Adopting Artificial Intelligence in Danish SMEs: Barriers to Become a
Data Driven Company, Its Solutions and Benefits
Nadeem Iftikhar
a
and Finn Ebertsen Nordbjerg
University College of Northern Denmark, Aalborg 9200, Denmark
Keywords:
Industry 4.0, Artificial Intelligence, SMEs, Smart Manufacturing.
Abstract:
Artificial intelligence allows small and medium-sized enterprises (SMEs) in the manufacturing sector to im-
prove performance, reduce downtime and increase productivity. SMEs in Denmark are still struggling to
implement artificial intelligence based strategies since they face a range of challenges, such as business ap-
plications, data availability, organizational culture towards the acceptance of new technologies, investment in
new technologies, skills gap, development process and effective strategy. In the beginning, the paper describes
the challenges faced by SMEs in adopting artificial intelligence. Then, the paper suggests solutions to over-
come these challenges and discusses the importance of artificial intelligence as well as the opportunities it
offers to SMEs.
1 INTRODUCTION
Industry 4.0, also called fourth industrial revolution,
is the integration of IT and production systems. The
IT systems compromise of artificial intelligence, in-
dustrial robots, sensors, alarms, IoT, cloud com-
puting, image analysis, inventory management, data
analysis and mood/behaviour analysis. The produc-
tion systems include but not limited to enterprise re-
source planning (ERP), manufacturing execution sys-
tem (MES), control and hardware. The integration of
IT systems with production systems provides new in-
sights from previously hidden information and allows
for better decision making. Further, since 5G reduces
response times from minutes to milliseconds, artifi-
cial intelligence (AI) has become the main driving
force behind this industrial revolution in order to help
enterprises to improve yield, quality, performance, ef-
ficiency and to decrease product waste, downtime,
production and maintenance cost. AI is an broader
term that covers a wide range of concepts and tech-
nologies, including machine learning (ML) and deep
learning (DL). A survey of more than 500 Danish
companies (Colotla et al., 2016) concluded that most
of the companies are willing to change their business
models to adopt AI in order to become more produc-
tive and to improve customer as well as product ser-
vices. In spite of that most of the SMEs are left be-
a
https://orcid.org/0000-0003-4872-8546
hind in this race of embracing AI due to numerous
obstacles, just as, lack of expert knowledge, capabil-
ities and funds. Aiming to be a front-runner in the
use of AI, Denmark has formulated a National Strat-
egy for Artificial Intelligence
1
to boost research and
development in AI. The main aims of this strategy is
to establish better collaboration between researchers
and businesses, start new education programmes on
AI and raise an investment pool of DKK 1.5 (C 0.2)
billion based on public-private partnership to help en-
terprises adopt AI (O’Dwyer, 2019).
To summarize, the main contributions of this pa-
per are as follow:
Discussing the main barriers for adopting AI.
Suggesting the activities to be performed before
adopting AI and investigating what needs to be
done to prepare SMEs for AI adoption.
Presenting the values of AI for SMEs.
The paper is structured as follows. Section 2
explains the motivation behind this paper. Sec-
tion 3 introduces the research methodology. Section 4
presents the challenges for successfully implementing
AI in SMEs. Section 5 suggests the solutions to deal
with these challenges. Section 6 presents the benefits
of AI for SMEs. Section 7 concludes the paper and
points to the future directions.
1
https://en.digst.dk/policy-and-strategy/denmark-s-
national-strategy-for-artificial-intelligence
Iftikhar, N. and Nordbjerg, F.
Adopting Artificial Intelligence in Danish SMEs: Barriers to Become a Data Driven Company, Its Solutions and Benefits.
DOI: 10.5220/0010691800003062
In Proceedings of the 2nd International Conference on Innovative Intelligent Industrial Production and Logistics (IN4PL 2021), pages 131-136
ISBN: 978-989-758-535-7
Copyright
c
2021 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
131
2 MOTIVATION
The European Commission defines SMEs as those en-
terprises employing fewer than 250 employees (Matt
et al., 2020), have an annual turnover of less than
DKK 375 (C 50) million and/or a total balance sheet
of less than DKK 320 ( C 43 million). According
to a survey conducted of European enterprises (J
¨
ager
et al., 2015), only one-third of SMEs have adopted
the fourth industrial revolution compared to more than
two-thirds of large enterprises. The main challenges
for the European SMEs to adopt AI appear to be lim-
ited funding, changing business models, data acces-
sibility, legal and intellectual property issues, lack
of industrial standards and shortage of skilled work-
ers (Matt et al., 2020). Denmark’s industry structure
is centered around SMEs there are currently more
than 300,000 SMEs in Denmark, corresponding to
more than 98% of Danish companies. Out of the to-
tal SMEs, just 5% SMEs in Denmark currently work
with AI (Lindberg et al., 2019). Further, only 20%
large enterprises have included AI in the core part
of their corporate strategy (Wagner, 2018). Denmark
ranks globally 25
th
on investment in AI and 65
th
as an
AI eco-system, total (% of GDP). Similarly like Euro-
pean SMEs, most of Danish enterprises also agree that
lack of skills and talent, access to funding, clear strat-
egy, data availability, ownership and commitment are
the biggest challenges to AI adoption. Adoption of AI
in Denmark will have a huge impact on Danish enter-
prises and economy. It will be a game changer for the
enterprises in order to help them to increase produc-
tivity and open the doors for new as well as innovative
products and business models. It is estimated that AI
may offers Danish enterprises between DKK 100 (C
13.5) to DKK 160 (C 21) billion of value potential.
