Not all businesses are digital startups or major corporations with pockets deep enough to run major transformation programs.
For many midmarket companies, the future is a digital dilemma. They continue to ponder about their business models while wrestling with legacy IT infrastructure and keeping the lights on.
In the Darwinistic world of business survival, the reality is that some make it through, and some do not.
Some can leverage the business DNA they have accumulated over decades and successfully use that to transform, while in many cases others hit the wall and are left behind.
Legacy Is An Asset
At leading Australian bank Westpac, Ganesh Chandresekkar is the general manager of SME Banking. He talked about the trend for mature businesses to create a “second act” where they are open to new ways of doing things and using their legacy as an asset rather than a drag.
“New businesses can’t buy customer loyalty, and you can’t buy legacy,” said Chandresekkar.
“The richness of having a business which is a leader in its craft or has a loyal customer base, that is very hard to replicate for new businesses and finding a way to leverage that legacy creates a competitive advantage,” he added.
According to a recent survey commissioned by Westpac, 67% of established businesses said they are in “maintain” or “wind down” mode as their confidence wanes. One key reason is the intense competition, including from newer digital platforms.
Westpac’s research found that 40% of small businesses that have experienced disruption said the cause was new technology. Thirty-one percent cited changing channel preferences, and 30% blamed new market entrants.
Open Your Minds
Chandresekkar gave a good example of one company which made it through, and another which is just maintaining what it did in the past.
He worked with a family-owned company that fitted out bathrooms. It was divided among the family.
One family member understood that his ability to grow the business was constrained by the number of quotes he was able to produce. He quickly realized that this number was limited because the quotations were created only after physical visits to prospective clients. So, he worked with a software company to develop a solution where people could put in all their details online and quotations could be developed and delivered remotely.
This innovation increased the company’s business by at least three times, according to Chandresekkar, while other members of the family who were continuing with the traditional way of doing things were reporting no growth.
Listen to Internet Whispers
Another Australian business enjoying this “second act” is Adelaide-based confectionery company Robern Menz, which has a history of 111 years.
Technology did not play a significant part in each of the pivots the company made in its history, but social media was instrumental in driving the most recent changes. Today, Robern Menz is producing several iconic and "retro" chocolate and confectionery brands famous in Australia during the 20th century.
Social media has a significant role in this development. After the company acquired the rights to produce the Violet Crumble chocolate bar, they were inundated with requests to keep going in this direction and bring back another iconic product, the Polly Waffle.
“We kept hearing one thing from social media: bring back the Polly Waffle,” said Phil Sims, the company’s managing director.
“We looked into it and saw there was a passionate community of people who love this product and were petitioning for its return. There was a Facebook group to bring back the Polly Waffle with more than 500,000 members, so we realized there had to be something there.”
Technology, according to Westpac's Chandresekkar, is the key to the future for these midmarket companies finding their “second act.”
While Westpac's research showed many of these companies were ambivalent about the future, a 2018 study by KPMG of midmarket Australian corporates had a more positive view, with 67% saying they were excited about the opportunities from technological innovation.
Sixty-two percent of respondents selected data tools to improve insights as their top priority, followed by 41% for cloud computing.
These are the technologies which can inform and drive innovation, and also deliver scale and agility by moving from asset-heavy legacy infrastructure to an asset-light one.
Even so, it is a challenging world out there. One in three midmarket companies, according to the KPMG survey, was worried about keeping up with the pace of change.
“Getting our digital strategy wrong and wasting money for no gain are reasons for concern,” was one of the anecdotal quotes from the survey.