Constraints Drive Tech–Celeration in the Mid-Market
Ryan Frederick | September 15th, 2021
There is a new trend we are seeing. Companies, especially those in the mid-market, are beginning to leverage technology more, but not for the sake of innovation. They are doing it to remove constraints.
Mid-market companies are being impacted by a myriad of disparate constraints like raw material shortages, supply chain delays, customers demanding shorter turnaround times, and the inability to find enough team members. These constraints and more are forcing mid-market companies to adopt technology at a much quicker pace than ever before, but the leaders don’t view it as innovative as much as they do a necessity.
Leveraging things like customer self-service digital tools, manufacturing and assembly robotics, and machine learning to better predict demand and supply chain issues before they happen are no longer viewed as innovative by the leaders of mid-market firms. These problems, left unaddressed with a technological solution, could mean the end of a company. The leaders of mid-market companies aren’t necessarily looking to innovate, they want to solve real constraints and problems.
Mid-market companies are often considered technology laggards with good reason. Enterprises can spin up innovation labs to experiment with new technologies like blockchain, machine learning, artificial intelligence, cloud computing, and robotics. Startups are often on the forefront of figuring out new applications for some of these technologies and more. The mid-market sits in between the book ends of the enterprise and startup innovation darlings. Mid-market companies don’t seek to be innovative because their focus is on operating. Mid-market companies exist and thrive because of their ability to service customers consistently and effectively. And this is where the constraints come in. Constraints that prevent or threaten a mid-market companies’ ability to serve customers consistently, effectively, and profitably put their mere existence at risk. Mid-market companies don’t seek to innovate for the sake of innovation, they seek to solve problems and remove constraints they can no longer tolerate.
I was speaking with the CEO of a mid-market manufacturing company recently who is beginning to explore some robotic manufacturing capabilities, because the manual process is slowing down the operation to the extent the company is leaving millions of dollars on the table each year. Not only is the manual process too slow, but the company can’t find enough workers, causing production delays as well. He told me that he doesn’t want to be on the cutting edge of manufacturing robotics, and likely wouldn’t even be considering it if he had other viable solutions to remove the constraints.
While enterprises and startups get most of the accolades for technology adoption, I would point to mid-market companies as getting the best return on them, because mid-markets don’t innovate for the sake of innovation. They leverage new technologies to solve real constraints and problems. Mid-market companies are less futuristic and more pragmatic, which means their implementation of new technologies must add immediate value and benefit to the business. Mid-market companies don’t toy with the what if’s, they are too caught up solving the immediate problem of what is.
The adoption of technology within mid-market companies has another factor; financial. Enterprises have deep financial resources for technological advancement. The technology operations are now the largest of any department inside many enterprises. Enterprises can also hire the largest and most expensive technology consulting firms to help them advance. It is not uncommon for an enterprise company to spend hundreds of millions of dollars with these technology consulting firms. Similarly, startups are raising vast sums of capital like never before. Startups can afford to experiment with new ways of leveraging technologies, because they are using investor money. Mid-market companies often are forced to invest their own money directly out of operating profit to become more technologically capable. Even in the cases where a mid-market company has a line of credit with a bank or has some capital from a private equity firm, they still need a short-return on technology, because there is still a short-return on the capital.
Mid-market companies typically don’t have the team, time, or capital to leverage technology in a futuristic, innovative manner. They need to leverage technology to solve today’s operational constraints.