Published on the 09/09/2026 | Written by Heather Wright

AI divide risk as small firms fall behind…

New Zealand risks creating an AI divide between large and small businesses unless it focuses on strengthening digital capability across the SME sector, Tech New Zealand says.

In a new report, Digital Foundations First: A Practical AI Pathway for New Zealand SMEs, the industry body warns that while AI adoption is growing rapidly, many smaller firms lack the connectivity, systems, skills and data foundations needed to translate AI use into meaningful productivity gains.

“The goal is not simply more technology spending, it is stronger business capability.”

The warning comes despite New Zealand ranking among the world’s most enthusiastic adopters of genAI. APEC’s (Asia Pacific Economic Cooperation) Business Advisory Council placed New Zealand third among APEC economies for genAI use among the working-age population at 39.5 percent in Q1 2026.

But TechNZ says widespread use does not equate to widespread business transformation.

“Most SMEs are still using AI in limited ways: Embedded tools and off-the-shelf applications for individual tasks, rather than integrating AI into core operations or redesigning workflows around it,” the report says.

SMEs risk being left behind

The findings mirror concerns in Australia where data from the National AI Centre shows 43 percent of Australian SMEs reported some level of AI adoption between December 2025 and February 2026, rising to 44 percent in February. However the Centre says more than half of SMEs had yet to meaningfully adopt AI and identified trust, perceived relevance and capability as key barriers to uptake.

The TechNZ report draws on discussions and research presented at an APEC workshop in Hanoi in July, where policymakers, business leaders and international organisations examined the challenges facing micro, small and medium enterprises in an AI-driven economy.

One of the key concerns emerging from the workshop was that AI capability is becoming concentrated among larger, better-resourced organisations. OECD research presented at the event showed AI adoption among small firms increased from around two percent in 2020 to 18 percent in 2025. However the gap between small and large companies remains wider for AI than for many other digital technologies.

TechNZ warns that if the trend continues unchecked, New Zealand could face a ‘two-speed economy’ in which larger companies accelerate productivity and competitiveness through technology while smaller businesses struggle to keep pace.

The report argues that policy setting should focus less on AI itself and more on the conditions that make successful adoption possible.

It points to a ‘4Cs’ framework developed by the World Bank that identifies four prerequisites for productive AI adoption: Connectivity, compute, context and competency.

The report says the priority is to help more companies build the basics that make adoption stick: Reliable connectivity, cloud and core business systems, quality data, cyber resilience, digital skills and the management capability required to change how work gets done.

“The goal is not simply more technology spending, it is stronger business capability,” the report notes. “A small business with a functional website, digital payments, cloud accounting, fit-for-purpose cyber security and usable customer or operational data is better placed to move beyond experimentation. It can use AI to create repeatable gains in sales, customer service, compliance, forecasting, administration and operations.”

TechNZ is calling for a staged approach to SME support, beginning with digital maturity assessments and foundational improvements in areas such as cloud systems, eCommerce, cyber security, data quality and workforce capability. Once those foundations are in place, businesses can focus on practical AI applications and deeper workflow integration.

Helping SMEs adopt low-risk, readily available AI tools that address a specific business problem – focusing on solving a problem, not adopting AI for its own sake is one of the steps highlighted in the report.

Adoption without transformation 

The report highlights significant capability gaps among businesses already experimenting with AI. OECD evidence cited in the report found 76 percent of AI-using SMEs were classified as novices, while 50 percent identified a lack of digital and AI skills as a barrier to further adoption.

“The message is clear: AI adoption is accelerating, but capability is not keeping pace,” the report says.

TechNZ argues the greatest opportunity lies not in creating more AI specialists, but in helping the broad base of New Zealand businesses develop the digital capability needed to become effective adopters. It’s urging a move from a one-size-fits-all model of support to instead providing a maturity based offer, ranking SMEs from novices to champions and tailoring support based on those, noting the largest public policy opportunity is at the front of the pipeline, helping novices build the digital capability and confidence to become effective AI adopters.

TechNZ is calling for New Zealand to prioritise a simple, visible offer delivered through trusted channels, pairing finance with advisory support, maturity assessment and implementation help, rather that grants alone, and ensuring learning is modular, practical and workplace-based.

Measurements should be based on sustained use, productivity, employment quality and market access – not attendance or pilots, and plain-language guidance on privacy, cyber security, data governance and responsible AI should be provided in order to create impact.

The report concludes that New Zealand should remain ambitious about AI, but disciplined about the pathway to productivity.

“The evidence from Hanoi points to a clear sequence: Build digital foundations first, support practical AI adoption next, and enable deeper transformation where firms are ready.”