Technological advances and the ability to access foreign markets have given midsize, private companies worldwide an opportunity to be competitive, research by Deloitte suggests.
Without shareholders and analysts pressuring them for short-term results, they can plan long term. Their size allows them to be flexible and agile. And many midsize, private companies value a corporate culture that promotes transparency and open communication. In fact, more than three-fourths of the 2,550 executives Deloitte polled last year in about 30 countries said a strong company culture is strategically important for success.
Like their bigger competitors, midsize companies face risks and challenges.
“Midsized companies that import products are concerned about risks like the China tariffs and the government’s impact on business,” said Stuart Draper, CEO and founder of Stukent, a US company that provides digital education materials. “Our greatest concerns are privacy and hackers.”
Trade barriers, such as tariffs and duties, and cybersecurity were the two biggest worries of executives polled by Deloitte. Cost of materials came in third. Executives in Asia Pacific were considerably more worried about all three risks than executives in the Americas, Europe, the Middle East, and Africa.
6 strategies to stay competitive
To stay competitive and continue to grow, midsize companies worldwide focus on innovation and efficiency. In pursuit of their goals, respondents in the 2019 Deloitte survey highlighted the following strategies:
Develop new products and services. It’s the most popular strategy to stay competitive, with 14% of all respondents believing it is their main advantage. Executives of midsize companies in Asia Pacific were nearly twice as likely as respondents in the Americas to count on new products and services as a competitive advantage.
“Companies need to scale technology innovation for strategic business growth continuously,” said Siddhartha Gupta, CEO of Mercer Mettl, an HR technology company and leading talent measurement firm in India. “We keep overhauling our products, systems, and processes to meet the demands of disruption, technological advancement, and competition.”
Increase productivity. It’s the most popular strategy amongst executives in the Americas, where 14% of respondents considered it their company’s main competitive advantage, compared with 10% who favoured development of new products and services.
Change the business model. Forty-three per cent of respondents said their companies are exploring a change in business model, and 33% said they have dedicated teams focused on disruption.
Executives confirmed they are willing to change their business models to avoid future competitive disadvantages. “Our business is software-based, so it isn’t as much of a challenge as it is for physical products,” Draper said. “We would consider changing our business model to maintain competitive advantage.”
Form strategic alliances and collaborations. Joint ventures, mergers, and acquisitions are a way to bring in-house innovative products and services. About 40% of respondents said they will likely be part of an acquisition in 2019, and an additional 26% said they are considering it.
Invest in digital transformation. Technology, such as data analytics and the internet of things, can help midsize companies be more competitive. But technology can also improve cybersecurity. Especially in Asia Pacific, executives are considering investing in cyber intelligence to reduce the risk of attacks — 43% of respondents compared with 34% in the Americas and 30% in Europe, the Middle East, and Africa.
Enter a foreign market. About three-fourths of respondents already generate more than 25% of annual revenue outside their home country.
To make any of these strategies work, executives said, companies need to maintain a strong culture. That includes investing in their workforce, hiring the right talent, and offering training and development to retain talent.
“Culture has far-reaching implications on business sustainability,” Gupta said. “The point is that even without a good culture, businesses can thrive for some time, but it will set a cycle of employees leaving continuously and the business bringing new hires. The cost of a new hire is way higher than retaining your employees. Culture is the foundation for brand creation and resonance, which adds intangible value to your business.”
— Sofia Simeonidou is a freelance writer based in the Netherlands. To comment on this article or to suggest an idea for another article, contact Sabine Vollmer, an FM magazine senior editor, at Sabine.Vollmer@aicpa-cima.com.