SPRINGBOX / Insights

How to compete and win in the middle market squeeze

by Tom West, December 7, 2017


The growth in private equity funding and other capital sources has created a significant opportunity for leaders of midsize growth companies to compete at much higher levels than in the past. In most cases, this capital infusion is focused on up-leveling management, building new capabilities and accessing new markets.

But these investments can come with high-stakes expectations for results and outcomes. This is leading many companies to prioritize gaining digital leadership and harnessing the power of technology as primary strategy objectives. As a result, every CEO of a growth company is trying to define their version of digital transformation.

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What strategy do I pursue for MY business?

“Digital transformation” has officially achieved buzzword status. Searching for the term generates 40.4 million results. It has, in many cases, become white noise to C-suite executives of middle-market growth companies. Countless studies have come out that stress the need for digital transformation, yet none seems to answer the most important question: What strategy do I pursue for my business? To be effective, your digital strategy must be custom to the specific dynamics of your industry, competitive set, customer targets and company capabilities.


Winning against larger enterprise competition

Market evidence suggests that the leaders of middle-market growth companies are caught in a historic squeeze. Their enterprise competitors have the budgets to hire the biggest, most expensive consultants and partners to build their strategy. They have access to full-stack-capable digital teams who can execute and deliver across massive complexity.

But that kind of scale can pose a challenge. The process is slow and does not often result in innovation breakthroughs. According to McKinsey(1), only 26% of enterprise digital transformation initiatives are successful. Perhaps large enterprise companies can afford this high number of failures, but as the CEOs of a midsize companies, we need to know that we have much higher odds of success.

The answer here is focus. McKinsey also states that the enterprise company can haveas many as 24 concurrent digital transformation initiatives. No wonder 3/4 of them fail. Midsize companies need to pick their vectors of success and invest in a limited number of high impact projects in order to win.

The other challenge that enterprise companies have is that they are painfully slow. Legacy systems, complex project management, multilevel approval processes and red tape cause project cycles to be measured in years. The midsize company has the ability to move much more quickly and beat the enterprise company to market. In the digital space, there is a significant first-mover advantage. Think of Airbnb and Homeaway in the vacation rental market, Paypal in the payments market and Netflix in the streaming market. All got there first and still enjoy the position of digital leader.


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Winning against the startup disrupter

On the other end of the spectrum, a never-ending supply of startups with fresh VC funding are using new technology ideas to disrupt the space. Technology has significantly lowered the barriers to entry, allowing new ideas to be tested quickly and efficiently. Take the example of Base CRM. Base is taking on the industry leader Salesforce by focusing on mobile and cloud technologies. Base is able to move quickly to adopt new mobile capabilities while Salesforce is still held back by legacy systems. Base was the first to add an AI layer of intelligent pipeline management to deliver data insights and recommendations that make the sales process more effective. As a result, Base has become a significant player in the space, amassing over 7k customers and raising over $50 million in capital.

For the middle market CEO, the key to digital transformation is to learn the lessons of these successful startups and incorporate them into your planning.

1) Adopt the startup mind-set.

Develop a big idea and don’t be afraid to fail. If there is one thing VCs do well, it is encouraging you to go big or go home. When Elon Musk started Tesla, there were many who felt it was impossible to take on big auto. Internally he led the teams with the rally call not just to build the best electric car ever seen but the best car ever seen, period, which he accomplished with the Model S. For anyone who has driven a Model S, you know that it is simply a new level for the car driving experience, which has now set a new standard for design, new technology and integrated UX.

2) Work in an agile model.

Startups move very quickly to get a prototype to market and then constantly refine based on user feedback. In today’s technological age, it is impossible to know what features are going to have the greatest impact with users until you put the solution into the field. You would be surprised at how much you can get away with by calling your early versions a beta program. Let your teams know that test and learn is critical and that catching failures early will be celebrated.

3) Experiment with new technology.

Technology is ramping at a faster rate than any time in history. Cloud, mobile, IoT, AI, VR, AR, Voice, Progressive Mobile Apps and Accelerated Mobile Pages are just a few of the new technologies that are allowing for re-invention of the customer experience.

4) Build around the customer.

One of the major advantages the mid-market CEO has over the startup is that you have actual customers. You have a business model that has been successful in getting to where you are now. Therefore, it is critical that you take advantage of this position and work with your most leading-edge customers to innovate and create even more value in your solution.

This is an amazing time to be a growth company CEO. However, the onus is on us to maximize the potential of technology in our business. To win, the midsize growth company must beat the enterprise with speed and focus while at the same time embracing the leading-edge technology and agile practices being used by startups.


Download the CEO's Guide to Digital Transformation


About the Author:


Tom West is a career Digital Business Leader having run multiple top 100 ecommerce sites as CEO, President and general manager. Today he acts as a digital director for multiple companies and helps many more to reach their full digital potential through his company, Springbox. You might also like Tom's Practical CEO Guide to Digital Transformation. 


Topics: digital transformation, middle market