Abstract
SMEs face growing challenges in leveraging digital technologies for innovation. Despite increased access to data and AI tools, many struggle with the deployment, effectiveness, and impact of knowledge-intensive innovation practices (KIIPs) as a result of data literacy gaps, investment misalignment, and ineffective integration of digital resources. This study explores these barriers and proposes strategies to enhance SMEs' competitiveness through AI-driven decision-making and structured innovation management. Reporting on a mixed-methods study of Colombian SMEs, findings highlight the negative impact of short-term financial focus on innovation effectiveness and utilisation of AI-powered analytics. The research examines and redefines digital boundaries and advocates for AI-enabled KIIPs to improve market positioning. The study introduces a Knowledge-Intensive Innovation Deployment Framework that integrates predictive analytics, knowledge sharing, and decision-support systems to optimise front-end innovation. By adopting these strategies, SMEs can enhance their capacity to seize market opportunities, strengthen absorptive capacity, and achieve long-term innovation-driven growth.