How to Manage Digital Transformations in the Mid-Market

Written By: Eric Kimberling
Date: December 28, 2021

If you're a mid-market organization that's about to go through a digital and business transformation, there are nuances that are unique to mid-market companies. Here at Third Stage, most of our clients are mid-market organizations.

By mid-market, I mean, somewhere between 100 million US dollars in revenue per year and a billion dollars. Big enough to not be small, but not so big as a multinational, multi-billion-dollar conglomerate.

When a mid-size organization is going through a digital transformation, there's a lot of distinctions to be aware of.

Finding the Right Technology

One of the first steps in a successful digital transformation at a mid-size organization is to find the right technology. It's important to look at the different types of enterprise technologies available in order to find the most effective system or systems that are going to enable growth and help achieve future growth strategies.

This recommendation applies to any size organization, whether small or a large, multinational, fortune 500 company.

With mid-size organizations, the options are a bit different. Mid-size organizations are typically big enough that they can't go with a small, basic vanilla system, but they're not big enough necessarily to justify some of the biggest, most complex systems in the market.

The key here is to make sure the focus is on the best fit systems that are most suitable for the mid-market. Now, in the ERP space, which is enterprise resource planning, the different types of software technologies are oftentimes broken up into tiers.

  • Tier One: Big SAP and Oracle types of systems
  • Tier Two: Mid-size ERP systems
  • Tier Three: Small niche systems

In the mid-market, the tier three systems are typically too small, and oftentimes, the tier one players are too big, although that's not always true. Mid-size organizations that aspire for aggressive growth and try to scale to reach the next level of success might consider a tier one system.

This leaves a broad range of options out there, everything from all the tier two systems like Epicor, N4, Microsoft Dynamics, and Sage. There are also tier one option like SAP S/4HANA and Oracle Fusion. It’s important to remember, looking at the right options in the marketplace is the first step.

Now, with a mid-market organization, it's vital not to only look at ERP systems but also a best-of-breed approach. For example, having a core back-office financial system and but implementing a separate system that handles CRM, sales, and customer service.

There is also an option to have a different system that handles HR vs. a system for supply chain management. It is key to make sure that the right types of systems fit the organization’s strategies.

What's probably most important to take away from this whole concept of right-sizing software is clearly defining future business goals and what types of technology or technologies are needed to achieve these objectives.

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Selecting a Systems Integrator

Once the evaluation and selection process of the types of technology or technologies that will be deployed to help get a future state, it's now important to identify the best system integrator will be for the organization. The term “system integrator” is essentially an implementation partner that does the technical aspects of configuring and developing the software that is being implemented.

Another common term for that is value-added reseller or VAR. Some refer to it as an implementation partner, reseller, whatever the case may be, but the whole idea here is to find a technical implementation partner that's best suited for the organization.

Much like choosing an enterprise technology for a mid-size organization, so too is selecting a system integrator different for mid-size organizations.

To note, most mid-size organizations have more complex and robust systems. On the flip side, the resources, or the budget to go hire a huge system integrator like Deloitte or an Accenture, may be lacking. There's a lot of very effective second tier system integrators and implementation partners in the marketplace, however, sourcing the best fit is essential.

Each technology has its own ecosystem and partner network. Individually, there is a range of different types of partners that can help with the technical aspects of the overall implementation. Within the selection process, business leaders must ensure that the SI matches the company culture as well as technical skill sets.

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The Implementation Plan

Having an effective and aligned implementation strategy and the plan is the next step in achieving a successful digital transformation for any mid-size organization. The tricky part of mid-size implementation plans is that, again, they are complex enough that the transformation will take significant time and resources, but they’re not so big that it will take years.

Mid-size businesses will want to be sure there is enough time allocated upfront for business process improvement initiatives, as well as define the future state of business processes or target operating model. It is also important to also ensure an organizational change strategy and plan are included in the implementation strategy. This is not “nice to have” it’s absolutely essential to any successful business transformation.

Those are just a few complexities that are somewhat unique to mid-size organizations that oftentimes get overlooked. If you are a smaller organization with, say just 20 or 50 employees, those may not be as important to you. But as a mid-size organization, that is going to be one of the key factors to pay attention to.

In the end, it is fundamental that the implementation plan is robust enough to account for business intricacies and growth as a mid-size organization. On the other side of the spectrum, be sure the implementation plan isn't so complex that the time and cost of the project will stress the overall business.

Project Management

Project management is central to any transformation, no matter what size the organization is. With the mid-size organization, there are a lot of moving parts and typically chances are the growth of the organization has already happened which in turn has accumulated multiple systems which have produced different pieces that need to be tied together.

It's important to ensure that the project focuses on addressing and navigating all these different moving parts, both from a project management perspective, as well as from a risk mitigation perspective.

Risk Mitigation

Some of the most common risks we see with the middle market include rapidly maturing organizations, that need to standardize business processes in order to sustain this growth. We always encourage these businesses to keep that entrepreneurial spirit but understand that having some standardized processes is essential in order to grow.

Another common risk is on the organizational change and people side of things, which is to ensure that the culture leverages the best of what is already there. The shifting and bending of culture are needed to scale and to be more successful going forward.

Those are two examples of very big risks for mid-size organizations within any technology implementation. There is a certain amount of art and science in project management, as well as the risk mitigation that goes along with that.

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Organizational Change Management

I've touched on the concept of organizational change management as one of the biggest risks of any sort of mid-market transformation however, it’s so critical – I want to dive deeper. People's jobs are changing and evolving as the business shifts from a reactionary organization to a mature, standard operating model. This change can produce disruptions through misperceptions and fear within the workforce.

The business is now looking to scale to get to the next level, which inevitably is going to have a significant impact on people within the organization. I would argue that the impact to the mid-market on the people side of the equation is much greater than on the larger organizations or the small organizations.

Why would I argue that you make ask? Simply because the transition and evolution that the organization is going throughputs more pressure on people, and it forces more change for people on the team. Organizational change management is perhaps most vital for companies in the mid-market. Assessing the organization, identifying the future state, and then building an organizational change strategy will help bridge that gap. The goal of OCM is to keep intact valuable human capital and tribal knowledge. The more this remains a priority the less disruption the business will experience.

For more information and best practices on change management, I encourage you to download our Guide to Organizational Change Management. That's going to give you some tips on things to think about as you think about the best organizational strategy and plan for the organization.

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Benefits Realization

At the end of the day, most mid-market organizations don't go through a digital transformation just for the fun of it. Chances are they're doing it because they want to gain some sort of business value, ROI, and benefits realization out of the investment that they're making in technology, people, and process changes. There needs to be a clear vision of what success looks like in terms of measurement and metrics, but also tangible business benefits.

Ultimately those target operating metrics are what is most important and identifying the stakeholders/departments that will be responsible for enabling these metrics within the overall digital transformation.

Having a clear vision is going to help guide the complete project and ensure it is delivering the desired business value.

Resources

I hope you found this information useful. I encourage you to check out the 2021 Digital Transformation Report. This report includes the top 10 rankings of different types of technologies, as well as general best practices for how to make digital transformations successful. As part of your digital strategy and planning, it’s a must-read.

If you have any questions regarding more about how to manage digital transformations for mid-market organizations, please don’t hesitate to reach out to me directly. I am happy to be an informal sounding board and advisor as you move through your digital transformation journey.

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Author:
Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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