Contact us anytime to know more — Kuldeep K., Founder & CEO CISIN
Before the pandemic hit, most businesses had already adopted technologies like Artificial Intelligence, Robotic Process Automation, and the Internet of Things to meet customer and employer demands for better service.
Now, with more people using technology for better results than ever, employers and customers are taking full advantage of their power to meet those demands more efficiently than ever. Mid-tier companies should take advantage of current market conditions to take strategic risks to gain market share and boost revenues by meeting customer needs, expanding market footprints, competing against larger competitors who may not be as agile, optimizing operations and talent management models, optimizing profitability while digitizing their businesses, positioning for profitable growth through Cherry Bekaert's "5R'' process.
Digital Transformation: The 5R Process
- Reexamine : As your first step, undertake an "outside-in" analysis. Reconsider your business environment to identify changes in customer demands, competitive landscape dynamics, regulatory environment, and emerging technologies that might impact your company and how best to utilize these developments. Businesses must remain committed to understanding consumers' needs and providing optimal ways of meeting them.
- Reassess: Next, conduct an "inside out" assessment. Reevaluate the vision and mission of your company as well as digital transformation's role within it; digital transformation should form part of its overall business strategy and not stand alone as its strategy. Research how your products/services have been affected by current market conditions as well as what technologies were used in their development and support; review company operations, including talent skills and abilities to determine any necessary changes for firm expansion; assess enabling functions to identify opportunities for margin enhancement as well as data and knowledge requirements before creating a roadmap to digital transformation - but remember businesses need a roadmap when embarking upon digital transformation!
- Reengineer: To ensure success with digital transformation, businesses need to prepare their business for success in advance. Every firm's journey towards digital transformation will vary based on its industry and specific business. Here are some steps for taking this journey forward:
- Product/Services Offerings - Examine existing products/services and determine what changes are required to increase customer retention. Determine new service offerings and identify the opportunities to shift to a productized or recurring revenue model. Different technologies may be required for new solutions, offerings, or a business that generates recurring revenues.
- Go-to-market strategy - According to a report, increasing customer retention by 5% can increase profits by 25 to 95%(2). Leaders tend to focus their attention on organic growth. This involves improving the effectiveness of business development and sales teams to increase revenues. Leadership has three options to achieve inorganic growth today: buy, build, or form strategic alliances. Each option has pros and cons and takes time and effort.
- Business Operation - To run a business effectively, most firms need to have several functions, including finance, operations, legal, risk, regulatory, procurement, and technology support. There is also experienced talent for "fractional" roles in business and operations. Leadership should determine how these areas have been affected and decide the best approach to running more efficiently and effectively (i.e. If they are onsite or offsite, if they can be in a shared services center, if the service is outsourced, if it's a managed service, etc. ).
These four areas will need to be changed in order for a business to become digital.
Processes: Split your processes up into tasks with high value-add and judgment-based tasks as well as mundane, repetitive, low-valued ones.
Create a journey plan for time-consuming, repetitive work to understand its optimization potential - whether automated, combined, and delivered via shared services centers, outsourced to lower-cost providers, managed service providers, or some combination thereof may work.
People: Transforming organizations requires people. Treat talent within your organization as both partners and customers on your transformation journey.
Since they know best what's happening within their processes and can identify pain points quickly with solutions, talent within an organization are invaluable partners in making change happen successfully. They will be using new tools, processes, and technologies created during transformation efforts and ultimately determine whether it succeeds or fails - leaders should check the talent of firm professionals and business leaders, look for ways to hire or retain current talent as well as leverage alternative talent models such as gig workers or fractional talents, etc.
Technology: As your business transitions towards repeatable or productized revenue models, significant investments will be necessary in technology.
Carefully examine how technology is being utilized within your group and its effects on wider ecosystems, then determine any additional tools, technologies, or services necessary for running operations efficiently and securely. Security also plays an integral part - privacy and analytics must be prioritized if providing personalized client experiences are key components.
Culture: Businesses branding often overlook the value of culture.
It is crucial to keep in mind that digital transformation does not happen at the center of an organization but from its peripheries closer to customers. Leadership must foster an environment that supports innovation while equipping professionals with all of the tools, techniques, and support systems necessary for them to perform at their best.
It is important to get some quick wins by leveraging agile development to create Minimum Viable Products with the customers/end-users, testing, iterating, and piloting before launch to maximize impact on the business.
Retain: Once the digital transformation is complete, leadership should use their newly acquired talent, processes, and operating models to take full advantage of its benefits while keeping an eye out for areas that could use improvement.
Repetition: Develop a system for success. Leadership must continually assess their strategies and approaches as the pace of change accelerates, with past companies producing three to five plans and strategies at most.
Now, best practices require organizations to review plans at least quarterly and update them annually - although, in times of rapid, unpredictable change, it would be prudent for leadership to review action items more frequently, such as monthly or weekly reviews of plans or action items.
