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Middle Market Growing Pains

Middle Market Growing Pains

By: Jim Gitney   |     March 30, 2017
Preparing for a Downturn

Middle market leadership teams are faced with the challenge to maintain their competitiveness in the marketplace and keep up with the fast-paced changes in technology.  They are on the threshold of a new world of operational efficiency, productivity and customer engagement.  When speaking with senior leaders of middle market companies, we routinely hear the following questions:

  1. Where am I in my business lifecycle and does our strategy support it?
  2. How well am I operating and utilizing my current IT/IS infrastructure?
  3. Does my current IT/IS infrastructure support the company’s strategic direction?
  4. Are our existing technology and software investments effectively meeting our current needs?
  5. Are our IT/IS platforms serving the company’s current life cycle needs and are they scalable and flexible enough to support future life cycle needs?
  6. Is the organization structured and staffed appropriately for the next phase in our lifecycle?
  7. How can we be better at customer interface and interaction?
  8. Can our business processes scale?

These questions require that the leadership team clearly articulates its strategic direction. They require more information because they are strategic in nature and dependent on where the company is in its current lifecycle.  All companies go through five business life cycles as shown in the graphic below.

Middle Market Business Life Cycles and Information TechnologyThese cross over points may happen over a long period and some companies go through these cycles many times. Middle market companies are especially challenged by the second and third cycle:  Growth and Maturation.  Typically, a company moves through the first two cycles by stitching together business processes, information technologies and organizations.  Highly success companies will go through what we call an inflection point where their growth doubles. Each time it doubles, there is a need to redesign the business, organization structure, business processes and technologies that allow the business to move to the next inflection point.  The second and third stages are typically the longest cycle in the business lifecycle.

At various point in a company’s life cycle, leadership recognizes that it structure (technology, organization, business processes) cannot support the company’s future because it isn’t efficient or scalable.  We have seen it in dozens of companies.  As we peel back the layers of the problem, we find that there are many issues causing this.

  1. Out of date IT infrastructure and software
  2. Ineffective customer facing systems
  3. Dozens of shadow systems designed to make up for business process and IT shortcomings
  4. Inefficient business processes, including those left-overs from when the company was immature
  5. Wrong organization structure and lack of appropriate skills to move forward

Leadership may attempt to identify the one or two projects (such as getting a new ERP system or installing a HRIS, making an organizational change, adding a CRM, etc.) that they think will get things back in order.  While this may help, it is shortsighted if it isn’t part of a larger strategic plan to transform business processes and systems in a way that is scalable and can accelerate business growth and profitability. Senior leaders need to know the answers to the 8 questions before they can effectively plan their next steps.

We see leadership teams struggle with the problem on how to prioritize this evolution to newer technologies and ways of doing business.  This problem is made worse by the rate of change of technology.  No sooner have they implemented a new system and there is another generation available.  This high rate of change often causes leadership teams to put off making a decision until the next generation arrives:  Another short-sighted approach.

We believe that companies who are significantly behind in both technology and business process should take the time to develop a planned transformation that is based on establishing scalable building blocks that can take advantage of next generation structures as they evolve.  A recent Deloitte mid-market survey observed that 41% of respondents see “critical” value in technology as a differentiator and catalyst for growth, while 38% view technology as a strategic investment. These numbers are shortsighted, because leadership teams should view technology as the backbone of their business. Those who don’t struggle at inflection points.

Middle market companies that have made the alignment between Technology, organization and business processes find themselves edging out competitors in productivity and cost reduction.  

Check out the following pages for more insight:

Business Transformation

Digital and Information Technology


 

About the Author:  Jim Gitney is the CEO of Group50 Consulting.  Group50 works with middle market companies to help them plan and implement their journey through various business life cycles.  Jim has worked with companies from start-up through Fortune 50 and understands how technology and business processes are the platforms for growth and higher profitability.  Group50 offers over 50 assessments and workshops, part of our Company Physical®, that are designed to provide a client’s leadership team with the appropriate insights to how their business operates and identifies the opportunities to significantly improve business performance.  You can reach Jim at (909)-949-9083, request more information here or drop him a line at info@group50.com

 

This entry was posted in Business Transformation, Information Technology, Strategic Execution, Supply Chain Optimization, on March 30, 2017
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