Rewiring for value: How SMEs and the Public Sector can seize the AI advantage

The era of AI experimentation is over.

According to McKinsey’s “The State of AI: Global Survey 2025,” organizations are moving past pilots and fundamentally “rewiring” their core operations to capture trillions in potential economic value.

With over 88% of organizations now reporting AI use in at least one business function—and the adoption of Generative AI (Gen AI) spiking across the board—the competitive landscape is shifting rapidly.

For Small and Medium-sized Enterprises (SMEs) and Public Sector organizations, this shift presents both an existential challenge and a massive opportunity.

The 2025 survey highlights that the true advantage lies not in adopting the technology, but in the transformation it drives.

1. AI for SMEs: Bridging the Adoption Divide

The McKinsey survey is clear: larger organizations (those with over $500 million in revenue) are accelerating their AI transformation faster than smaller counterparts. This trend signals a growing AI divide, largely because extracting value requires structural changes—including redesigning workflows, dedicating C-suite oversight, and making significant talent investments—which often strain the limited resources of SMEs.

The SME Strategy: Focus on Targeted, High-Impact Gen AI

Instead of attempting enterprise-wide overhauls, the successful SME must focus on adopting AI in strategic areas where low-cost Gen AI tools can deliver immediate, measurable impact:

Customer Operations: Deploying Gen AI assistants to deflect routine queries and reduce customer handle time is a low-barrier-to-entry use case cited in the survey findings. This frees human staff to handle complex issues, a direct path to improving customer satisfaction and competitive differentiation.
Marketing and Sales: Leveraging AI for content creation, personalized customer outreach, and audience modeling can dramatically boost marketing performance and accelerate time-to-market without requiring large, dedicated teams.
Software Engineering (for tech-focused SMEs): Gen AI coding assistants significantly augment developer productivity, allowing small teams to achieve disproportionate output.

From Technology to Transformation

The most crucial takeaway for SMEs is that the value of AI is unlocked through workflow redesign. Simply layering AI onto existing broken processes will yield minimal results. SMEs must:

Prioritize Reskilling: The report notes that organizations are increasingly focused on upskilling existing staff rather than just hiring scarce AI talent. For SMEs, this is vital. Retraining employees to work alongside AI tools (e.g., prompt engineering, data literacy) is more feasible and cost-effective than a large-scale hiring spree.
Adopt Hybrid Governance: Smaller organizations are more likely to use hybrid or partially centralized models for AI adoption. This flexible approach, which distributes some resources across functions while maintaining central oversight for data standards, allows SMEs to adapt quickly without the rigidity of a massive Center of Excellence.

2. The Public Sector: Scaling Efficiency and Trust

For Public Sector organizations, AI’s potential is measured not just in EBIT (Earnings Before Interest and Taxes) impact, but in improved citizen services, operational efficiency, and strengthened compliance. While the Public Sector was not exclusively detailed, the survey’s findings on the necessity of governance and structural change apply directly to government bodies and agencies.

AI’s Value Proposition in Governance and Operations

Public Sector entities must focus on the AI use cases that streamline complex, high-volume processes and enhance decision-making:

Operations and Efficiency: Implementing AI for predictive maintenance (e.g., infrastructure), smart scheduling (e.g., transport, resources), and automated workflows can cut operational downtime and dramatically improve throughput—core drivers of public service value.
Risk and Compliance: AI-driven anomaly detection strengthens fraud prevention and enhances regulatory reporting capabilities, a critical function for maintaining public trust and fiscal responsibility.
Citizen Engagement: Using Gen AI for service portals can deflect routine citizen queries (e.g., license renewals, benefits information), ensuring 24/7 service availability and reducing the burden on human staff.

The Imperative of Responsible AI Governance

A standout theme in the 2025 survey is the maturation of Responsible AI (RAI). As AI scales, so do risks related to:

Inaccuracy/Hallucination in Gen AI outputs.
Data privacy and cybersecurity vulnerabilities.
Ethical concerns around bias and explainability.

For the Public Sector, where services must be equitable and transparent, formal AI governance is non-negotiable. McKinsey notes that executive ownership of AI governance is a key differentiator for success. Public sector leaders must follow suit, moving beyond awareness to implement robust model monitoring tools, formal review boards, and transparency standards for every AI application. Responsible deployment builds the critical public trust necessary for widespread AI adoption in government services.

Conclusion: Transformation, not just technology

The McKinsey “State of AI: Global Survey 2025” serves as a rallying cry:

AI is no longer a side project; it is now a strategy lever.

Whether it’s an SME looking to maximize a small team’s output or a government agency aiming to serve millions more efficiently, success hinges on the willingness to fundamentally redesign workflows and treat AI as a core organizational design question.

The organizations that are succeeding are those focused on embedding AI into their corporate strategy, prioritizing reskilling, and building robust governance frameworks. For SMEs and the Public Sector alike, the future advantage belongs to those who adapt now and start the essential work of rewiring their enterprises for the age of artificial intelligence.