Midmarket digital transformation – Aspiration versus Implementation

In 2018, 41 percent of US midmarket firms had set their ambitions on a “Holistic” digital transformation strategy, meaning that these firms believed that Internet and digital technologies impacted every aspect of their business and should be a core part of their organizational strategy. In 2019, midmarket firms have tempered their ambitions and only 27 percent believe in holistic strategy. Nevertheless, the percent of midmarket firms with “Inclusive” digital transformation has remained unchanged at 43 percent. These firms believe that digital transformation while important is still a subset of strategic planning but not seen as critical business-wide. Both the 2018 and 2019 surveys were conducted with 876 midmarket firms.

Good news is that 17 percent of midmarket firms have either completed or have substantially completed their digital transformation journey. Another 46 percent are focusing on digitally transforming their businesses in the next 1-2 years. Highest planned adoption at 41 percent is coming from high-growth midmarket firms.

So what changed in the last 1-2 years?

The exploration of digital transformation drivers and benefits begs an obvious question: if it has such tremendous upside, why are so many firms slow on accelerating their digital transformation journey. A list of twelve inhibitors faced by midmarket firms starts with, and is dominated by, lack of skills, which are a constraint for nearly one-third of midmarket businesses. Grouped tightly are four different issues that can be viewed as parts of two broader issues: a difficulty in embracing change (‘staff or business management reluctance to change current practices’ and ‘corporate culture/management is risk averse’, both at 25%) and an inability to build a capable technology platform (‘lack of adequate technology to support digitalization initiatives’ and ‘lack of investment capital/budget’, both at 24 percent). The next two issues can also be grouped under a broader mantle of ‘absence of urgency to embark on digitalization,’ reflected in both ‘lack of a compelling business case/ROI/cohesive plan’ (22 percent) and ‘too many other competing demands’ (21 percent). Respondents go on to cite a lack of executive sponsorship (20 percent), technical leadership (17 percent), and other issues as reasons for forgoing launch of digital transformation initiatives.

Techaisle survey data breaks down five of these factors by approach to digital transformation. One area – lack of investment capital/budget – applies more to Holistic digitalization adopters (who are looking at more advanced projects that carry a higher price tag) than to Inclusive or Siloed users. Other impediments are more significant for firms that are not as mature in their digitalization activities. ‘Lack of skills’, for example, is a constraint for 35 percent of “Inclusives” and 45 percent of firms in the “Siloed” category – meaning that firms in these categories are roughly 60 percent and 100 percent more likely to struggle with skills-related issues than organizations in the Holistic segment. The pattern is similar, if less extreme, for ‘staff or business management reluctance to change current practices’ and ‘lack of technical leadership to support digitization initiatives’.

Taken together, these findings indicate that businesses learn to become more adept at digital transformation over time – that issues which constrain non-users or new users become less pernicious once the firm has developed experience with digital transformation. This is likely the case in many fields – but the ability to articulate how current constraints are diminished with successful initiatives gives marketers a fact-based way of explaining that adopting a specific digitalization solution both addresses an immediate issue in the business and also builds general capabilities that contribute to the positive business outcomes (increased revenue, profitability, etc.) associated with digitalization.

Technology architecture, business process re-engineering and orchestration are necessary for developing a digital transformation roadmap. 87 percent of midmarket firms turn to channel partners and 46 percent to technology vendors to help deploy beacons along their road to digital transformation journey. Although 87 percent of midmarket-focused channel partners say that they offer digital transformation guidance and solution, deeper drill-down indicates that are only 8 percent are equipped to develop, architect, orchestrate and deploy digital transformation for their midmarket customers, thereby compounding the slow journey problem.

In many cases, channel partners that describe digital transformation to prospective clients are really talking about digitization, or some combination of digitization and digitalization. This is particularly true of MSPs or cloud (SaaS, IaaS) suppliers who are positioning their infrastructure management offerings – which are, for the most part, vehicles for augmentation – as a means of achieving DX.

However, in its transformational end stages, DX is defined not by supplier delivery but by customer processes and objectives. It is not possible to redesign tasks or create new IT-enabled opportunities within the client enterprise without developing a deep understanding of the current state of the client’s operations, and mapping a path that expands from task redesign to connected platforms that support entirely new work processes.

Dell Technologies Consulting has a framework for building transformation plans in 6 weeks or less – the ProConsult Advisory Service. The service is designed to get stakeholders aligned quickly and comes in three configurations based on the level of depth of analysis that is needed– one day, 3 weeks or 6 weeks. The deliverable for the ProConsult Advisory engagements is an easy-to-reference pictorial representation that shows the current “AS-IS” state, the future “TO-BE” state, a holistic roadmap with actionable initiatives, and a benefits analysis of current, future and transformational costs, with suggested timeframes.