Similarly, the impact potential of AI may bring up to
additional DKK 35 ( C 4.7) billion annually by 2030,
total (% of GDP).
Nonetheless, adopting AI will be costly, however,
its overall impact on the Danish economy will be pos-
itive. AI will make a positive difference to the Danish
job market by creating jobs up to 80,000 people with
AI skills by 2030 (Lindberg et al., 2019).
3 METHODOLOGICAL
APPROACH
The methodological approach used in this paper is
known as the systematic literature review (Kitchen-
ham et al., 2009). This approach deals with collect-
ing, checking and analysing data from the existing lit-
erature based on information found in journals, con-
ferences, books, academic dissertations, reports and
news articles with specific search questions in mind.
Some of the questions are as follow:
What are the challenges of adopting AI in manu-
facturing SMEs in Denmark/Nordic countries?
What solutions are most commonly associated
with AI adoption in SMEs?
Does AI produce beneficial outcomes for SMEs?
4 CHALLENGES FOR
ADOPTING AI IN SMEs
4.1 Overview
Small and medium-sized enterprises are far behind
in deploying AI-based technologies when compared
with large enterprises. The common challenges faced
by SMEs in Denmark as well as SMEs in neighbour-
ing Nordic countries and in Germany are: lack of sup-
port and commitment for AI within organization, high
degree of restraint over return on investment (ROI),
shortfall of right skills/competences, absence of dig-
ital standards, data security/privacy issues, inade-
quate funding and shortage of right tools/technologies
(Colotla et al., 2016), (Wuest et al., 2016), (Stentoft
et al., 2019), (El-Jawhari et al., 2020), (Bauer et al.,
2020), (Sjøberg, 2019), (Yu and Schweisfurth, 2020),
(Schr
¨
oder, 2016), (Rauch et al., 2019), (Bianchini
and Michalkova, 2019), (Truv
´
e et al., 2019), (Aarstad
and Saidl, 2019), (Kim et al., 2018). Furthermore,
it can be observed in the radar chart (Fig. 1) with
number of quantitative variables that lack of organi-
zational readiness for change, skilled labour shortages
and shortage of funds are the three main obstacles to
AI adoption. As, the focus of this paper is to suggest
the activities that must be considered before imple-
menting AI in SMEs. Thus, in addition to these three
above mentioned challenges some of the other SME
specific challenges posed by AI adoption that must be
addressed are also discussed further in Section 5.
5 WAYS OF OVERCOMING THE
CHALLENGES
5.1 Overview
In order to overcome some of the challenges asso-
ciated with the adoption of AI, AI Denmark
2
has
2
https://aidenmark.dk
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132
Shortage of workforce skilled in AI
Lack of clear business case
Lack of advice from experts
Lack of knowledge about the role of AI in Industry 4.0
Lack of access to good quality data
Shortage of funds
Lack of standards
Data security issues
Technologies not yet fully mature
Uncertain returns from investment
Lack of organizational readiness for change
Insufficient tailor-made AI solutions for SMEs
0
5
10
9
5
2
6
3
8
2
5
1
4
8
2
Manufacturing SMEs in
Denmark, Germany and
other Nordic countries
Figure 1: Barriers to AI adoption for SMEs.
launched an innovative project to help Danish SMEs
to increase their competitiveness with AI. The project
is financed by The Danish Industry Foundation
3
. The
total project budget is DKK 34.5 (C 4.6) million and
the project will run for the next three years from 2021
to 2023. About 120 Danish SMEs will participate in
the project for a period of next six months in order
to gain competitive advantage. The main goals of the
project is to launch tailor-made/company-specific AI-
based pilot projects, provide training to its workforce
on the utilization of AI-based tools/technologies and
support successful process of organizational change.
