How Your Company can Compete with Larger Enterprises through Digital Strategy and IT Involvement

Many small and medium-sized enterprises (SMEs)  struggle to compete with larger competitors due to their limited resources and reputation. Many SMEs lack the financial freedom to experiment with innovative approaches or discovering new business aread. Many simply tries to copy the big enterprises and to provide the exact same service, often lacking in quality, delivery times and landing on roughly the same cost. However, there is still hope for SMEs to succeed. According to Deloitte insights a recent survey showed that 70-80% of surveyed organizations see IT as a cost center or IT service provider. Only 30% agreed that top management had any interest in IT and even rarer any IT questions were discussed on top level.

“So, how do I win?” you might ask. It’s easy. The same survey highlights a strong correlation between the involvement and understanding of top management in IT and the success of post-merger integration (PMI). Of course, this applies not only to the post-merger process but also to IT in general. In our current digitalized world, where digital transformation occurs frequently, the interest of top management in IT, along with their deep understanding and presence at all levels (especially top management), can significantly add value to the business.

Define your digital strategy

When defining your business roadmap, a significant portion of it should be dedicated solely to IT. This section should outline how IT supports and complements every milestone on your roadmap. This is one of the most critical steps in obtaining top management involvement and keeping a focus on IT-related questions. However, every claim made should have a solid business case behind it. Deploying technology solely for technology’s sake will only lead to increased costs and a loss of focus on your core business needs.

At the same time your IT infrastructure must be:

• Simply scalable
• Very flexible
• Centrally governed while providing a relatively high level of freedom to all connected systems.

What you are trying to achieve is a platform that can effortlessly support your growth without requiring significant investment in rebuilding what you already have into a slightly larger version. As your business expands, you will eventually need to expand your landscape or replace one of your existing systems with another. Basic functionality should work with minimal adjustments, and everything else can be built on top over an extended period.

Innovation

Even if “there has never been a digital product like it and nobody is doing that,” you can still innovate. You don’t need to create the next iPhone or Google overnight, but you can:

• Have your IT department create building blocks, which are small services that provide basic functionality. Each building block should be a part of your business process.
• Use these blocks in your product team to build your basic product (for more information, see low-code product delivery).
• Configure small deviations from your default business process or request the delivery of a new service that does something innovative.
• Package it as a ready product or service and test it with your customers. If they’re interested, continue with the same approach. If not, document your findings and try something else. Just because it didn’t work today doesn’t mean it won’t work in the future.

If IT projects have strong ties to business processes and are followed at the top management level, there is a good chance they will yield positive results. However, you may need to map your findings to terms such as profit, cost, and ROI and avoid using “confusing IT nerd terms” at the beginning.

Flexibility

Your IT infrastructure should always remain flexible, scalable, and easy to reconfigure to deliver results quickly. Major companies often lose time in planning, organizing, and negotiating major changes, which is why digital transformation projects can last for five to ten years. As companies grow bigger, there are more levels of bureaucracy and approvals, which add more delays. However, for SMEs, this process is simpler.

While most SMEs can’t afford enterprise-grade functionality that big enterprises can, there is a beautiful alternative – using a high-quality API management platform and utilizing thousands of SaaS services that, when combined in a smart way, can deliver the same functionality at a fraction of the cost.

Onboarding new functionality may still take time, but think of the flexibility and agility you can gain. Instead of having long sales calls and negotiations for months and system onboarding for a year to integrate into an already existing monolith, as an SME, you can simply subscribe to the service, set up an API in a matter of days, launch the basic product in a short period of time, and then spend time improving the service.

Using an API platform provides an additional benefit of reusing the same functionality (service) across different teams. In large organizations, it is often necessary to request special access, an API, or navigate through many different procedures to obtain what you need. There are also cases where the same company is paying for the same functionality to the same vendor, but because procurement and dev teams are separated across many branches the left hand doesn’t know what the right hand is doing and enterprises end up overpaying for functionality that could be easily reused.

Eliminating silos in an almost-independent solution 

While every team wants to remain independent, working together is essential for delivering results. The central API Gateway offers a simple solution. It provides central governance rules that apply to all teams in your organization. These rules include naming conventions, API usage, lifecycle management, and more. Within your team, you have the freedom to do what you want as long as the output, which is the API window in your system, remains unchanged and all its parameters follow universal rules. Any changes are announced through a common process. This allows your teams to innovate, optimize, and deliver what is truly needed without wasting time on agreements and arguments about what, when, and how to deliver.

Mergers and Acquisitions

Mergers and Acquisitions (M&A) are one of the biggest drivers of growth in today’s volatile business world. Companies that engage in M&A and build new businesses can find good synergies, as “the enterprise value multiple of reported new business revenues is nearly twice that of core business revenues.” The best results are usually delivered during the first year of the post-merger integration process. To achieve this, you need to ensure that your IT landscape can support the technology and integrate it as quickly as possible. The faster you can do this, the faster you can deliver your first basic product and start innovating.

Having the flexibility to onboard acquired systems, as well as support for data migration and integration, will greatly aid in the M&A process. As KPMG found in their M&A research, capturing a significant portion of synergies quickly can lead to an increase of up to 20%. According to KPMG: “The strongest indicator of shareholder value return is actually demonstrating results quickly. Companies that do this have an average increase of shareholder return of approximately 20 percent more than their peers.” If this is not one of the main reasons for you to have a flexible IT solution and a focus on IT questions at the management level, then perhaps you are in the wrong place.

Yes, large enterprises engage in M&As frequently, acquire new technologies, and often realize significant synergies. However, these deals typically involve high values and complex financial and legal agreements that can take a considerable amount of time to evaluate, negotiate, and finalize. This is where you can gain an advantage by focusing on speed and technical flexibility. 

In conclusion

There are many obstacles that prevent small and medium-sized enterprises from competing with big enterprises. However, technological advances in the digital age can help level the playing field. If you think about any enterprise that has a leading or even a monopolistic position in the market, chances are that the company that will challenge its status has not yet been established. For example, before the pandemic, Google held a dominant position in the search engine business. However, today, everyone is talking about ChatGPT, Google Bard, and other AI bots that can replace traditional search engine business with more human-like answers to searches and fewer sites that are adapted to appear in good ranks (Have you ever tried to find a food recipe online, only to be forced to read the author’s autobiography and their grandmother’s life story before getting to the actual ingredients list?).

As an SME, you have a chance to compete with the big players, but you have to deliver a product or service that can compete with them. Give us a call, and we will help you deal with integration questions and bring them to the top levels to become flexible and innovative.

https://advisory.kpmg.us/articles/2018/winning-in-ma.html

https://www2.deloitte.com/content/dam/Deloitte/de/Documents/mergers-acqisitions/IT-MA-Studie.pdf