How MSMEs Can Leverage AI For Growth Experts acknowledge the immense potential of AI in transforming operations, driving growth and overcoming financial challenges within the MSME sector

India's MSME sector is the backbone of the country's economy, employing millions and contributing significantly to GDP growth. However, these small businesses often face significant challenges in scaling up and remaining competitive in a rapidly evolving market. Artificial Intelligence (AI) is a game-changing technology that can help MSMEs in India overcome traditional limitations and unlock new opportunities for growth, innovation and success. shed light on how AI can be a game-changer for Micro, Small and Medium Enterprises (MSMEs). Experts acknowledge the immense potential of AI in transforming operations, driving growth and overcoming financial challenges within the MSME sector.

AI's Impact on MSMEs

Shiv Kumar Y, managing director, commercial and SMB, Cisco India & SAARC, highlighted AI's ability to enhance supply chain management, CRM and financial tools, stating, "The overall objective of AI is that how do we make some of these use cases earlier in a traditional environment which we were not able to solve or it was taking longer time or it was time consuming or it was not cost efficient. Think about it, that AI can be one of the leverages for you to use that same use case and then try to solve those problems."

In supply chain management, for example, AI can predict inventory needs based on patterns in the data, preventing overstocking and reducing costs. "If you have the ability of a system to predict based on a pattern that you don't need this inventory for the next two days, think about the impact it would make," Kumar explained. This kind of real-time prediction improves not only cost efficiency but also operational agility.

Similarly, in customer relationship management (CRM), the integration of AI chatbots is making a profound difference. Many MSMEs have adopted chatbots to handle customer queries without the need for large call centers, thus saving on operational costs. "Today, when you visit any website, the first thing you encounter is a chatbot, not a phone number," Kumar pointed out, underlining how this technology can improve customer satisfaction while minimizing human resource costs.

MSMEs face financial barriers in adopting AI: the initial perception of AI as a costly investment is a misconception. Addressing this concern, Rampawan Kumar, managing director, LBM Solutions, Chair-FICCI CMSME Punjab, advocated for a step-by-step approach where MSMEs can start small and expand as they see the benefits, explaining, "You don't need to immediately implement AI across the entire organization. Start with one area, such as email automation or customer support, and then expand from there."

Rampawan shared an example from his own experience of implementing a chatbot for an event in Chandigarh. "We created a simple AI-based chatbot for event registration, and it helped us filter the right prospects. Out of 1,200 registrations, the chatbot did the work of figuring out the right participants without needing any manual intervention, saving time and cost," he revealed.

Abhijit Banerjee, head of business development, factory automation, Siemens India, added another layer to this by suggesting alternative financial models for AI adoption by stating, "There's no need to think of AI as a huge upfront investment. Many solutions can be acquired under financing models, such as pay-as-you-use or subscription-based services. As MSMEs leverage the benefits of AI, they can pay for it in increments rather than making a large capital expenditure."

Banerjee further elaborated on the importance of understanding the return on investment (ROI) from AI. He pointed out that while it's difficult to measure the ROI of AI immediately, its benefits in increasing productivity, improving efficiency and offering operational flexibility are undeniable. "As MSMEs produce more varieties of products and come under cost pressures, AI helps by automating complex tasks, increasing productivity and reducing errors," Banerjee explained.

Pankaj Mathur, co-founder & president, CogniTensor technologies, echoed similar sentiments, stressing that the financial cost of AI is far smaller than many MSMEs imagine. He argued that businesses should think of AI as an operational expense (opex) rather than a capital expense (capex), given that many AI services are available on subscription. "You don't need to plan a huge capex for AI. Start with one small use case, and as it proves valuable, additional use cases will follow," Mathur advised.

AI is a long-term investment for MSME growth

When asked about the first steps MSMEs should take when implementing AI, Kumar emphasized that MSMEs don't need to reinvent the wheel by stating, "Not every MSME has the capability to build AI systems from scratch, but they can certainly adopt best practices from larger players in their industry. You don't have to be an inventor, but you can be an adopter."

One key takeaway was the need for data readiness. Mathur explained that before any AI implementation, MSMEs must ensure that their data is in order. "The first step in implementing AI is getting your data right. AI thrives on good, clean data and once you have that, you can start applying AI to solve business problems," Mathur said.

He also outlined the concept of starting with a single use case, typically a high-impact area like sales or finance, where the results can be clearly seen. As that use case delivers value, MSMEs can gradually expand their AI initiatives across other departments.

Rampawan added that it's not just about automating processes but improving decision-making. He shared his own experience of using AI tools daily by revealing, "I use AI tools for around two hours each day, whether it's writing emails, analyzing reports or gathering knowledge. It saves time, energy and helps in making more informed decisions."

AI is not merely a technology trend but a transformative tool that can elevate MSMEs to new levels of efficiency and competitiveness. Kumar encapsulated the essence of AI's role in MSMEs by saying, "AI can enable MSMEs to reach a higher level. It's not about whether you can afford AI, but whether you can afford not to use it. AI is the future, and MSMEs must adopt it to stay competitive."

AI's ability to enhance productivity, streamline operations, and reduce costs makes it a powerful asset for MSMEs, especially in a highly competitive market. With the right mindset, careful planning, and a focus on data readiness, MSMEs can implement AI in manageable, cost-effective ways. The key is to start small, measure the impact and expand as the business grows.

Speaking to Entrepreneur India, Shiv Kumar, MD, Cisco India & SAARC stated, "There is no gap based on the geography, but it all is emerging. The world is flat now, so you never know from which country who is working on which technology. There is a lot of innovation which is happening across the world, including India as well as the western world. So there's absolutely no gap, but there's a lot of specific research which is happening in various institutes across India as well as the United States. MSMEs as long as they have the access to the technology, there is no limit for their growth and there's no boundary where they can do business with, and AI brings in that advantage for the MSMEs."

AI is not just for large enterprises. MSMEs too can revolutionize their operations, improve decision-making and drive growth by embracing AI and other advanced technologies.

The speakers were speaking in a panel discussion on 'Revolutionizing MSME Sector with Artificial Intelligence and Tech' at the 10th FICCI CMSME National Conference 2024.