Business Transformation Now Crucial, Says IBM

The challenges communications service providers face also seem to be seen as crucial by midmarket CEOs. Recent surveys of telecom industry executives have found them focusing top attention on changing business models. It now appears that sentiment is widely shared.

In a global marketplace, it's all about change, say midmarket CEOs recently surveyed by IBM. About 74 percent of midmarket CEOs "plan to substantially change their business models over the next three years, versus 69 percent of the overall sample," IBM says. The big takeaway? Nearly 70 percent of CEOs say they have to change their business models. 

"They told us that this is partly because they are finding it increasingly difficult to differentiate their companies through products

and services alone, and partly because technological advances have given them many more options," IBM says. 

Of those executives that plan to substantially change their business models, 33 percent are focusing on enterprise model innovation,   addressing new markets and customer segments. 

Another 22 percent of midmarket CEOs are engaging in revenue model innovation. One respondent, for example, is focusing on “new services to existing customers” and “new ways to sell and price,” while a second aims to shift from a “transaction-based” pricing regime to a “fee-for-service” model that is “more value-based.”

Similarly, 23 percent are undertaking industry model innovations. The vast majority of these respondents plan to redefine the industry

in which their companies are operating. Surprisingly, however, 39 percent of this group aims to create entirely new industries, IBM says. 

Mid-market CEOs also say they are struggling to keep up with an environment where consumers are now dictating the pace of change, where formerly they were the ones in control. “Change in the organization is not happening fast enough. The gap is widening,” one Dutch midmarket CEO told IBM researchers. 

In 2004, market factors (such as variations in customer purchasing patterns, growing competition and industry consolidation)

dominated the boardroom agenda. Today, however, midmarket CEOs have to focus on a much broader range of concerns, IBM says. 

Market factors remain their top priority, but access to people with the skills they need, regulatory compliance, technological factors and globalization also weigh heavily on their minds. Regulation is a source of particular anxiety. About 37 percent of midmarket CEOs think it will bring major changes, compared with just 30 percent of the total survey population.

Globalization is creating many more challenges for mid-market enterprise executives. Rather than being able to concentrate their efforts on a few specific issues, midmarket CEOs must now cover a much wider front and cope with much greater uncertainty. They must “master complexity,” as one respondent put it.

Mid-market CEOs plan to channel more than 22 percent of their budgets into meeting the needs of information omnivores. Most companies are focusing on the development of “the next generation of products” and services, and “how to attract” these customers, as one respondent put it.