Article by Fernando Florez, Chief Revenue Officer at Making Sense
Mid-market companies are at a pivotal moment. With tightening markets and slower growth rates, the need to aggressively pursue market share has never been more crucial. According to recent data on mid-market growth rates for 2023-2024, companies face increasing pressure to demonstrate real value, not just maintain a comfortable position. As growth slows, competition intensifies, requiring businesses to clearly differentiate themselves in how they operate and deliver value.
While data and AI are often touted as transformative technologies, many mid-market companies can see faster impacts with lower-cost implementations by focusing on established tech solutions. Companies frequently become paralyzed by the overwhelming focus on cutting-edge advancements like AI or machine learning. However, these companies don’t need to wait—they can begin the process of digital transformation through foundational improvements that will streamline operations and yield immediate ROI.
How Technology Creates Value
A technology-driven strategy can significantly increase value creation and EBITDA by helping businesses:
- Streamline operations, reducing inefficiencies and manual processes.
- Boost efficiency and productivity, optimizing how employees spend time and resources.
- Eliminate dependencies on people, automate tasks, and allow teams to focus on higher-value work (productivity gains don’t always mean more people).
- Scale easily, with systems that allow growth without needing extensive additional investment.
- Enable better reporting and data-driven decision-making across the organization.
These steps not only improve operational effectiveness but also create a strong foundation for sustained growth.
In fact, the results of technology adoption are evident. According to a BCG survey, total shareholder return increased by 12% on average over the four-year period leading up to 2023, driven primarily by companies embracing digital technologies. Similarly, Deloitte’s technology outlook predicts significant growth in AI-enabled tools by 2025, but mid-market companies don’t need to wait that long to see results from other tech improvements.
The Digital Challenge for Mid-Market Companies
The accelerating pace of digital transformation has reshaped industries, and mid-sized companies must keep up. Digital tools have become essential to increasing revenue, improving customer satisfaction, and optimizing operations.
However, mid-market companies face resource constraints, making it harder to compete with larger enterprises. According to a report from the SMB Group, businesses in this segment increasingly recognize the need for digital tools to enhance their operations and customer experiences, driving innovation that can ultimately boost valuation.
Key Drivers of Digital Growth
Several critical factors are pushing digital transformation for mid-market companies:
- Operational Efficiency: Automation and digitization reduce costs by streamlining manual processes, helping allocate resources more effectively.
- Scalability: Tech solutions allow businesses to expand quickly without significant capital investment.
- Innovation: Investing in technology differentiates a company from competitors, opening up new revenue streams and increasing market share.
- Customer Experience: As consumer expectations shift, businesses must adapt quickly, offering personalized experiences. Smaller companies and startups often move faster to meet these evolving needs. Deloitte’s recent report shows that companies investing in digital customer experiences dramatically improve satisfaction and retention rates.
Successful Digital Transformation Examples
Consider these real-world examples of digital transformation:
- A logistics company operating for over 30 years faced scalability challenges due to outdated systems. By implementing a phased digital transformation, including a cloud-based real-time load management system, they significantly improved operational efficiency, streamlined communication, and reduced costs. These improvements helped attract new clients and raised the company’s valuation.
- A fintech partner with a high call center churn rate (80%) leveraged AI-powered data pipelines to analyze customer interactions. This reduced churn captured more leads, and enhanced customer satisfaction. The data-driven approach allowed the company to address pain points and increase its long-term value.
Overcoming Barriers to Digital Adoption
While the benefits of digital transformation are clear, barriers remain for mid-market companies. Limited budgets and staff often slow down progress. However, these challenges are not insurmountable. A Gartner 2023 survey found that more mid-market businesses are adopting cloud-based solutions and managed services to overcome resource limitations. These technologies offer scalability without the large upfront investments typically required by traditional IT infrastructure. Additionally, companies can tap into international talent—particularly from Latin America, where time zones align well and costs are lower, offering a significant competitive advantage.
Another key barrier is internal resistance to change. Digital transformation often requires rethinking how the company operates, and this can face pushback from employees and management. To address this, companies should ensure they leverage the institutional knowledge of their current teams while also providing training and communicating the benefits of the changes.
The Role of Leadership in Digital Success
Leadership is crucial for the success of digital initiatives. According to a Harvard Business Review study, companies where leaders actively engage in digital transformation are more likely to succeed. Mid-market businesses must ensure their leadership teams drive these strategies and align them with broader business goals.
Leaders must also focus on data-driven decision-making. A Tech Pro Research survey revealed that over 70% of mid-market leaders consider digital transformation a top strategic priority. This aligns with our own conversations with mid-market executives and private equity firms, emphasizing how crucial it is to leverage technology for growth and value creation.
Final Word
As pressures increase on mid-market companies to embrace digital transformation, there’s no “one-size-fits-all” approach. Leadership must be clear on their strategy for improving EBITDA before embarking on a digital roadmap. Is the company focused on organic growth, expansion, or efficiency? Technology, when deployed strategically, can support these goals, but it must be based on a clear, measurable plan to generate the expected impact.