In addition, the following initiatives will strengthen
the adoption of AI in Manufacturing SMEs in Den-
mark.
5.2 Business Strategy
5.2.1 Involvement of Top Management
The involvement of senior leadership in the imple-
mentation of Industry 4.0 and AI is one the most
critical success factors even more important than the
technical ability and AI technology (Dhasarathy et al.,
2020). Those SMEs, whose senior management has
basic understanding of AI-related technologies/tools,
their applications in SMEs and associated benefits,
are more likely to succeed in adopting AI (Iftikhar
and Nordbjerg, 2021). Hence, it is recommended that
the top management should have a clear strategy of
how to generate most value with AI by investing in
AI skill development, good quality data and organiza-
tional cultural enhancement. Moreover, the AI strat-
egy should be an integral part of their overall business
strategy.
3
https://www.industriensfond.dk
5.2.2 Organizational Change Process and
Cultural Enhancement
Top management needs to enable a data and AI-
driven culture with in the organization (J
¨
ohnk et al.,
2021). In order to meet this challenge, it is rec-
ommended that the top management must create AI
knowledge/awareness among its employees and edu-
cate the employees about the capabilities and value
of AI, in addition to the risks and limitations associ-
ated with AI. At the same time, they need to address
the ethical and moral implication of AI by generat-
ing trust between human-robot interaction tasks and
countering the fears of AI replacing their jobs.
5.2.3 Returns from AI Investment
To measure returns from AI investment, it is neces-
sary to calculate all possible costs such as, chang-
ing the overall business process and mindset, training
employees, data collection, technology investment as
well as forecast the business value that AI will bring
to the enterprise. In this way, the enterprise’s top man-
agement can make the decision on returns from AI
investment.
5.2.4 Crash Courses in AI for Everyone
The lack of AI knowledge within SMEs can prevent
them from adopting AI. Enterprise employees might
not know how to start/use or even which AI tech-
nology exists and how it can be used for their ben-
efit (Hansen and Bøgh, 2021). To tackle this issue,
it is suggested that Denmark might also follow Fin-
land’s model to launch free online crash courses in
Elements of AI
4
with the aim of educating not only
the enterprise employees but also the general popula-
tion about this new technology. Similarly, enterprises
should commit and invest in the skill development
4
https://www.elementsofai.com
Adopting Artificial Intelligence in Danish SMEs: Barriers to Become a Data Driven Company, Its Solutions and Benefits
133
programs of their work force. In addition, AI aware-
ness should be generated by establishing partnership
with other non-competing enterprises as well as edu-
cational institutions, especially the university colleges
for the reason that Danish university colleges have al-
ready close ties with SMEs. Basic to advanced level
AI courses should be offered with public-private part-
nerships for enterprises that are thinking about adopt-
ing AI as well as the enterprises that are already work-
ing with AI.
5.2.5 Business Case
Clearly defining the ultimate project/business goals is
very crucial for the success of any AI-driven project.
It is suggested that the AI-driven project should start
with the identification of a problem. The project
should have a specific and a clear business case. In
this regard, some of the most common questions that
should be answered are:
What is this project going to achieve with respect
to business value?
What is the problem that needs a solution?
Why is the problem important?
Are there any hypotheses?
What is the preferred outcome?
What are the expected benefits for the business?
Will the solution be actually implemented?
What are the constraints with relation to the im-
plementation?
Further, once the scope of the to-do-list to achieve
the goals has been finalized. Assembling the right
project team, selecting the core functionalities and
preparing a prototype as early as possible, can form
the basis for a clear business case.
5.3 SME Collaborations
For Denmark to accelerate in AI adoption, a
joint alliance among SMEs, non-profit organiza-
tions/associations, universities and startup companies
is necessary (Lindberg et al., 2019).
In this regard, an experimental learning facility
“small Industry 4.0 factory” has been established at
Aalborg University, Denmark. The main aim of
the learning factory is to create a platform for de-
veloping Industry 4.0 technologies to satisfy future
manufacturing requirements as well as demonstrat-
ing their value to SMEs in a production-like envi-
ronment (Nardello et al., 2017). Similarly, Manu-
facturing Academy of Denmark
5
and Norwegian Ar-
tificial Intelligence Research Consortium
6
has also
taken initiatives for the development of strategic part-
nerships between universities/university colleges, re-
search and technology organisations, start-up compa-
nies and SMEs.
Moreover, alliances among non-competing SMEs,
universities/university colleges and start-up compa-
nies are highly recommended. Through these al-
liances, partners can not only share their experiences
but also help in narrowing the talent gap by offering
expert help and contributing to the fund by sharing the
budget, for example due to similar business/use cases.
