Member Article

North East’s mid-market “digital reactionaries” risk growth

As the impact of digital technology on the region’s businesses gathers pace, KPMG Enterprise warns that the cautious approach of mid-market companies risks their competitive position.

The professional services firm’s report, Digital to the Core, found that while most mid-market companies are investing in digital, to access new markets, improve their customers’ experience and facilitate more internal collaboration for example, the majority are adopting a tentative strategy.

In the North slightly more than half (55%) of mid-tier executives plan to increase their investment, compared to 68% nationally, and just over one in ten are a “digital pioneer.” Nearly three-quarters are content to follow, described by KPMG as “Reactionaries” or “Sceptics.”

• 11% of businesses in the North identified as Digital Pioneers: we strive to stay at the cutting edge of new digital technologies
• 37% identified as Digital Adopters: we wait until new digital technology is well established, but then move quickly to adopt
• 16% identified as Digital Reactionaries: we are playing catch up on digital
• 19% identified as Digital Sceptics: we evaluate digital innovations cautiously, and would prefer to move slowly but make the right investments

Nick Plumb, Enterprise Partner at KPMG in Newcastle, said:

“There is nothing inherently wrong in waiting for technology to be proven but, in the fast-paced world of digital, this can leave companies on the back foot, raising concerns about future competitiveness.

“While we urge this critical part of the regional economy to harness the power of digital to transform productivity and accelerate their growth, we understand the challenge involved in the fundamental rethinking of operating principles, customer experience and business model involved.”

The KPMG Enterprise survey found six key barriers to the delivery of digital change in Northern businesses, led by technology implementation issues.

• 30% cited implementation challenges in delivering and embedding new technologies
• 27% cited lack of investment
• 22% cited limited understanding of digital opportunities and new technologies
• 20% cited lack of an organisation-wide digital strategy and vision
• 16% cited difficulty attracting staff with digital skills (compared to 9% nationally)
• 15% cited lack of top table commitment

Commenting, Nick Plumb says:

“The complexity involved in rolling out a digital project is sure to throw up significant implementation challenges. An end-to-end solution for servicing customers over digital channels will involve existing and new technologies and platforms, and all of them have to work in harmony.

“The resources to tackle this are more constrained for mid-tiers than for the corporate giants. But combining new technologies with agile development models can make it faster, cheaper and less risky for mid-tiers to roll out their digital services and platforms, so such barriers are not insurmountable.”

KPMG advises mid-tier companies to focus on three key digital objectives:

• Pick up the pace to avoid being left behind by the digital revolution and challenged by new, or yet to be formed, digital disruptors.
• Harness digital to deliver more customer value by building greater insights across the channels to market in order to develop more relevant, innovative products and services.
• Adopt an agile strategy to digital that takes advantage of the speed of digital change unconstrained by the traditional waterfall model of project and change delivery.

Nick Plumb concludes:

“Digital is here to stay. The pace will only accelerate and intensify as new technologies come online and digital disruptors encroach on industries. Businesses must innovate or risk being left behind.

“Given UK Trade and Investment estimates that the country’s mid-tier companies account for about a third of private sector output and more than one in three UK jobs, it is vital that these businesses exploit technology in order to compete successfully.

“The North East’s mid-tier companies have the potential to be world-beaters in the digital arena. Many of them have specialised products or services that can be brought to global markets thanks to the power and reach of today’s customer channels. By putting digital at the core of their strategies, businesses can target new growth opportunities and get closer to their customers.”

This was posted in Bdaily's Members' News section by KPMG .