BUILDING TOMORROW’S BUSINESS

HOW THE MIDDLE MARKET IS TACKLING DISRUPTION TODAY

2020 Digital Transformation Survey


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Table of Contents

03 INTRODUCTION
21 DIGITAL TRANSFORMATION SUCCESS SECRETS

About the 2020 Digital Transformation Survey Digital ROI: What does success look like?

6 Factors of Digital Transformation Success

07 SNAPSHOT: 2020 DIGITAL OUTLOOK

25 BENCHMARKING YOUR DIGITAL
TRANSFORMATION EFFORTS

Benchmarking: Strategy Status

11 DIGITAL TRANSFORMATION
VALUE DRIVERS Benchmarking: Emerging Technology Adoption
1. Boosting Operational Efficiencies Digital Enablers Defined
2. Bolstering Digital Resilience Benchmarking: Data Privacy Compliance
3. Improving Customer Experience Benchmarking: Digital Adoption & Enablement
4. Driving Revenue Benchmarking: Digital ROI

18 DIGITAL TRANSFORMATION
CHALLENGES
33 CONCLUSION

About BDO Digital

Spotlight: Digital Transformation
During Times of Crisis

 Implementation Challenges

Lessons Learned from Failure

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Introduction
In the span of just a few short years, digital transformation has gone
from buzzword to best practice to baseline. No longer confined to A crisis like the COVID-19 pandemic can lead some
Silicon Valley or corporate giants with bottomless pockets, digital organizations to pause or de-emphasize innovation.
transformation is now as critical to the longevity of a business
But now more than ever, it’s critical to continue
as sound risk management or disciplined financial stewardship.
Although the COVID-19 pandemic has disrupted business developing digital capabilities that enable success
operations and impacted revenues across all industries, the crisis for both the present and future. Deploying digital
has also highlighted the importance of optimizing processes and initiatives strategically can help protect revenues and
driving efficiencies with more digital channels to market. Digital identify unmet customer needs.
transformation enables both of those strategies.

The exigency of digital transformation isn’t hyperbole, but simple MALCOLM COHRON
fact: 100% of middle market organizations have either developed or National Digital Transformation
are planning to develop a digital transformation strategy, according Services Leader, BDO Digital
to the 2020 Digital Transformation Survey.

Digital transformation is no less critical amid a pandemic or

economic downturn. Organizations that can harness digital
capabilities have a much better chance to survive the crisis and
thrive in the turbulence that lies ahead. Success depends on coming
up with the right digital strategy and effectively executing it.

HOW DOES
YOUR BUSINESS

STACK UP?
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What is Digital Transformation?

It may be recognized as a business imperative, but digital transformation remains a nebulous concept. It is far more than “going digital” in the most basic
sense. For the adoption of digital technology to be transformative, it must either solve a traditional business problem in a more effective way or deliver new
customer value propositions. Technology powers the transformation; what’s transformed is the way the business operates and performs, as well as the way
value is created and delivered to customers.

While every company follows its own trajectory, we can generally break down digital transformation into four essential parts:

Digital Business is focused on To learn the basics of building a

creating new value, market digital transformation strategy,
differentiation, and revenue in the explore our Digital 3+1
digital economy. Strategy series:
DIGITAL BUSINESS
Building a Digital Transformation
(GROWTH) Strategy Part 1: Digital Business

Building a Digital Transformation

Strategy Part 2: Digital Process
DIGITAL Building a Digital Transformation
ADOPTION Strategy Part 3: Digital Backbone
Digital Process focuses
on operational reinvention
Building a Digital Transformation
by optimizing end-to-end
Strategy Part 4: Digital Adoption
process performance and
DIGITAL PROCESS DIGITAL BACKBONE
improving efficiency.
(PROFITABILITY) (SECURITY)

Digital Backbone is the

foundation on which all digital
 Digital Adoption, our +1, is at the heart of our initiatives are built, centering on
approach: a fully integrated change management addressing or removing the IT
program that informs and enables the business’s complexities, risks, and barriers to
 strategic direction, while streamlining user adoption innovation, to meet business and
for employees, suppliers and customers. evolving market demands.
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About the BDO Middle Market Digital Transformation Survey

The 2020 Digital Transformation Survey was conducted (prior to the COVID-19 pandemic) by Rabin Research Company, an independent marketing research
firm. The survey included 600 C-level executives in a wide range of capacities, for companies with annual revenues between $250 million and $3 billion.

