Without technology investments, remaining viable will be difficult.
For all their benefits, supply chain tracking and monitoring, blockchain, artificial intelligence and the internet of things technologies are currently the least used in the middle market, according to the . Only one in four executives participating in the survey claims to be leading their competitors when it comes to implementing digital technology.
Notably, most company executives (94 percent) participating in the digital transformation survey claim to have a “digital road map,” that is, a detailed, operational plan that describes how digital strategy will take shape. Yet when asked if they have a strategy to achieve specific goals or objectives in place, less than half (48 percent) had a fully developed plan.
But tech priorities may be gaining more importance.
As research firm Gartner notes, spending on application and infrastructure software is expected to continue to rise through 2019. In addition, among the participants in the RSM MMBI survey who prioritize increasing capex, three of the top five areas for investment are tech-related:
“IT is not about just maintaining servers anymore,” says Bill Kracunas, RSM US’s national management consulting leader. “Among other things, it’s about aggregating data from a number of different sources that can provide visibility into patterns and trends for increased insight into customers, employees and financials.
As Kracunas sees it, companies are using technology to connect with current customers and expand their customer base. They are using enterprise systems to achieve better inventory, production and quality management, as well as improving customer behavior forecasting. Many are implementing performance management and employee self-service systems to give employees a better work experience and insights into their careers.
Trends in technology investments
Clearly, some company executives see the disruption coming and they are investing accordingly. For all business processes and segments, the vast majority of middle market companies expect future digital spending to increase over the next three years, particularly in operational efficiency, according to the digital transformation survey.
In fact, small and medium-size businesses are expected to spend nearly $602 billion in 2018 for IT hardware, software and services, a nearly 5 percent increase over 2017, according to research firm International Data Corporation. Devices such as personal computers and mobile phones make up the largest spending category, followed by spending in applications and enterprise resource management.
Depending on the industry, companies are investing in technology to enhance the customer experience, track and even gather biometrics. From business-to-consumer to business-to-business, technology disruption abounds in health care, financial institutions, retailers and other industries:
According to the , millennials are the fastest-growing customer base and one that is changing the way banks do business (see Profile section on Kansas City-based NBKC Bank). This generation requires digital solutions to manage their money, and banks that offer digital services such as mobile payments, budgeting and wealth management tools are improving their engagement with millennial consumers and other generations. However, many traditional financial institutions are experiencing competition from financial technologies (fintech) such as mobile transaction apps. According to the analytics software company , while fintech use is still somewhat low across the board, younger generations (those aged 18 to 34) are twice as likely to use mobile payments as those over 35, and more likely to start using mobile payments in the next 12 months.
To combat fraud and protect customers, a number of retailers and financial institutions are tracking visitors’ physical movements as they use websites and apps. Using sensors on phones or code on websites, the data points—known as behavioral biometrics—are collected and being used to prove that a digital customer actually is who he or she claims to be.
Some companies are implementing social media listening initiatives to monitor and enhance engagement and consumer confidence, allowing businesses to that is then integrated into its customer relationship management systems. This helps companies understand customer preferences and be more proactive about potential issues. Manufacturers, retailers and others are also using predictive analytics technology to remain agile and forecast appropriate inventory levels throughout the year to improve their ability to meet client demands.
Consumers value streamlined convenience, information, easy comparison shopping and quick transactions once they’re ready to buy. Successful consumer products businesses are providing services such as mobile or online ordering with in-store pickup, easy returns and improved loyalty programs, as well as showroom and online experiences featuring artificial intelligence and virtual reality. Many companies are leveraging big data to mine targeted demographic information, maximize their omnichannel effectiveness, expand their reach with customers and better understand them.
Improving operations and engagement
Smart are linking multiple computer systems across the enterprise to exchange collected information. This allows patients’ electronic health records to be entered once but referenced endless times, providing accurate care, quicker service and efficient billing. Some health care providers are also leveraging population health management studies to help prevent or predict community health concerns.
Many organizations are leveraging digital technology to increase communication and gather employee feedback. Common strategies include installing video boards to share office news and current events, creating surveys to gauge employee satisfaction and implementing internal social media platforms.
For some time now, mobility strategies have altered the traditional work environment, removing the need for the daily commute, the desktop PC and the conventional workweek, and transforming how employees work, when they work and where they work. Mobile tech is arguably the biggest enabler of the digital revolution.
The looming disruption is gaining the attention of managers, who are increasingly . Investment strategies include application software, IT services, hardware, office electronics and consumer electronics, among others. In the first five months of 2018, 16 of the 46 new fund launches, representing $6.7 billion or 30.1 percent of all assets deployed, were PE funds with tech investment strategies, continuing an upward trajectory of such investments. By the third quarter of 2018, there were more middle market funds with technology strategies than in all of 2017. It appears the middle market is using innovation as a way to propel investment returns, and managers are sensing market disruption in their respective ecosystems. With the emergence of artificial intelligence and automation in nearly all industries, PE firms recognize the inevitability that tech will transform business.
Technology investments require a commitment over the long term. “It’s not like you can just go flip the switch and you automatically gain the advantages,” says Steve Ems, leader of RSM US’s national business application practice. “It’s an investment of time, dollars and other resources. However, the derived benefits can be substantial.”