Leadership must understand that digital transformation differs significantly from "business as usual," requiring different capabilities, skills, and expertise.
Finding the appropriate partner or team to drive this transformation process is also key; business transformation can be an iterative, complex, and messy journey - no one-size-fits-all solution exists - therefore, your leadership team may face resistance during this phase - its goal should be getting everyone on board and getting buy-in; business as usual is no longer an option in today's market.
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The Middle Market's Digital Transformation Fronts
Middle-market businesses across the U.S. were not immune to the unprecedented challenges that have occurred to businesses of all sizes over the last 18 months.
Average employment growth was 5.9% throughout 2023 in this sector. By June 2023, 70% of middle market workers had returned to their primary workplace. Leaders of midsize businesses also identified two aspects that most pose challenges when running their business: 51% identified employee communication engagement productivity issues as their top concern.
In contrast, 45% mentioned customer engagement as such an obstacle.
These challenges vary in intensity depending on the industry: 60% of healthcare companies report difficulty engaging employees.
In comparison, 55% of construction firms find it challenging to reach out and engage their customers effectively.
How can midsized companies flourish amid an uneven recovery? Our research over the last decade has demonstrated that these organizations are resourceful and adaptable, even with limited capital, expertise, or time resources.
By digitalizing their business, they can better address employee engagement challenges as well as customer acquisition hurdles.
The Pandemic Has Shifted Priorities
This pandemic has led to an increase in investments in different technologies with the purpose of improving operational areas such as cybersecurity and customer engagement.
This trend toward digitization does not reflect how executives feel about their businesses.
Only 35% of leaders rated themselves as being ahead or advanced of their peers when we asked about digitization's importance.
In comparison, only 46% of mid-market companies have an active digital strategy, leaving others either without plans or no way of addressing it immediately.
Digital maturity levels vary across industries and challenges. Manufacturing accounts for approximately 17% of middle market companies, and nearly half are concerned about keeping up with technology to remain competitive; technology affects all aspects of business, not just advanced manufacturing.
Gertrude Hawk, a chocolate maker based out of Scranton (Pennsylvania), stands as an exemplar. Established in 1934 and operating for 85 years now, they boast 40 physical locations across three states plus both consumer-facing e-commerce websites as well as one for businesses.
Internal processes at this company were top-notch, yet they had neglected digital platforms' impact in engaging customers for far too long. Recent investments were made in digital marketing tools, including an improved website with high-quality photography and a rewards program accessible via mobile devices to make shopping and ordering simpler for customers.
After realizing it was falling behind its peers, this company invested in these digital tools; their investment has seen increased site traffic, increased average time spent per visit to their site, as well as an increase in rewards members as a result.
Customer engagement and employee communication remain challenges. Though initial concerns such as uncertainty, continuity of operation, and working capital have decreased over time, they still linger.
Nearly one-third of midsize firms report permanently transitioning to digital communication internally, while 24% plan to do so soon afterward; additionally, 31% have implemented technology permanently to engage their customers.
Twiddy and Company was a hospitality business based out of Duck, North Carolina, that has for years relied upon strong customer relations, repeat business, and referrals as its core foundation.
Clark Twiddy, the company president, started using CRM platforms in the spring of 2023 to reach out to customers in new and inventive ways. For instance, text messaging proved more successful in reaching past and potential renters than emails or phone calls.
Twiddy's marketing and sales teams were able to track and collect every point of contact, no matter the method. This enabled them to calculate conversion rates and ensure they used an optimal mix for occupancy growth - results that proved impressive and drove historic increases in occupancy growth.
Twiddy is committed to innovation, experimentation, and investing in digital communication technologies.
Middle-market businesses face resource limitations that make investment decisions challenging, making similar investments a daunting prospect.
When asked to identify obstacles they faced when adopting new technology, most cited budget and cost issues as major obstacles; in fact, most spent their IT budgets on daily operations of their business and cybersecurity, respectively - these areas constituted approximately 11% each of total budgets spent. Firms also mentioned a lack of time due to other priorities or insufficient internal resources to implement such technologies.
Framework for Digital Transformation
Investment in digital tools hasn't suffered as significantly from other functions over the last 18 months due to necessity; rather, digital tool and process investments have actually seen an uptick as companies strive for a more productive, efficient, and profitable future.
Middle-market firms with a clear digital vision that guides strategic decisions tend to experience 75% faster growth on average compared to those less adept with technology.
Nearly two-thirds of organizations report that digital skills shortages impede them from meeting more ambitious goals, so how should executives deal with these obstacles? The National Council for Midmarket Management (NCMM) has developed a framework to assist middle digital market businesses through the digital transformation process; an enterprise serves as the focal point for five interrelated but distinct activities:
Digital Transformation: The Benefits and Consequences
Digital transformation is an essential aspect of business growth; it allows us to gain insight into our customers' digital footprint and maximize marketing and sales initiatives with them.
