A happy medium: how connectivity can help mid-sized businesses overcome sector challenges

Employing more people than small or FTSE 350 companies, the UK’s medium-sized businesses (typically defined as those employing 50 to 249 people) have been dubbed “the engine of economic growth”.

However, being too big to qualify for a lot of government support, and too small to have the influence and power of global giants, the UK’s mid-market businesses are also battling their own set of challenges. Medium-sized firms play an important role in global supply chains, which are under unprecedented stress due to a range of geopolitical factors.

Many of these firms are running on legacy systems and processes, and facing long-term underinvestment in skills and technologies. According to Grant Thornton’s Business Outlook Tracker, investment expectations among medium-sized companies had stalled, with intentions around investing in technology having declined by 22 percentage points in December, compared with July 2021.

And yet technology is one area with a lot of potential for mid-market businesses to thrive. More agile than their larger counterparts, but with more resources at their disposal than small businesses, leveraging digital technology could be key to their resilience, flexibility and scalability, as some medium-sized companies have discovered.

Catherine Amran - final
Catherine Amran of Virgin Media O2 Business

“Digital transformation and the tech that makes it happen are key to helping medium-sized businesses overcome some of the challenges they’re currently facing, and thrive at a time of huge change and uncertainty,” says Catherine Amran, director of small and medium business at Virgin Media O2 Business.

“But these challenges can vary massively. To get the most out of their tech, these businesses need a partner that can provide a dedicated, tailored connectivity service – whether that’s via their account team, training, or technical support – for employees in or out of the office. As a business scales up and down, flexibility and adaptability are vital to helping it achieve more with connectivity.”

Easing the growing pains
For many mid-market firms, it is the growth transition from a small- to a medium-sized business that brings the mid-market challenges into sharp focus. Tiny Rebel is a Welsh craft brewery founded by two friends in their garage a decade ago. Today, it employs 168 people, runs three bars, and operates a wholesale division, supplying the likes of Sainsbury’s.

As Tiny Rebel’s operations expanded, manual processes that were previously easy to manage became laborious and time-consuming. Investment in digital technology, including an open API (application programming interface) that allows different parts of the business to connect with each other, has helped to streamline operations and create efficiencies.

“As we’ve grown we’ve felt more pressure points from different parts of the business. We started out using spreadsheets, but now use a cloud-based accounting system. We’ve invested in a new stock control system and, that, along with our dispatch system, can connect to our accounting system through the API, process the sales invoices and purchase orders and control our stock,” says Hannah Williams, chief financial officer at Tiny Rebel. “It’s seamless, and efficient, and has enabled us to minimise our staffing costs, while the increased speed and transparency created by digital tech allows us to make better, faster business decisions.”

Female worker selecting spare parts in a factory store area
Digital technology such as stock control systems can improve efficiency. Photograph: Alistair Berg/Getty Images

Supporting global expansion
As a medium business expands into overseas markets, digital technology plays a vital role in supporting global customer relationships.

Algeos is a family business employing 62 people, which manufactures and distributes medical materials, technology and consumables to the podiatry, physiotherapy, footwear and orthopaedic markets. Alongside dealing with supply chain challenges, the Liverpool-based firm is focused on improving the company’s connectivity – upgrading some of its IT systems with new servers and hardware, and adopting new communications technology, including the Teams and Zoom platforms to provide interactive webinars to help educate its customers. A new telephone system is helping team members work from home more efficiently and effectively, while investment in new servers and hardware has provided staff with better access to information.

“By being more digitally focused, we’ve helped customers who need it most, be it in new markets or on a more international scale,” says Max Sheridan, managing director at Algeos. “It has become our storefront to a global audience, allowing us to extend our reach to new customers in new markets here and overseas.”

Alongside investing in new tech, businesses will need to ensure they have the right talent and skills to support and use this technology. Attracting and retaining talent, especially in a difficult labour market, is a challenge for the mid-market sector – but as new research from Virgin Media O2 Business shows, investment in technology and connectivity can give firms in the sector a competitive advantage.

The Battle for Talent report, based on a survey of 1,500 public and private sector respondents, says that 56% of medium business respondents would feel happier at work if their employer invested in new digital technology, while 45% said they would be more likely to stay in their role.

Investing in digital tech
Finance is another key issue for the mid-market sector. The December Business Outlook Tracker found that only 64% of mid-market firms were confident in their company’s funding position, a decline of 10 percentage points from the previous two months.

New research from Challenge Works suggests that mid-market firms may find it harder to secure funding than smaller companies. It revealed that 64% of innovators in medium-sized businesses believed that funders, including government funders and investors, preferred to invest in well-known companies.

Schemes such as Get More, a tech fund introduced by Virgin Media O2 Business, can help. An initiative that aims to add value for medium businesses and alleviate some of the financial pressures, Get More gives them 10% of the cost of eligible new broadband and mobile plans to put towards new tech for their staff.

Some firms are finding that investment in digital tech can help them combat another huge financial challenge, that of rising costs. The Conservatory Outlet Group supplies windows, doors and living space products to a network of 27 independent retailers across the UK. The 230-person firm has faced financial challenges from rising costs. “Raw material across the board rose by 25-30% last year, with a further increase of 15% this year. There is genuine fear in the industry that more rises are on the way,” says Craig Schmidt, group head of IT at the company.

Last year, the Conservatory Outlet Group announced a £250,000 investment in new IT hardware and software, which included the integration of their front-end sales systems with manufacturing, installation and collection to shorten and streamline the customer journey.

“We have offset some of these price rises by becoming even more efficient and using our digital transformation project to schedule stock better, learn from real-time information and streamline different processes,” says Schmidt. “Investing £250,000 when the economy is so fragile was not an easy decision, but sometimes you have to endure short-term pain for future gain. I would advise other mid-sized companies to look for any local or regional support that’s available. We secured some matched funding, which didn’t cover the costs of the project, but did make the decision to invest easier.”

Facing a broad range of challenges, many influenced by their sector, medium-sized businesses will benefit from having digital partners who understand these challenges and can consult them on the best solutions.

To read the full Battle for Talent report from Virgin Media O2 Business, download it here