Mid-Market Digital Transformation

By Teresa Exton and Hermann Waschefort
May 14, 2024
Season 5, Episode 26

What unique challenges do mid-market companies have when it comes to digital transformation and generative artificial intelligence (Gen AI) deployment? How can companies overcome such challenges? Two experts from The Hackett Group’s Business Services Transformation practice in the UK – Director Teresa Exton and Associate Principal Hermann Waschefort – discuss these issues and more.

Welcome to The Hackett Group’s “Business Excelleration® Podcast,” where week after week we hear from experts on how to avoid obstacles, manage detours and celebrate milestones on the journey to world-class performance. This episode is hosted by Gary Baker, Global Communications Director for The Hackett Group. Today’s episode will discuss the challenges to digital transformation for mid-market organizations and how to overcome them. Gary is joined by Director Teresa Exton and Associate Principal Hermann Waschefort from the Business Services Transformation practice at The Hackett Group in the UK.

To begin, Teresa starts off by defining that mid-market organizations have a revenue between $1 billion and $6 billion as a guide. Revenue is consistently used and measured across the globe, but there is not a consistent definition of mid-market since it is based on many factors. Hermann also discusses that digital transformation is the process of change where technology is combined with people and processed to deliver. There are three elements, including change in the culture, with people, ways of working, etc.; people and process; and thirdly, generating value, which is a focus on improving performance and integrating AI for business excellence.

Mid-market digital transformation is different from large or small organizations because of the uniqueness with shortages of staff or skills. Every organization is struggling with funds for investment. Risk is also relevant for mid and larger companies, which includes cyber and data risk. There is also a lack of scale to compete globally and operationally since mid-market organizations are not as big as a large organization. In addition, there is a lack of good information to plan investments. These companies have also outgrown enterprise resource planning (ERP) systems and are changing to cloud-based, which presents many challenges to make that change for that level of technology. This also includes an increase in business and technical complexity and the maturity of organizations that digital is the main information technology (IT) to drive innovation instead of business led.

Next, they discuss how mid-market organizations address these challenges. First, The Hackett Group has a digital transformation framework, which includes key things that any business should undertake. That includes business strategy, capabilities and IT, which are all focused around digital. The goals are to maximize customer value, be innovative around products and services, and keep costs down. The business strategy and vision for the company need to be identified, along with the objectives, initiatives to execute those objectives, and the resources required. Once you have that strategy, then you can define what business capabilities you need. The Hackett Group’s capabilities are first, digital customer engagement, which is how you integrate and expand and make the experience for customers enjoyable. The next capability is a digital-enabled workforce, which includes virtual teams, how to manage knowledge, and facilitate collaboration and workflow. The third capability is digital service optimization, which is the business process automation, and how to digitize content and processes on a day-to-day level, and how to deliver that. The fourth capability is the ecosystem, which includes knowledge networks, business networks, and connecting a lot of manufacturing, and how to manage that. The last capability is analytics, which is using that data to drive business inside, including looking at the market, customer, operational and financial data. There also needs to be innovation for IT to drive the architectural discussion.

In closing, mid-market organizations tend to get it wrong with IT focusing on buying technology without engaging the business, and then no one adopts the new technology. They also treat the move to cloud-based as a technology deployment, but it’s a true transformation with standardization and harmonization data. There is also not a vision or bigger picture with goals for where the company is trying to go. Change management also needs to be clear with the tasks properly addressed with the latest ERP systems. The best practices for mid-market companies are first to establish a clear baseline and understand where the company is. Next, there needs to be the right resources on the project with IT support driving the transformation process.

Time stamps:

0:49 – Welcome to this episode hosted by Gary Baker.

1:22 – What is the mid-market?

1:57 – What does digital transformation mean?

2:54 – How is mid-market digital transformation different than large or small?

6:33 – How do mid-market organizations address these challenges?

11:59 – Where does the mid-market get it wrong?

15:59 – Best practices for mid-market companies.