Heading into the post-pandemic world, middle market organizations are accelerating digital transformation. While finances may still be strained, 90% of companies plan to maintain or increase their digital spending in 2021, according to BDO Digital’s 2021 Middle Market Digital Transformation Survey, which polled 500 C-level executives.
As business mindsets shift from perseverance to recovery and beyond, executives are moving from innovation out of necessity to innovation with intention. Nearly half (49%) of respondents are revising their long-term strategic vision for a more digital future.
“The middle market faces a unique opportunity to leapfrog its less nimble competitors,” Malcolm Cohron, national digital transformation services leader at BDO Digital, said. “To capitalize on this opportunity, middle market companies need to rethink their digital strategies, move up their digital timelines and seize new digital opportunities.”
Key survey findings outlined in the report, Digital Accelerated: Innovating Now for What’s Next, include:
- CX edges out operational efficiencies as the No. 1 digital priority: For the first time in the three years BDO’s survey has been conducted, participants cited customer experience (CX) as their top digital priority, ahead of increasing operational efficiencies — even as the disruptive events of 2020 spotlighted the importance of efficient operations. Businesses realize they must invest in new capabilities to improve the quality of customer interactions, which increasingly take place on digital and mobile channels. A next-gen customer experience integrates front- and back-end processes to reduce friction, personalize interactions at scale and uncover emerging needs through data.
- Automation is creating jobs, not eliminating them: Automation and other digital technologies are redefining how work is done, with a positive impact on the workforce. As a result of automation, 34% of C-level executives say they will add to their staff, compared to 22% who plan to decrease headcount. But for workplace technology to help increase the speed and quality of work, or free up employees to focus elsewhere, people need to know how to leverage it. Too often, digital initiatives fall short due to insufficient training, employee pushback and poor communication from management.
- Cloud use is on the rise, but on-premise platforms remain a risk: Nearly three-quarters (72%) of middle market executives say their organization uses cloud computing, up from 66% in 2020. Although adoption is increasing to capitalize on the flexibility, scalability and security offered by the cloud, 31% of executives still cite reliance on on-premise IT platforms as a significant inhibitor to overall IT resilience. During this period of digital acceleration, businesses should work to modernize their infrastructures and strengthen their foundation for continuous innovation.
- Business model innovation is born out of creative partnering: To fast-track growth and enhance their innovation capacity, middle-market organizations are partnering externally. Nearly a fourth (24%) of respondents are pursuing joint ventures, and a full 46% are joining or expanding a digital partner ecosystem. Whether owners or participants in digital ecosystems, organizations can gain access to new external applications and opportunities to co-create value. But not all partnerships are fruitful — technological, cultural and ideological synergies are critical.
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Findings for individual industry segments are explored in BDO’s five industry digital transformation reports:
- Financial Services: Shifting customer behaviors have redefined the financial services sector and made digital transformation a necessity, not an option. Since the outbreak of COVID-19, nearly half of all financial services organizations have accelerated their digital initiatives, according to BDO’s 2021 Financial Services Digital Transformation Survey. They’re making investments in technologies like AI, digital ledger technology, virtual reality and more to improve the customer experience, keep pace with nimble new entrants and navigate regulatory pressures.
- Healthcare: As healthcare organizations stepped up to combat the pandemic, use of digital solutions like telehealth and remote patient monitoring became widespread as the only way to continue providing quality care. Now, according to BDO’s 2021 Healthcare Digital Transformation Survey, healthcare organizations are doubling down on their digital investments, with 93% of healthcare organizations having developed a digital transformation strategy or currently creating one.
- Manufacturing: Manufacturers are poised for a comeback — and they’re planning to use Industry 4.0 tools and solutions to make it happen. This year, 49% of manufacturers will fast-track their digital investments with a focus on boosting agility, resilience and connectivity, and 50% expect their Industry 4.0 investments to increase revenues, according to BDO’s 2021 Industry 4.0 Survey.
- Retail: Over the last 12 months, digital transformation went from a key retail strategy for differentiation to the only way to ensure long-term viability. Retailers that thought they led the industry in technology sophistication saw their competitors catch up fast. Now, just 10% of retailers say superior technology is their top competitive differentiator, down from 20% who said the same pre-COVID-19, according to BDO’s 2021 Retail Digital Transformation Survey.
- Technology: Although demand for the goods and services offered by the tech industry surged during the pandemic, technology companies cannot afford to bask in that success. They need to focus on fine-tuning critical processes and security measures to ensure they can continue to satisfy customer demand while mitigating risks that come with scaling and increased scrutiny, according to BDO’s 2021 Technology Digital Transformation Survey.
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The 2021 BDO Middle Market Digital Transformation Survey was conducted by Rabin Research Company, an independent marketing research firm. The survey included 500 C-level executives in a wide range of capacities for companies with annual revenues between $100 million and $3 billion. View the key findings and industry reports here.
Additional data from the survey can be found in BDO’s 2021 Middle Market Digital Transformation Survey Benchmarking Report here.