WHO WE SURVEYED

16%
9% Chief Technology 14%
$2 billion to 19% Officer or Chief CEO
$3 billion $250 million to Innovation Officer
$500 million

20%
Chief Information
Officer or Chief
Information
ANNUAL EXECUTIVE
Security Officer
REVENUES TITLES

23%
 $1 billion to just 20% 12% 14%
under $2 billion $501 million to 13%
$750 million
Line of Business 11% COO CFO
Executive Chief
29% Marketing
 $751 million to
Officer
just under $1 billion
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Industries
We surveyed executives across six industries:

RETAIL ENERGY MANUFACTURING

#1 Competitive Differentiator: #1 Long-Term Objective: #1 Long-Term Objective:
Superior Technology Increase Market Diversify Revenues
Differentiation

HEALTHCARE TECHNOLOGY FINANCIAL

 34% say cyber attacks and #1 Digital Threat: SERVICES
privacy breaches are their top Cyber Attacks or 68% say digital investments led
digital threat Privacy Breaches to revenue increases in 2019
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Snapshot / 2020 Digital Outlook

TECH VS. NON-TECH LEADERSHIP

32% Senior Management, e.g., Steering Committee

CEO, CMO, COO

Board of Directors Business Unit Heads (e.g.,

Product Development, Customer
36%
Experience, Procurement)
64% 14%

64%
13%

of digital transformation
5% strategies are led by non-tech executives

ENABLING CHANGE

Over a fifth of senior executives rank change management as their top digital priority for the year ahead—suggesting a growing understanding of its role in
digital transformation success. Change readiness is a function of:

CULTURE COMMITMENT CAPACITY

The level of cultural The level of conviction in the The level of resources,
acceptance and alignment proposed change and resolve knowledge and skills
with proposed new behaviors. to see it through to success. to support and sustain
the proposed change.



In an environment where disruption is constant, systematizing an approach to change
management becomes increasingly critical to organizational agility.
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DIGITAL TRANSFORMATION
REMAINS A DOUBLE-
EDGED SWORD
TOP DIGITAL THREAT / NEXT 12 MONTHS

39% 20% 16% 13% 10%

1) Cyber Attacks 2) Disruption by 3) Disruption by 4) Commoditization/ 5) Poor Customer

or Privacy Industry Competitors Industry Outsiders Automation Experience

36% see industry disruption

 as the #1 digital threat.


As the COVID-19 outbreak has worsened, IT security vendors have reported a sharp increase in cyber threats. Cloudflare noted a 37% increase in
cyber attacks during the month of March, and Barracuda Networks found a 600% increase in COVID-19-themed phishing emails during that period.
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TRANSFORMATION FOCUS AREAS

37%
IT
65%

Customer 29%
Service 60%

Marketing & 36%

Sales 53%

Core Business 41%

Operations 50%

Risk Mmgt. & 42%

Compliance 46%

Finance & 39%

Accounting 43%

38%
DIGITAL
HR 41% INITIATIVES
Tax
35% SPAN
37%
MULTIPLE
Other
5%
2%
BUSINESS
Projects Planned Next 12 Months*
 FUNCTIONS
Projects Currently Underway

 *Projects for the next 12 months were planned prior to the COVID-19 outbreak, so some may have been
de-prioritized or put on hold.
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LONG-TERM
TOP OVERALL BUSINESS OBJECTIVES

COVID-19 may cause organizations to focus more on operational

BUSINESS efficiencies and cost savings in the short term. However, business
objectives for the longer term are likely to hold steady. Middle market
executives say that the top objectives for their digital strategy are

OBJECTIVES
diversifying revenues and modernizing IT infrastructure over the next 18
months to three years.

