Advanced artificial intelligence (AI) techniques are no longer a thing of the future. In the past several years, AI has not only moved to the top of the agenda for businesses, but also for policymakers, academic research institutions and the broader public. AI techniques are expected to bring numerous benefits in the form of added value for citizens, higher productivity, improved corporate performance and economic growth. At the same time, AI has the potential to disrupt existing business models, possibly displacing successful ones and impacting the way people live and work. To keep up with the evolution of AI and realise the competitive advantages it can provide, companies need to invest in technology and innovation. This poses a particular challenge for small and medium-sized enterprises (SMEs), which form the backbone of the European economy. Therefore, it is crucial that SMEs are given the best conditions to implement and capitalise on the value of AI applications. Against this backdrop, EASME and DG GROW aim to identify the optimal mix of industrial policy measures that create a favourable framework for the development and uptake of AI applications by European SMEs, including a successful transition that fully embraces the benefits of AI and mitigates the risks associated with it.