—which represent the backbone of most economies—digitalization isn’t just about staying competitive; it’s about survival and growth in an increasingly connected world. Digital technologies offer these businesses unprecedented opportunities to innovate, scale operations, access new markets, and transition to more sustainable business models.
Yet the reality on the ground tells a complex story. While SME digital connectivity has improved dramatically since the COVID-19 pandemic, with ultra-fast broadband adoption increasing from 23% to 52% among small businesses between 2019 and 2022, these companies continue to lag behind their larger counterparts in adopting productivity-enhancing technologies.
The Generative AI Revolution: A Game Changer?
Perhaps the most significant development in recent years has been the emergence of accessible artificial intelligence tools. Generative AI platforms, such as ChatGPT, Copilot, and Claude, have democratized access to sophisticated AI capabilities that were once the exclusive domain of tech giants.
The survey findings are striking: within just one year of public release, 18% of SMEs across France, Germany, Italy, Japan, Korea, Spain, and the United States are already experimenting with generative AI services. More importantly, 57% of these businesses believe the potential benefits outweigh the associated risks.
“The advent of affordable and accessible Large Language Models has now put that potential in the hands of SMEs,” the OECD report notes. “By helping automate manual and repetitive tasks, they free up human resources for tasks that demand greater complexity and creativity.”
This represents a fundamental shift. For the first time, small businesses can access AI capabilities that help level the playing field with larger enterprises—potentially addressing longstanding productivity gaps through technology rather than scale.
Data-Driven Decisions Become the Norm
One of the survey’s most encouraging findings is that 72% of SMEs now use data to support decision-making, underscoring how data-driven insights have become central to modern business strategies. Companies that embrace data-driven decision-making report higher satisfaction with their overall digitalization efforts.
This trend also extends to sustainability initiatives. Software-based energy efficiency technologies, including energy monitoring systems and smart meters, enable businesses to gather consumption data and optimize resource usage automatically. However, adoption varies significantly by region—59% of European companies have environmental monitoring systems in place, compared to just 31% in Korea and the United States.
The Cybersecurity Challenge
While businesses are embracing digital tools, cybersecurity practices remain worryingly fragmented. The survey reveals that 19% of SMEs admit to having no cybersecurity measures in place, while 44% rely on just one or two basic protections.
The disparities are stark across countries: 41% of Korean businesses report no cybersecurity measures, compared to just 4% in EU countries surveyed. Even more concerning, despite human error being a leading cause of security breaches, only 11% of businesses invest in cybersecurity training for their employees.
One Size Doesn’t Fit All
The research highlights that the digitalization needs of SMEs vary significantly based on their operational practices, size, and sector. The primary drivers for digital adoption include:
- Increasing domestic sales (47% of businesses)
- Expanding customer reach (41%)
- Process automation (40%, rising to 48% among highly digitalized businesses)
Different business models pursue other strategies. Hybrid businesses—those operating both online and offline—are more likely to prioritize exploring new revenue streams (26%), while purely online companies focus more heavily on cost reduction (29%).
Sector differences are equally pronounced. While over 60% of wholesale trade, manufacturing, and professional services implement hybrid practices, 52% of retailers operate exclusively online. The food and beverage sector remains predominantly traditional, with 52% conducting business solely in person.
The Support Gap
Despite various government programs designed to support SME digitalization—from the EU’s “Digital Europe” program to Japan’s “IT Implementation Subsidies”—awareness of these initiatives remains surprisingly low. Only 18% of SMEs report being knowledgeable about available government support for digital adoption.
Even among businesses aware of these programs, uptake remains limited. In Korea, fewer than 31% of aware companies take advantage of available measures, while in Japan, the figure drops to just 25%. This suggests that barriers extend beyond awareness to include potentially burdensome application processes or misalignment between program offerings and the actual needs of SMEs.
Looking Forward: The Path to Digital Inclusion
The survey findings paint a picture of an economy in transition. While SMEs have made significant strides in digitalization since the pandemic, sustained effort is required to close the gap with larger enterprises and address the diverse needs of different business types.
Key recommendations emerging from the research include:
For Policymakers:
- Balance structural and targeted policies to address sector-specific barriers
- Improve awareness and accessibility of support programs
- Foster cooperation between government agencies, digital service providers, and SMEs
For Businesses:
- Prioritize cybersecurity training and robust security measures
- Embrace data-driven decision-making processes
- Explore generative AI tools for automating routine tasks
For the Digital Ecosystem:
- Develop SME-specific solutions that address resource constraints
- Provide ongoing support and training beyond initial implementation
- Create partnerships that help smaller businesses access advanced technologies
The Bottom Line
The digitalization of SMEs represents both a massive opportunity and a critical challenge for global economic growth. While generative AI and other emerging technologies offer unprecedented potential to level the playing field, success will require coordinated efforts from governments, technology providers, and the businesses themselves.
As the OECD researchers conclude: “Co-operation between governments, large and small digital service providers, SMEs and entrepreneurs is essential to ensure the continued digital transformation of SMEs and their fundamental contribution towards a more productive and sustainable economy.”
The digital divide between large and small businesses may be narrowing, but closing it entirely will require sustained commitment from all stakeholders in the innovation ecosystem. The companies that can successfully navigate this transformation won’t just survive—they’ll be positioned to thrive in an increasingly digital future.
This article is based on findings from the 2023 OECD D4SME survey, which examined digital practices among SMEs across France, Germany, Italy, Japan, Korea, Spain, and the United States. The survey covered topics including the adoption of generative AI, data utilization, cybersecurity practices, and awareness of government support programs.