Next 18 Months to 3 Years

1. Diversify Revenues*

1. Modernize IT Infrastructure*

3. Increase Market Differentiation

4. Increase Operational Efficiencies*

4. Bolster Cyber*


*Represents a tie in ranking
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Digital Transformation Value Drivers

Boosting Bolstering Improving Driving

Operational Digital Customer Revenue
Efficiencies Resilience Experience

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1 / Boosting Operational Efficiences

Even before the COVID-19 pandemic, boosting operational efficiencies was the top digital priority for middle market executives. Achieving that goal is even
more urgent now. Adapting to accelerated change requires greater agility. Every digital project should seek to continuously improve business processes,
reduce complexity and increase flexibility. Digitizing operations by injecting intelligence and automation into business processes can reduce costs, accelerate
speed and improve quality.

BENEFITS OF STREAMLINING OPERATIONS

Cut Cost Optimize Resource Increase Improve Increase Employee Boost Speeds
Allocation Transparency Productivity Retention

1 in 4
say increasing operational of participants say
efficiencies is a modernizing IT

58% top short-term business goal

(12-18 months).
59% infrastructure—critical to
boosting efficiency—is a top say optimizing business
short-term business goal. processes is their #1
 X 40% say increasing
digital priority.
operational efficiencies is
a top long-term business
goal (18 months-3 years).
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BDO INSIGHT
In the face of unprecedented economic disruption and significant Boosting operational efficiencies requires an end-to-end view of business
liquidity challenges, businesses need to find ways of doing more with models and processes—both enterprise-wide processes and intra-
less. Breaking down artificial barriers within an organization can help organizational processes—in the context of an integrated value chain.
integrate processes with the flow of information, which enables better By improving how people work together, the business can generate
collaboration and decision-making that is rooted in data. collective intelligence and identify solutions that extend beyond the
limited view of a single person, function or entity. Decisions informed
by data also help to focus innovations on areas that have the greatest
impact on core business.

Think about the rule of the Two T’s and the Two C’s: Transparency & Traceability and Communication & Collaboration

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2 / Bolstering Digital Resilience

The impact of COVID-19 has forced many organizations to respond by making sudden changes, such as rapidly shifting to remote work, pivoting production
or emphasizing digital revenue streams. The ability to achieve such changes is a key facet of business resilience. The crisis has also brought an increase in
cyber threats, and repelling these is another crucial aspect of resilience. While emerging technologies have helped streamline and optimize many different
processes, they also expose businesses to significant risk. There has never been more information to harness—and to simultaneously insulate from risk.
Because of the grave consequences, data privacy and security risks are top of mind for middle market executives.

39% cite cyber attacks as their 12% of CFOs cite data privacy as their
39% #1 digital threat 12% #1 overall business priority*

59% say bolstering cybersecurity is one of their top 3 42% are planning digital initiatives in the area of
short-term business goals (12-18 months) risk management and compliance over the next 12
59% X 40% say bolstering cybersecurity is one of their 42% months
top 3 long-term business goals X 46% already have projects underway
(18 months-3 years)

DIGITAL RESILIENCE BDO INSIGHT

Private &
Security While digital initiatives can help improve processes and increase
Responsiveness Reliability efficiencies, measures for digital resilience are just as important to
guard against an array of threats. And this goes far beyond mere
IT security, because threats are just as likely to come from inside
the business as from outside. Resilience investments need to focus
on proactive threat intelligence, detection and rapid response, in
 addition to basic data privacy and security measures. Moreover,
security defenses can reach a point of diminishing returns—when
they become so cumbersome that they impact usability and
 Privacy & Recovery Flexibility impede innovation. The goal is to strike the right balance.
Security
*Source: BDO 2020 CFO Outlook Survey
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3 / Improving Customer Experience (CX)

A familiar adage states that the customer is king—and this is even more true during lean times. As businesses fight to preserve revenue during a period
of unprecedented economic disruption, customer retention can be the difference between sustaining through the crisis or not. That’s why improving the
customer experience remains a vital business objective. As customer behaviors shift, digital transformation can help provide customers with better service
and, perhaps more importantly, identify unmet needs through a better understanding of customer behavior. Because customers expect more and they
expect it faster, good CX can induce loyalty and drive both customer retention and acquisition.

cite CX-related strengths as their

#1 competitive differentiator.
say improving customer experience is a top short-
68% term business goal (12-18 months). 38% X Stronger marketing and brand awareness (15%)
X Outstanding customer service (12%)
X Greater convenience (11%)

say poor customer experience is their

have digital projects underway in the #1 digital threat.
customer service arena.
60% X 53% have digital projects underway in the 10% X Companies must delight their customers and
users in new, innovative and unexpected ways,
marketing/sales arena or they risk losing valuable market share
to competitors.

