Artificial intelligence (AI) is rapidly reshaping the landscape of innovation across industries. As businesses worldwide strive to remain competitive, AI is increasingly seen as a critical tool in research and development (R&D) processes. According to the 2025 International Innovation Barometer (IIB), AI has moved from being a novel technology to becoming a fundamental part of innovation strategies across the globe.
We’ll dive deep into the findings from the IIB, detailing how AI is being leveraged by businesses to drive growth, optimize R&D processes, and overcome barriers in an increasingly competitive marketplace.
The Growing Importance of AI in Innovation Budgets
AI is no longer an optional investment—it’s becoming a necessity for businesses seeking to stay ahead. The IIB reveals that a staggering 86% of companies now have a portion of their R&D budget dedicated to AI development. This marks a significant increase in AI adoption compared to previous years, reflecting the widespread recognition of AI’s potential to transform not just R&D, but entire business models.
Most companies (approximately 65%) allocate less than 20% of their innovation budgets to AI, with the most common range falling between 6% and 10%. For large firms, the commitment to AI is even more pronounced. These organizations tend to spend significantly more on AI-related R&D, driven by their need to maximize efficiency across multiple departments and achieve productivity gains at scale. Large enterprises have the capital to invest in customizing AI solutions to their specific needs, which smaller firms often struggle to afford.
However, smaller firms are not left behind. The IIB shows that only 5% of businesses report having no AI budget at all, indicating that even smaller companies recognize the value of AI. While AI implementation has historically been cost-prohibitive for many smaller firms, the dropping costs of AI technology are making it increasingly accessible. Many companies are now able to adopt AI incrementally, starting with basic automation and data analysis as they gradually scale their investment. Read more about the declining costs of AI and its impact on adoption.
AI Adoption Across Industries: Sector-Specific Trends
The influence of AI on innovation varies significantly across different sectors. Technology and finance lead the way, with both industries seeing particularly high levels of AI integration. This is no surprise—these sectors are data-driven, and AI’s ability to handle massive amounts of information, automate processes, and predict outcomes makes it a natural fit.
Pharmaceuticals and healthcare have also seen a sharp increase in AI adoption. In these fields, AI is used to accelerate drug discovery, optimize clinical trials, and personalize medicine. The healthcare sector benefits from AI’s ability to analyze vast datasets of patient information, identify patterns, and generate insights that might take human researchers years to uncover.
In contrast, sectors like construction and civil engineering are facing more barriers to AI integration. The manual nature of many tasks in these industries makes it difficult to implement AI-driven processes. Nevertheless, efforts are underway to incorporate AI into project management, predictive maintenance, and building information modeling (BIM), where automation and data analysis can provide measurable improvements.
AI as a Tool for Enhancing R&D Processes
One of the most impactful uses of AI in R&D is its ability to handle large volumes of data quickly and accurately. According to the IIB, 53% of companies report using AI to analyze data within their R&D workflows. Data analysis is essential for uncovering trends, optimizing products, and predicting future market needs. AI can process data at speeds far beyond human capacity, allowing R&D teams to focus on strategic decision-making and creative problem-solving.
Predictive analytics, another area where AI is making significant strides, is used by 43% of companies surveyed in the IIB. This capability allows businesses to forecast market trends, customer behavior, and even the success of new products. AI models can analyze historical data and predict outcomes, providing valuable insights that guide product development and resource allocation.
Moreover, AI is being utilized in more creative tasks. Some firms have developed bespoke AI tools to generate new ideas, simulate prototypes, and automate routine administrative tasks. For example, companies in manufacturing use AI to streamline product design and testing phases, reducing time-to-market for new innovations.
In fact, AI’s ability to run simulations and conduct real-time testing without the need for physical prototypes is revolutionizing industries like automotive and aerospace, where prototyping costs can be extraordinarily high. By using AI to simulate different conditions and variables, companies can save millions while improving the accuracy and efficiency of their product development cycles.
The Shift Towards AI-Driven Teams
The integration of AI into R&D is not just changing the way companies innovate—it’s reshaping the very structure of innovation teams. According to the IIB, 85% of companies say AI tools are having an impact on their R&D teams. This shift is most pronounced in larger organizations, where more than half have already restructured their teams to incorporate AI effectively.