5.3.1 Narrow the Talent Gap in AI
The number of graduates in AI-related fields must be
increased by providing more AI-related educational
programs at Danish universities and university col-
leges as well as by attracting international talent. In
addition, to meet industry’s increasing need for AI
skills Denmark sets out to overcome the AI talent
shortage
7
by launching a large initiative called the
Danish Technology Pact (TP) to increase the number
of Science, Technology, Engineering and Mathemat-
ics (STEM) professionals with 20% by 2025.
5.3.2 AI Project Funding
SMEs should take proactive approach, partner with
other non-competing enterprises, start-up companies
as well as universities/university colleges in Den-
mark and internationally, and look for expert help,
for example, Manufacturing Academy of Denmark
(MADE) for funding their projects. Further, SMEs
can get funding help from Innobooster, which is a
funding programme within Innovation Fund Den-
mark
8
. Innobooster invests in promising ideas from
SMEs and start-ups. Innobooster covers 33% of
project expenses and invests up to DKK 5 ( C 0.65)
million in projects that demonstrate innovative think-
ing and significant market potential.
Furthermore, it is recommended that flexible loans
and tax incentives/credits should be offered to SMEs
carrying out AI-related projects. Cash awards should
be given for AI solutions that demonstrates best busi-
ness values. Similarly, SMEs should be offered
grants for private consultations, participation in train-
ing workshops and any opportunities to strengthen AI
skills of their work force.
5
https://www.made.dk
6
https://www.nora.ai
7
https://investindk.com/insights/denmark-sets-out-to-
overcome-the-ai-talent-shortage
8
https://innovationsfonden.dk
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134
6 BENEFITS OF ADOPTING AI IN
SMES
6.1 Overview
The introduction of AI comes with many benefits that
can help SMEs to gain valuable insight into their
usual operations and maintenance strategies, thus re-
ducing maintenance cost. SMEs can perform their
tasks in more efficient way by improving operational
efficiency, production process and Overall Equipment
Effectiveness (OEE)
9
. Further, AI can assist SMEs in
raising human-robot collaboration, enhancing prod-
uct quality, minimizing downtime, increasing produc-
tivity, boosting revenue and exploring new business
opportunities (Colotla et al., 2016), (Lindberg et al.,
2019).
Furthermore, one of the direct benefits of AI
in manufacturing SMEs is fault detection, predic-
tion/predictive maintenance and prevention, which is
described below.
6.1.1 Fault Detection, Prediction and Prevention
Fault detection or diagnosis identifies a fault after
it occurred as well as the cause or location of the
fault and/or what needs to be adjusted in order to
fix the fault. Fault diagnosis based systems monitor
data in real-time and provide an alert or alarm when
an anomaly has occurred (Iftikhar et al., 2020). On
the other hand, fault prediction or prognosis helps to
predict when and where a fault might occur, so that
necessary corrective actions can be taken. It is use-
ful to identify the remaining useful life of a machine
or when a equipment will fail (Angelopoulos et al.,
2020). Moreover, fault prevention takes fault predic-
tion a step further. In addition to predict the threats
of potential equipment failure, it also suggests what
actions should be taken in order to avoid the failure.
Additionally, a concrete example of the bene-
fits of AI in a real-world medium-sized manufactur-
ing company in Denmark is presented in (Iftikhar
et al., 2019). One of the main goals of the exam-
ple “is to find patterns at real-time in sensor data us-
ing AI that can help to predict and ultimately prevent
equipment/production line sudden failure”. Equip-
ment/production line failure is one of the most com-
mon causes of unplanned downtime that costs global
manufacturing sector an estimated DKK 315 ( C 42)
billion annually. Analyzing sensor data from a pro-
duction environment is complicated because the data
is often high dimensional and it is nearly impossible
9
https://www.oee.com
to find patterns across dozens or even hundreds of sen-
sors, manually. AI has the ability to analyze the com-
plex relationships of the sensor data in real-time in
order to predict any upcoming errors in advance by
raising a warning flag to keep production operations
running smoothly.
7 CONCLUSIONS
This paper underlines the importance of Industry
4.0 for SMEs that provides the opportunity to improve
their productivity and competitiveness by optimizing
their production processes. The paper also highlights
the Danish national strategies aim to reduce obstacles
for SMEs in order to adopt industry 4.0 and AI-related
technologies. Further, motivated by the impact of AI
on Danish economy in future, this paper aims at em-
phasizing the benefits of AI that can help SMEs to
gain valuable insights from operational/process data
for better decision making.
Future research should validate and examine the
impact as well as measure the success of solu-
tions/activities suggested on AI adoption for SMEs.
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