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THE ELEMENTS OF CX

Quality of 58%
Customer Support 50%

Speed of 51%
Customer Support 46%

43%
Consistency
41%

40%
Personalization
44%

37%
User-Friendliness
44%

Current Focus Area Future Focus Area

BDO INSIGHT
Often the starting point for digital transformation, CX is key not only to increasing customer satisfaction
and brand loyalty, but also to getting closer to the customer and uncovering unmet customer needs.
Digital initiatives focused on improving CX can be a differentiator by delivering more effective
personalization and engaging with the customer in innovative ways. These can also help to better
understand the customer and potentially influence behavior across channels to increase engagement.

When facing a recession environment, it may be more profitable to focus on CX over product or service
 innovations. In a time of reduced customer spending, it’s even more important to enhance the end-to-
When in doubt, follow the
end customer journey, whether that comes through eliminating points of friction, creating consistency or S.E.C. Rule – simplicity,
enabling more personalization. ease, convenience.


IMPROVE CUSTOMER EXPERIENCE & EMPLOYEE PRODUCTIVITY

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4 / Driving Revenue
Many organizations face cash flow challenges due to the pandemic-related economic downturn, and for some, business priorities have shifted from growing
revenue to protecting it. But digital transformation can achieve both of these goals by optimizing processes and increasing efficiencies. Numerous studies
show a direct correlation between digital maturity and revenue growth—suggesting that digital transformation efforts may lead to more revenue even if
it isn’t the primary objective. Diversifying revenue streams, on the other hand, takes concerted focus and intentional investment, but may be necessary to
remain relevant in the digital economy.

say adopting a new business

# 1 most-cited long-term business anticipate increases in
objective is diversifying revenues 11% or revenue model is their #1 81% revenue over the next 3 years
digital priority

REVENUE-BOOSTING DIGITAL STRATEGIES

New Product/ Digital Revenue Model Digital Demand Customer Omnichannel

Service Development Development Generation Segmentation Distribution

BDO INSIGHT
To unleash their full revenue potential, companies need to think critically Organizations can generate additional revenue sources from innovative
about managing their data as a corporate asset with real economic business models and market expansions that leverage digital capabilities.
value that can be measured and monetized. The ability to make data- These can include subscription services and pay-per-use models (including
driven decisions is especially important when operations have been add-on services and premium features that can help expand to new
disrupted and budgets are limited. Data can provide indirect business customer segments), as well as product-as-a-service and service-as-a-
and performance value by informing strategic decisions and optimizing product models, which can be offered on a subscription or pay-per-use
 outcomes, or it can provide direct value in the form of new business basis. Customer centricity is key. Prioritize revenue-generating initiatives
models, products or services. This could come in the form of new digital that address unmet customer needs and embrace design thinking
versions of products/services, enhancements to existing digital products/ principles to reframe the problem in a human-centric way.
services and new standalone digital offerings.

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Digital Transformation Challenges

DIGITAL TRANSFORMATION DURING TIMES OF CRISIS

The COVID-19 outbreak has had a devastating effect and altered the Persevering through the crisis and beyond demands much more than
lives of billions of people around the globe. For many organizations, just cutting costs; it requires new levels of operational efficiency, the
the impact on their employees, suppliers and customers makes it an resilience to continue operations and the agility to make necessary
existential business threat as well. Don’t expect a “return to normal” changes quickly. Having a digital strategy already in place gives an
either, because the tectonic shifts the novel coronavirus crisis has organization a distinct advantage in responding to economic volatility
created will become part of the new post-pandemic reality, and and market disruption. And for those that are still developing or
businesses must adapt or face the consequences. planning to implement their digital strategy, they must forge ahead or
risk obsolescence.
The economy is now mired in a downturn, which may outlast the
current public health crisis. The knee-jerk reaction to an economic This crisis can serve as the catalyst for accelerating digital
downturn tends to be to slash costs across the board—and some transformation and adoption across an organization, as well as
businesses may consider making digital transformation a sacrificial increasing the willingness to experiment, learn and scale within a
lamb. But halting digital transformation is a short-sighted measure. compressed timeframe. The right digital strategy can help mitigate the
If the coronavirus crisis has shown us anything, it is that businesses effects of these challenges, and it can also identify new opportunities
need to be able to operate in a digital world now more than ever. In to address unmet customer needs through a better understanding of
fact, the response to the pandemic has expedited the digitization and customer behavior. By using design thinking principles and taking an
servitization of the economy that was already end-to-end view of processes, organizations can innovate with new
in progress. offerings and business models that have the potential to grow revenue
at a time when it’s needed most. The innovations that are made out of
necessity could become permanent pillars of the business that help it
to thrive well beyond the pandemic.