The use of AI enables teams to automate time-consuming, repetitive tasks such as data entry and administrative work, freeing up human talent to focus on more strategic initiatives. AI’s capacity to process and analyze large datasets quickly also means that teams can operate with fewer people while maintaining or even increasing their output.
AI is also facilitating cross-functional collaboration within companies. R&D teams can now work more closely with marketing, finance, and operations, as AI tools bridge the gaps between departments. For instance, AI-generated insights about customer preferences and market trends can help align product development with broader business strategies.
This shift towards AI-driven teams is expected to accelerate as AI tools become more sophisticated and accessible. As companies continue to integrate AI into their innovation processes, the demand for skilled professionals who can work alongside AI systems is growing. This has led to a greater focus on training and upskilling, ensuring that employees can maximize the value of AI.
Opportunities and Challenges in AI Adoption
The widespread adoption of AI in innovation is creating numerous opportunities, but it also presents challenges that companies must navigate carefully. On the opportunity side, AI offers unparalleled efficiency gains, particularly in industries that rely on data analysis, such as finance, pharmaceuticals, and manufacturing. AI can reduce the time it takes to bring new products to market, lower operational costs, and enhance decision-making capabilities by providing data-driven insights.
However, the IIB highlights several risks that companies must manage when adopting AI. One of the most prominent concerns is the potential for intellectual property (IP) theft. Public AI platforms like ChatGPT are built on historical data, and there is a risk that sensitive or proprietary information could be exposed through the use of these tools. Firms need to be cautious about the type of data they input into public AI systems, particularly when it comes to R&D and product development.
To mitigate these risks, companies are increasingly developing bespoke AI systems that are tailored to their specific needs and kept within closed ecosystems. By controlling their AI infrastructure, firms can protect their IP while still benefiting from AI’s capabilities.
Another challenge highlighted by the IIB is the initial cost of AI implementation. While AI offers long-term cost savings, the upfront investment in technology, infrastructure, and training can be substantial. This is particularly challenging for smaller companies, which often lack the financial resources to develop or integrate complex AI systems. Nevertheless, the long-term benefits of AI adoption, such as increased productivity and faster innovation cycles, outweigh the initial costs for most companies.
AI’s Future in Innovation: The Road Ahead
The future of AI in innovation is full of potential. As AI systems become more advanced, their role in the R&D process is likely to expand. The IIB predicts that AI will increasingly be used for more creative tasks, such as generating new product ideas and identifying novel research opportunities. The use of AI for predictive analytics and data analysis is expected to continue growing, as companies recognize the value of making data-driven decisions.
One area of particular interest is the development of AI that can not only analyze past data but also generate new insights based on future projections. This could revolutionize industries such as pharmaceuticals, where AI could predict the effectiveness of new drugs before they enter clinical trials, or manufacturing, where AI could foresee potential supply chain disruptions and adjust production schedules accordingly.
Despite these exciting advancements, businesses must remain mindful of the ethical implications of AI. As AI tools become more integrated into decision-making processes, companies will need to ensure that their use of AI is transparent, responsible, and aligned with broader societal values. Issues such as bias in AI algorithms and the potential for job displacement are ongoing concerns that must be addressed as AI continues to evolve.
Conclusion
The findings from the 2025 International Innovation Barometer make it clear that AI is no longer just a tool for the future—it is already transforming how companies innovate today. From automating routine tasks to analyzing data at unprecedented speeds, AI is helping businesses achieve greater efficiency, reduce costs, and accelerate their R&D efforts.
As AI continues to evolve, its role in the innovation process will only grow. Companies that invest in AI now stand to gain a competitive edge, not only by improving their R&D outcomes but also by positioning themselves at the forefront of technological advancement. However, the challenges associated with AI, such as the risks to intellectual property and the high costs of implementation, must be carefully managed.
In the years to come, the companies that successfully integrate AI into their innovation strategies will be those that recognize both the opportunities and the challenges of this powerful technology. With AI poised to shape the future of innovation, the time to embrace it is now.