Small and midsize enterprises looking for expansion should consider adopting this form of change as one powerful weapon against competitive pressures.
Many companies, however, have failed to heed warnings about digital transformation strategies and are now paying the price.
Laggards who believe their current go-to-market initiatives can drive growth are sabotaging themselves. At the same time, other firms gain market share and traction - leaving behind those that laggards currently claim as theirs.
Digital is worth it! Growth statistics demonstrate that today's businesses' success relies heavily on their ability to take advantage of digitized business operations.
Six Reasons Why Mid-Market Businesses Should Go Digital
Here are six key reasons why digital transformation is essential for the long-term success of mid-market companies:
Increase Productivity
Digitization of processes can save companies both time and money. Aberdeen Group conducted a study that revealed companies who have successfully transitioned all operations to the cloud can reap numerous advantages.
Implementation time has increased by 61%, total lifecycle cost (59%), and scalability has improved by 44%. Utilizing digital processes may help business owners avoid additional staff for tedious tasks such as data entry.
Digital Business Security: Strengthening the Protection of Digital Business
Businesses and consumers must take measures to secure sensitive data like financial and customer records from being compromised online.
Digital transformation is an integral component of the fight against cyber attacks, providing businesses with an effective strategy for dealing with potential attacks as well as plans and protocols in place to safeguard data protection, including encryption and other measures. Digital transformation ensures that system integrations and customer data are safeguarded against hackers who exploit vulnerabilities in the system.
Take Smarter and Quicker Business Decisions
Digital leaders can reap immense benefits by using tools such as machine learning, artificial intelligence (AI), and data analysis to streamline strategic decisions.
Mid-market companies can utilize big data to improve marketing and sales initiatives.
Businesses can gather data on their customers to better understand what they need and want, helping mid-market businesses track results and understand what aspects are most valuable to their success.
Big data can assist mid-market companies with streamlining their operations by helping to predict trends and make better decisions regarding inventory, staffing, and other factors.
Data and analytics can also create actionable insights that enhance internal processes and how businesses engage with their customers.
Empowering Technological Innovation
Digital transformation involves simplifying work using digital tools in order to provide functionality for smaller businesses.
If these digital tools don't integrate smoothly, managing all your data becomes increasingly challenging. Luckily, the software/SaaS market offers flexible integration of digital technology without breaking the bank or going through complex setup procedures.
Digital transformation can be an intimidating undertaking for many individuals and companies alike.
Yet, automation needn't be overly complex in order to benefit mid-market companies. Choose the software that meets your current anda future needs best; tools like Outreach, Aircall, and SalesLoft help simplify tedious, repetitive tasks while streamlining business processes with data analytics, artificial intelligence tools, or other digital solutions.
Reduces Costs And Increases Profit
At first, digital transformation may seem costly; however, if done right, it could save money and bring in extra profits!Automated processes are efficient and require less time for implementation, helping businesses save on operational costs while increasing profits! Mid-market workers who rely on automatized processes can focus their efforts on strategic initiatives while scaling up without hiring more staff; growth achieved this way reduces costs while simultaneously increasing profits! An established digital transformation strategy can assist mid-market businesses in cutting costs and increasing revenues.
How To Respond To The New Customer Experience Era
Digital transformation has grown increasingly important as more customers utilize digital channels to access information and connect with businesses.
Pandemics have highlighted how vital it is to respond swiftly to customer needs; COVID-19, in particular, completely changed customer behavior and experience.
Digital transformation enables companies to interact with customers instantly - something buyers have come to expect.
Furthermore, this has created global markets and increased responsiveness because people expect problems to be resolved instantly when online businesses operate offline.
Why Is Digital Transformation Needed?
No matter the form it takes - digital, political, or environmental - everything evolves with time. Human beings demonstrate our capacity for adaptation through this evolution.
The internet has undoubtedly revolutionized our lives; with each technological step forward, we continue to adapt and explore new avenues that bring us ever closer together.
Real and digital worlds are rapidly merging, becoming more intertwined than ever. Our actions online can affect what happens in real life and vice versa.
One could describe our current state as "in-between stories," with both feet planted firmly on analog earth yet boldly taking steps into digital territory.
Digital transformation and rapid digitization provide us with an opportunity to strengthen interoperability. Digital transformation can lead to increased market opportunities, agility gains, productivity increases, and efficiency gains - but these are only surface drivers; the true value lies in understanding our world better and becoming more connected through it all.
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The Conclusion Of The Article Is:
Over the past several years, companies of all sizes have faced unprecedented challenges, opportunities, and changes - middle market companies being no exception.
A pandemic of change has accelerated various initiatives that were once considered mere pipe dreams for mid-sized businesses but are now taking shape and bearing fruition, digital transformation being one of the main forces driving change and its implications.