WHAT CAN THREATEN OR DERAIL
DIGITAL TRANSFORMATION EFFORTS?

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Challenges on the Road to Transformation

Even though COVID-19 has caused cash flow issues and budget constraints, digital spending will be an even more important area to focus resources on going
forward. Leaders of digital transformation need to make the business case for how spending on digital initiatives can help preserve revenue and capital to
make the entire business more resilient. However, the biggest obstacle to moving forward with a new digital initiative is concerns about introducing new
security risks. Fear is the overriding factor: Enthusiasm about the potential benefits of technology are overridden by potential repercussions.

WHAT IS YOUR ORGANIZATION’S BIGGEST CHALLENGE IN MOVING FORWARD WITH A NEW DIGITAL INITIATIVE?

6%
Fear of failure

31%
Concerns about cybersecurity
11%
Making the business case to
internal stakeholders

13%
Knowing how/
where to start

20%
Establishing the right metrics

19%
*Budget/resource constraints

*In the current environment, budget/resource constraints are likely to pose an even greater challenge than is reflected here.
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Lessons Learned from Failure

Failure is necessary to innovation—but within reason. An unsalvageable digital initiative is costly and can put a damper on appetite for future digital
transformation efforts. When asked why digital initiatives fail at their organization, senior executives most frequently cited a lack of the necessary skills,
emphasizing the importance of a formal approach to change management and digital upskilling.

TOP REASONS FOR FAILURE

41% 40% 33% 30% 28% 28%

Lack of Skills or Interoperability Underinvestment/ Employee Poor Communication Lack of Leadership

Insufficient Training with Legacy Tech Under-Prioritization Pushback or Project or Vision
Management

Where does it all fall apart? Among the 91 executives who experienced failure in the last year, the vast majority (82%) reported the initiatives never
managed to get off the ground. Only 18% of unsuccessful initiatives failed after they had already been launched across the firm.

DIGITAL TRANSFORMATION IN PRACTICE: CAUSES OF FAILURE*

 18%
Failure to adopt (initiative was launched
82%
Failure to launch (could not get
across the firm, but poorly understood initiative launched across
 and adopted by employees, vendors/ the firm).
suppliers/partners and customers).

* Among the 91 respondents who experienced a failed digital initiative in the last year
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Digital Transformation Success Secrets

For all the talk of failure, most middle market executives rate their digital transformation initiatives from the last
year a success. A smaller percentage of organizations—just under a fourth—executed digital initiatives that were
“overwhelmingly” successful, with results exceeding their expectations. Their success translated into measurably
greater improvement in overall business performance compared to those that reported moderate success.

Digital transformation has gone mainstream. But now

that the cat’s out of the bag, every business is actively
pursuing it. To secure your future, it isn’t enough just to ‘do’
digital transformation: You need to do it better than your
competitors, you need to do it faster and you need to
do it now.

MALCOLM COHRON
National Digital Transformation
Services Leader, BDO Digital


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Digital ROI / What does success look like?

RATE OF SUCCESS

15% 23% BDO INSIGHT

Overwhelmingly successful
Failure Capturing ROI requires identifying clear goals
(business outcomes
surpassed expectations) and corresponding metrics up front, and then
tabulating ROI realization at set intervals to
confirm progress and course correct
when needed. While spending precious
resources on digital initiatives can be

62%
challenging in a time of tightened budgets,
these investments can enable greater
Moderately successful efficiencies in both the near term and the
(achieved expected long term. Implementing digital initiatives as
business outcomes) part of an overarching digital strategy helps
protect capital and drive revenue.

