Is AI the Key to Sustaining Growth in the UAE’s Dynamic Startup Scene?

By John Mullins, Associate Professor of Management Practice in Marketing and Entrepreneurship, London Business School.

Over the past few years, the startup ecosystem in the UAE and the wider region has demonstrated remarkable resilience. In the UAE, for instance, the ecosystem ranks 1st regionally and 27th globally in the 2023 Global Startup Ecosystem Index, underscoring its evolution into a key entrepreneurship hub. Saudi Arabia’s capital, Riyadh, now ranks among the top five ecosystems in the region, while Abu Dhabi has emerged as the fastest-growing emerging ecosystem, with a remarkable 28 percent surge in value in 2024.

A lot of this growth is fostered by AI, according to a recent report, the MENA region is projected to gain $320 billion in economic growth by 2030. As AI reshapes industries and business models globally, the question arises: will the MENA region’s startup ecosystem be able to maintain its upward trajectory, or will the adoption of AI pose new challenges?

Is AI a New Threat?

Does AI represent a new and existential threat to the skill, imagination, and flair of the entrepreneur? Does it represent the ultimate knock-out punch that will push human entrepreneurial flair and skill to the canvas floor?

The potential for businesses using AI to increase their profits is one factor that has certainly influenced the stock market these past few years. Products such as chatbots, advanced search systems, and image-generation don’t seem to have strong monetization strategies and as global stock market valuations for AI companies fell over the summer this year, there was a growing sense that the AI bubble had burst.

In the UAE, however, AI adoption is on the rise, with the government aiming to make the UAE a global leader in AI by 2031. According to a PwC report, AI is expected to contribute $96 billion to the UAE’s GDP by 2030. This proactive approach, supported by initiatives such as the National Program for Artificial Intelligence, places the country in a unique position to harness AI for entrepreneurial growth.

Booms and bubbles aside, can AI potentially transform how entrepreneurs develop and implement strategies to enable them to grow and survive, even flourish? Studies suggest that AI can facilitate innovation by automating routine tasks, enabling entrepreneurs – like anyone else – to focus on creative problem-solving and strategic thinking. Concerns have unsurprisingly been raised, however, about the possible displacement of human intuition and creativity in entrepreneurial decision-making due to a potential over-reliance on AI.

For entrepreneurs, generative AI can assist with researching ideas, coming up with marketing collateral, creating a website, and more, but the main advantage of AI should be its ability to enhance human skills. It is impossible to imagine yielding to AI the human creativity, empathy and daring so necessary for the role of the entrepreneur. No backward-looking algorithm would be able to match these forward-looking skills. But it is quite feasible to imagine AI as an enabler for entrepreneurs.

A Boost, Not a Threat

I don’t share the dystopian view of the future. We humans are too ingenious to lose our souls to science. And I don’t believe we’ll get to a point where AI-based tech will be running all our affairs for us.

What is more than likely is that AI will actually spawn many more entrepreneurs, with perhaps the majority running their own small enterprises, at least at the outset. In the UAE, startups in AI-driven sectors are expected to be major contributors to future job creation. The Dubai Future Foundation predicts AI and robotics will generate 10% of the city’s job opportunities by 2030. Perhaps those that grow fast and become bigger companies thanks to AI will, as fast-growing entrepreneurial companies have for decades, create nearly all the new jobs on the planet. And, by virtue of Moore’s law and further advances in digital technology, they’ll be running businesses with a global reach – virtual experts, able to do business anywhere.

Looking at the world in 2024 and beyond, I can see a bright future on the horizon. The UAE’s Vision 2071 encapsulates this optimism, placing entrepreneurship and AI at the center of the country’s long-term economic strategy. Our shift towards entrepreneurship and our sheer adaptability are positively inspirational.

Making the Most of AI

Marketing and Sales: In the UAE, AI is transforming marketing efforts by enhancing personalization. Entrepreneurs are using AI-driven marketing tools to segment the market and deliver personalized content.

Accelerating Product Development: AI helps startups assess product viability by analyzing consumer feedback and identifying market trends faster than traditional methods. UAE entrepreneurs, benefiting from the government’s heavy investment in AI research and development, are leveraging these tools to stay competitive and accelerate product innovation.

Cost Saving and Operational Efficiency: AI-driven solutions in the UAE are helping businesses modernize their operations, from automated workflows to predictive maintenance. With the UAE aiming to reduce business costs and attract international investments, local startups are increasingly turning to AI to streamline processes, optimize supply chains, and reduce operational expenses. A good example of this is the London Business School MENA Startup Competition 2023’s winning startup, The Surpluss that uses machine learning to helping companies match together to share their excess resources to enhance sustainability.

Predictive Analytics: In the MENA region, where economic and consumer behavior can shift rapidly, predictive analytics provides a powerful tool for navigating uncertainty and capitalizing on emerging opportunities. AI-powered predictive analytics are already being used by UAE-based entrepreneurs to understand emerging market trends. For example, sectors like retail, e-commerce, and fintech are using AI to anticipate customer behavior, allowing businesses to make better-informed decisions on product offerings, inventory management, and even marketing campaigns.

In Summary

AI is about being practical and shrewd. Instead of being daunted by the complexity of AI, entrepreneurs should focus on the low-hanging fruit it offers. Locate ways in which to unlock faster time to market solutions; and boost product value and differentiate your business more sharply by using AI-powered analysis of user feedback.