|[January 16, 2019]
Mid-Market Companies Ignoring Digital Transformation Risk Irrelevancy
The middle market has reached a digital precipice where ignoring the
forces of disruption is no longer an option, new research finds.
According to BDO's inaugural Middle
Market Digital Transformation Survey, which polls C-level
executives at companies with annual revenues between $250 million and $3
billion, 94 percent of mid-market organizations have either developed a
digital transformation strategy (63 percent) or are in the midst of
developing one (31 percent).
There is good reason for the hype: Digital transformation is already
paying significant dividends. Nearly three-fourths (71 percent) of
mid-market companies experienced an increase in revenue from their
digital initiatives over the past 12 months, while 74 percent saw an
increase in profitability. Eighty-one and 79 percent, respectively,
anticipate a similar increase in revenue and profitability over the next
Mid-market executives are putting their money where their mouth is: 79
percent plan to increase their digital spending over the next year-37
percent by 10 percent or more. The most popular funding strategies
include working capital (68 percent), R&D tax credits and incentives (40
percent) and private funding (40 percent).
"No business or industry is immune to disruption," says Malcolm
Cohron, leader of BDO USA's National Digital
Transformation Services practice. "Disruption can be turned from
threat to opportunity, but only with a combination of foresight and
focus. Organizations that don't take proactive steps to adapt their
business to meet tomorrow's needs will soon be relegated to the annals
Top findings from BDO's 2019
Middle Market Digital Transformation Survey include:
Digital Transformation Drivers
Increasing Revenue and Profitability: One-fifth (20 percent) of
businesses experienced a revenue increase of 10 percent or more from
digital initiatives over the past year, and 40 percent expect a
similar percentage increase in profitability over the next three years.
Improving Customer Experience: 69 percent of mid-market
executives say that improving customer experience is one of their top
three long-term business goal (18 months-3 years).
Boosting Operational Efficiency: 72 percent cite replacing or
upgrading legacy IT systems as one of their top three short-term
business goal (12-18 months).
Digital Transformation Success Factors
Strong Leadership & Management: Digital transforation has
now transcended the IT department, with nearly half (46 percent) of
all middle market companies citing their non-tech C-suite executives
(e.g. CEO, CMO, COO) as the primary ones responsible for leading their
organization's digital transformation.
Defined Digital Transformation Approach: Taking intentional
steps toward a clearly defined strategy is the most common approach to
digital transformation (51 percent), followed by experimental testing
and learning (22 percent).
Business Enablement & Digital Adoption: To enable and
ensure employee adoption of technology advances, companies are
implementing training to upskill current employees (62 percent),
developing a formal change management strategy (58 percent) and
establishing a Digital Transformation Office (49 percent), among other
Digital Transformation Risks & Challenges
Cyber and Data Privacy Concerns: 33 percent of executives cite
cyberattacks and privacy breaches as their number one digital threat.
Measuring Digital Success: 27 percent say that establishing the
right metrics is the number one barrier to moving forward with a new
Finding and Training Talent: 54 percent worry about a lack of
skills or insufficient training as a barrier to implementation.
"While any business can reap the benefits of digital transformation, we
believe the middle market needs its own playbook," says Stephanie
Giammarco, partner and national leader of BDO USA's Technology
and Business Transformation Services practice. "Ultimately, the
middle market's road to digital transformation is rooted in balancing
smart risk-taking and reality, where short-term priorities are addressed
in the context of the long-term vision."
For the full survey results, click
About the BDO
Middle Market Digital Transformation Survey
The 2019 BDO Middle Market Digital Transformation Survey was
conducted by Rabin Research Company, an independent marketing research
firm, utilizing Op4G's panel of executives. The survey included 300
C-level executives in a wide range of capacities, for companies with
annual revenues between $250 million and $3 billion. The focus included
companies in the retail and consumer products, natural resources and
energy, financial services, and healthcare and pharmaceutical industries.
Digital Transformation Services (DTS) Practice
BDO's Digital Transformation Services practice is dedicated to advising
and guiding clients to see digital transformation through to fruition,
so they can reimagine the way they're doing business, and then make it a
reality-maximizing value with minimal disruption to their existing
infrastructure. Applying deep industry solutions and extensive
experience, the practice's group of talented professionals provides a
holistic approach to middle market clients looking for successful
digital transformation, using its Digital 3+1 approach.
For more information, please visit the Digital
Transformation Services practice page or the Technology
& Business Transformation Services practice page.
BDO is the brand name for BDO USA, LLP, a U.S. professional services
firm providing assurance, tax, and advisory services to a wide range of
publicly traded and privately held companies. For more than 100 years,
BDO has provided quality service through the active involvement of
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more than 60 offices and over 550 independent alliance firm locations
nationwide. As an independent Member Firm of BDO International Limited,
BDO serves multi-national clients through a global network of 73,800
people working out of 1,500 offices across 162 countries.
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member of BDO International Limited, a UK company limited by guarantee,
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not be acted on without professional advice tailored to your firm's
© 2019 BDO USA, LLP. All rights reserved.
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