LAST 12 MONTHS

Revenue Increases 86% 69% 41%

Revenue Increases of 10% or More 37% 12% 10%

Profitability Increases 86% 70% 39%


Profitability Increases of 10% or more 36% 16% 3%


Overwhelmingly Successful Moderately Successful Failure
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6 Factors of Digital Transformation Success

What do companies with overwhelmingly successful results from their digital initiatives do differently?
Here’s a look at their secret sauce.


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1 / THEY’RE REINVENTING 2 / THEY’RE INTENTIONAL ABOUT 3 / THE SENIOR MANAGEMENT TEAM

THEIR BUSINESS. ENABLING CHANGE. LEADS THE CHARGE.

Digital Projects Underway in Core Developing a Formal Change Digital Transformation Strategy Led by
Business Operations: Management Strategy: Senior Management:

X Overwhelmingly successful: 64% X Overwhelmingly successful: 50% X Overwhelmingly successful: 44%

X Moderately successful: 49% X Moderately successful: 42% X Moderately successful: 30%
X Failures: 37% X Failures: 36% X Failures: 24%

4 / THEY’RE IMPLEMENTING FASTER. 5 / THEY’RE USING MORE EMERGING 6 / THEY’RE FOCUSED ON USING
TECHNOLOGIES TO HARNESS DATA ETHICALLY.
Organizations Implementing Their INSIGHTS FROM DATA.
Digital Transformation Strategy: Data Ethics Policy in Place:
Data Analytics
X Overwhelmingly successful: 49% X Overwhelmingly successful: 78%
X Moderately successful: 22% X Overwhelmingly successful: 72% X Moderately successful: 69%
X Failures: 11% X Moderately successful: 55% X Failures: 64%
X Failures: 41%
Robotic Process Automation:
X Overwhelmingly successful: 48%
X Moderately successful: 31%
X Failures: 14%
Artificial Intelligence:
X Overwhelmingly successful: 53%
X Moderately successful: 44%
X Failures: 37%



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Benchmarking Your Digital Transformation Efforts

How do you stack up against your middle market peers? While every industry is different, benchmarking
against those in your revenue range can help you determine the priority areas of focus for your digital
transformation efforts.

HOW TO USE THIS BENCHMARKING DATA

Identify your Understand Gauge where you Prioritize

relative strengths & competitive gaps & can gain a investments
weaknesses threats to competitive advantage
your business

For the purposes of this section, organizations are categorized in two groups, according to their annual revenues:

 X Lower Middle Market: $250M-$750M

X Upper Middle Market: $751M-$3B


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W H AT I S T H E S TAT U S
O F YO U R D I G I TA L
T R A N S F O R M AT I O N S T R AT E G Y ?

Benchmarking / Strategy Status

STRATEGY STATUS

Implementing against a DT strategy 27% 21% 31%

Developed a DT strategy, but not yet

36% 38% 34%
implementing it
In the process of developing a
28% 30% 28%
DT strategy
Want to develop a DT strategy, but
8% 10% 7%
 haven’t started

No plans for DT 0%


All Respondents Lower Middle Market Upper Middle Market
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WHICH DIGITAL ENABLERS ARE YOU ADOPTING?

Benchmarking / Emerging Technology Adoption

All Respondents Lower Middle Market Upper Middle Market

Emerging Technologies Currently Considering Currently Considering Currently Considering
Deploying Deploying Deploying Deploying Deploying Deploying
66% 27% 64% 25% 67% 28%
Cloud Computing
93% 89% 95%
57% 34% 56% 35% 57% 34%
Advanced Analytics
91% 91% 91%

Robotic Process 33% 39% 29% 41% 35% 37%

Automation 72% 70% 72%

Artificial Intelligence & 45% 42% 37% 48% 50% 39%

Machine Learning 87% 85% 89%
53% 33% 54% 33% 53% 33%
Internet of Things
86% 87% 86%

Blockchain/Digital 33% 42% 32% 39% 34% 45%

Ledger Technology 75% 71% 79%
29% 26% 27% 27% 31% 24%
 3D Printing
55% 54% 55%
33% 36% 33% 38% 33% 36%
Extended Reality
 69% 71% 69%
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Digital Enablers Defined

Cloud Computing Blockchain
Cloud computing shifts the access, processing and storage of A type of distributed ledger technology, governed by a
data and services to the internet. consensus protocol, used for sharing and storing validated
and unchangeable information.

