Middle market businesses are the economy’s unsung heroes. They serve as critical points in the nation’s supply chain and fill the gap between the smaller “mom-and-pop” shops and other more prominent enterprise-level players, giving them the ability to be more nimble, flexible, and opportunistic.
The middle market sector is vibrant but loosely defined: Organizations with annual revenues between $10 million and $1 billion are considered mid-market. Importantly, they span almost all industries. Mid-markets are ubiquitous, and they are vital to the economy. The mid-market is responsible for one-third of private-sector GDP and employment, according to the Harvard Business Review, and its companies have created upward of 30 million new jobs since the 2008 recession, one report says.
While the mid-market was hit hard by the pandemic, many of these companies also discovered their own resiliency. As they look forward to the future, they are leading the way in technology adoption, but may face headwinds regarding available skills.
Optimism and Increased Investment in Tech
If any company had been reluctant to adopt technology before the onset of COVID-19, it’s likely that hesitancy has since evaporated. Because of mandatory lockdowns, many mid-market employees had to work virtually. Deliveries became contactless by default. The choice was stark for most companies -- either work digitally or stop working altogether.
A recent Capital One report found that as these new dynamics accelerated tech adoption, mid-market businesses are now optimistic about their prospects. Eighty-six percent of business leaders plan to grow by March 2022, and only 2% are considering downsizing.
Digital transformation is fundamental to their strategies. It’s mission-critical for businesses to implement emerging technologies and automate processes to achieve their desired growth. Mid-market companies are therefore doubling down on technological investment.
The Capital One Middle Market Strategic Investments Survey found that a quarter of mid-market leaders plan to invest more than half a million dollars in ecommerce, data analytics, cybersecurity, and artificial intelligence over the next one to three years. Zeroing in on these areas of IT will enable these businesses to scale digitally and build a robust online presence while protecting critical customer and company information.
These companies feel confident that their workforces will have the skills and resources to maximize the benefits these technologies and processes will bring. However, 20% of respondents reported technology integration is the top challenge that keeps them up at night -- even above cash flow, inflation, taxes, and cost of labor.
Fortunately, leaders can overcome this challenge through strategic implementation. Middle market business owners and leaders should first outline what elements, including capital needs, must be in place to implement and sustain this new tech. Then they must identify any skills gap among their workers. Financial decision-makers also identified skills gaps in management and leadership (32%), data analytics (31%), machine learning (31%), cloud computing (30%), and data science (30%).
Achieving the successful adoption of AI, security, and data tech will require an investment in upskilling. While not everyone needs to learn how to code, leaders should create opportunities for continuous learning, development, and training, along with apprenticeships, internships, mentorships, and guided programs.
Following this path will be essential. The pace of innovation is not slowing down. Those who adopt technology will be most competitive and nimble in addressing the next set of business challenges. To remain a powerful engine of the nation’s economy, the middle market must prioritize technology adoption to stay ahead of the digital revolution and achieve the greatest return on investment.