Midsize firms have an ideal mix of sufficient financial strength, diverse customer bases, and nimbleness which gives them an opportunity to take advantage of the market changes that will persist post-Covid (some permanently). The ones that delay risk permanently losing their market position. 

To be successful in a changed landscape, midsize companies must harness those advantages and commit to these three capabilities:

  1. Continual investments in innovation (systems, people, and capital)
  2. Extensive information gathering throughout the marketplace to discover opportunities and threats
  3. Innovation managed as a team sport — not as eureka moments of brilliant individuals

Investing in Innovation

Midsize companies have money to invest, but not frivolously. At midsize scale, innovation must be a process whereby opportunities are discovered, evaluated, and incrementally de-risked. This is often called an “innovation funnel.” Opportunities can be categorized, analyzed, and valued. The progress of innovation efforts overall can be measured and assessed. With a systemic approach, budgets can be used to direct capital toward the right objectives. Midsize companies often struggle to spend on innovation, feeling uncomfortable spending capital on projects that have no clear return on investment. But on-schedule investment is required to adapt while unmet demand exists.

Gathering Valuable Marketplace Intelligence

The best way to start is to identify what the market needs but can’t yet find. Curtis R. Carlson, former CEO of SRI International, a famous research center, developed and popularized an approach called NABC; N, the first and most important step, stands for “need.” Identifying shifting demand and new needs comes from externally facing activity, such as talking with customers, suppliers, and other players in industry and scrutinizing what moves competitors are making.

Typically, most midsize companies’ external activities have to do with selling and marketing, telling the world about their wares. Innovation’s external activities are much more about listening and looking for early signs of change, then homing in to listen even more carefully. Many innovations are the result of partnering with other organizations with different core competencies, each of whom deliver part of the value chain.

Prioritizing Collaboration

Innovation isn’t something that happens in isolation in some R&D lab — that’s basic research. For the most part, midsize companies are using existing know-how in new ways, which means cross-functional innovation teams are a must. Marketing is involved in understanding the market need; R&D tests; engineering builds the pilot test; manufacturing ensures feasibility; finance validates potential profitability; and sales collects customer feedback. For the early visioning stage of innovation, this team should be a handful of people who understand their department’s perspectives. For those innovations nearing execution, the teams will grow significantly.

But teamwork isn’t limited to those inside the company. More people, and likely different people, will be required. The existing teams in midsize companies are always busy and have ongoing job duties. While some companies employ people eager to think differently, there must be significant time dedicated to the innovation effort that’s walled off from normal day-to-day activities.

Teamwork between partners up and down the supply chain is critical. Few midsize companies solve for demand shifts on their own. Collaboration between separate entities requires negotiating how costs and benefits will be shared, role definitions, and timelines. They must be formalized in writing to justify investment and ensure alignment. 

The pandemic has accelerated change that will significantly affect demand trends. Despite the step-up in urgent needs during the pandemic, such as safety and managing remote employees, forward-thinking midsize companies must understand the change in demand patterns and adapt through innovation.

Midsize companies in every industry can have a big role in making the future better. But their work must begin now, fuelled by systematic investment in innovation, information-gathering activities, and teaming.

Source: Harvard Business Review