Innovation in Action: Building AI Capacity in Canada’s Small Businesses

Small and medium-sized enterprises (SMEs) are the backbone of Canada’s economy, accounting for 90% of private-sector employment and driving growth across every region of the country. Yet many of these businesses face mounting pressures as digital transformation accelerates. Diversity Institute (DI) research reveals that while artificial intelligence promises to boost productivity and competitiveness, SMEs are faced with having to overcome a lack of resources, time and AI-related skills to adopt new technologies effectively. 

The DI’s Founder and Academic Director, Dr. Wendy Cukier has been meeting with SME groups this fall, sharing key insights on the potential impacts of AI along with strategies and tactics they can use to harness AI technologies to unlock growth. 

Addressing leaders at Building AI Capacity in SMEs: Overcoming Barriers and Addressing Skills Shortages — a webinar cohosted by the DI in partnership with the Ontario Chamber of Commerce (OCC) and Magnet — Dr. Cukier shared highlights from the DI’s recent reports:  Bridging the AI Gap in SMEs in Canada and Artificial Intelligence in Action for Small and Medium-Sized Enterprises, both funded by the Government of Canada's Future Skills Program. These topics were also featured in her presentation at the 2025 Aurora Chamber Business Summit.

The two reports reveal gaps and explore practical case studies of SMEs that are deploying AI to drive growth. Bridging the AI Gap in SMEs in Canada reinforces that SMEs need accessible tools, ecosystem support and confidence-building to close the gap between AI innovation and implementation. Artificial Intelligence in Action for Small and Medium-Sized Enterprises showcases practical case studies, including Toronto-based jewellery brand JENNY BIRD, which is using an AI-powered upsell tool to boost sales and streamline workflows, demonstrating how small teams are already using AI to personalize customer experiences and drive measurable growth.

Along with highlights from these in-depth reports and an overview of current AI technologies and tools, Dr. Cukier outlined strategies for utilizing AI to improve productivity and opportunities available to access skills and resources to do so.

These include Skills Bridge (external link) , an online learning hub designed specifically for small and medium-sized businesses. Powered by Magnet, Skills Bridge was created by the OCC in partnership with the DI and funded by the Government of Canada's Future Skills Program to provide SMEs with free, curated online training to strengthen their digital capacity in AI, leadership, HR practices, adaptability, while also enhancing their equity, diversity and inclusion initiatives. The virtual platform enables business leaders to access practical tools and learning opportunities to support long-term growth.

In her presentations, Dr. Cukier discussed what has become known as the Canadian AI paradox: while Canada is recognized globally for its leadership in AI research and innovation, the country continues to lag in AI adoption. This gap is shaped in part by Canada’s economic structure, in which SMEs account for a majority of private sector employment but often lack the resources, skills and internal capacity needed to integrate emerging technologies. Most rely on existing staff to explore and implement AI tools, making adoption uneven and difficult to measure. The result is a persistent skills gap that limits the ability of SMEs to fully leverage AI’s potential despite Canada’s strong global standing in the field.

Dr. Cukier emphasized that measuring AI adoption among Canadian SMEs remains a moving target, largely because studies define and assess “AI use” in different ways. Narrower definitions tend to produce lower estimates. For example, some 2023 studies focused specifically on machine learning report a 26% adoption rate (external link) , while Statistics Canada found just 12.2% of SMEs (external link)  used AI specifically “in the production of goods or delivery of services.” Broader definitions yield much higher figures. A recent BDC survey found that  (PDF file) 39% of businesses (external link)  reported using AI, but that number rose to 66% when respondents were given examples of AI-enabled tools such as automated translation or generative AI. Similarly, Microsoft’s 2025 SMB Report found 71% of SME decision-makers (external link)  use some form of AI. 

Dr. Cukier also highlighted examples of AI-enabled tools that can streamline operations for SMEs. These include platforms like Rippling—which automates key HR functions, from onboarding and payroll to benefits and software provisioning, reducing manual paperwork and ensuring consistent employee access—and customer service tools such as Kustomer which offer code-free chatbots and unified customer profiles to deliver personalized support and anticipate client needs. More accessible everyday tools, including Grammarly, Notion and Otter AI, can further enhance productivity by improving writing quality, organizing workflows and automating meeting transcription. Together, these tools demonstrate how AI can support SMEs in managing routine tasks and improving efficiency without requiring deep technical expertise.

AI adoption brings significant risks that SMEs must actively manage, noted Dr. Cukier. Limited transparency can obscure how models generate outputs, while bias in historical data can cause AI systems to reproduce systemic inequalities. Generative tools remain prone to hallucinations, producing incorrect or fabricated information, and greater reliance on automated systems increases exposure to cybersecurity threats. She emphasized that responsible AI adoption requires keeping humans in the loop, ensuring oversight, accountability and sound judgment as businesses integrate these tools.

She encouraged SME leaders to start now, focusing on small, practical wins rather than waiting for perfect solutions. AI can act as a capacity multiplier by taking initial passes at routine tasks, such as building first drafts, summaries and data entry, allowing small teams to focus on customers and decision-making. It can improve quality and consistency by standardizing tone and checklists, accelerate decisions by surfacing simple, explainable insights and expand a business’s reach by generating variations of messages and online content. Dr. Cukier recommended beginning with a single workflow, using familiar tools, and making incremental improvements, noting that data and cybersecurity form the foundation of any effective AI strategy. Businesses do not need large budgets to experiment, learn and scale what works, she concluded; free training and resources geared to SMEs are vital in building confidence, capacity and clear pathways that help Canada’s vibrant small businesses unlock the transformative power of AI and drive better business outcomes.