Advanced Analytics
Advanced analytics go beyond historical data analysis to 3D Printing
provide real-time and predictive business intelligence. Also known as additive manufacturing, 3D printing builds
three-dimensional objects from a digital model.

Robotic Process Automation (RPA)

RPA is the use of software “bots” that automate repetitive Extended Reality (XR)
manual tasks. The extended reality realm encompasses virtual reality (VR),
augmented reality (AR) and mixed reality (MR).

Artificial Intelligence (AI)

Artificial Intelligence is a broad concept to describe machines Virtual Reality
trained to think like humans. VR is a full immersion into a
computer-generated environment.

Machine Learning
A subset of AI, machine learning aims to mirror human Augmented Reality
intelligence by equipping algorithms with the ability to AR overlays virtual elements, such as computer-
“learn” on their own without human intervention based on generated graphics or simulations, on top of the
experience and new inputs. real-world environment.

Internet of Things (IoT) Mixed Reality

IoT connects “smart” devices to the Internet and to MR is an advanced form of augmented reality,
each other. integrating the virtual and physical worlds to create an
 immersive interface.

Distributed Ledger Technology (DLT)

A database of information that is simultaneously shared and
 updated in real time and in multiple locations across
a network.
 BUILDING TOMORROW’S BUSINESS: HOW THE MIDDLE MARKET IS TACKLING DISRUPTION TODAY / 2020 DIGITAL TRANSFORMATION SURVEY 29

HOW ARE YOU RESPONDING TO NEW DATA PRIVACY

REGULATIONS AND NORMS?

Benchmarking / Data Privacy Compliance

All Respondents Lower Middle Market Upper Middle Market

Currently Next 12 Months Currently Next 12 Months Currently Next 12 Months

Providing Training for 55% 40% 53% 38% 57% 41%

Employees 95% 91% 98%

Revising Privacy Policies 53% 36% 55% 36% 52% 35%

and Processes 89% 91% 87%

Updating Privacy 52% 35% 58% 34% 48% 36%

Disclosures 87% 92% 84%

Performing a Readiness 49% 35% 54% 30% 46% 30%

Assessment 84% 84% 76%

Automating Compliance 48% 43% 46% 44% 49% 42%

Processes 91% 90% 91%

Performing a Data 47% 39% 51% 35% 44% 41%

Mapping Exercise 86% 86% 85%

Reviewing Third-Party 46% 40% 40% 44% 50% 37%

 Agreements 86% 84% 87%


 BUILDING TOMORROW’S BUSINESS: HOW THE MIDDLE MARKET IS TACKLING DISRUPTION TODAY / 2020 DIGITAL TRANSFORMATION SURVEY 30

HOW ARE YOU PREPARING YOUR EMPLOYEES FOR DIGITAL TRANSFORMATION IN THE WORKPLACE?

Benchmarking / Digital Adoption & Enablement

PLANS TO ENABLE EMPLOYEE ADOPTION

56%
Implementing training to upskill
54%
current employees
57%

46%
Establishing a Digital
43%
Transformation office
49%

43%
Developing a formal change
40%
management strategy
45%

40%
Working with an external
38%
advisory firm
42%

34%
Leveraging third-party
29%
outsourcing solutions
37%

All Respondents Lower Middle Market Upper Middle Market


 BUILDING TOMORROW’S BUSINESS: HOW THE MIDDLE MARKET IS TACKLING DISRUPTION TODAY / 2020 DIGITAL TRANSFORMATION SURVEY 31

IS YOUR INVESTMENT IN DIGITAL PAYING OFF?

Benchmarking / Digital ROI

RATE OF SUCCESS
Business outcomes surpassed
18% 15% 29%
expectations

Achieved expected outcomes 51% 67% 58%

Failure 15% 8% 13%

12-MONTH REVENUE GROWTH FROM DIGITAL INITIATIVES

Increased by 10% or more 18% 19% 17%

Increased by 1-9% 51% 42% 56%

No impact 30% 38% 25%

Decreased 2% 1% 2% *Excludes respondents that did not make digital investments in the last 12 months

12-MONTH PROFITABILITY IMPROVEMENT FROM DIGITAL INITIATIVES

Increased by 10% or more 19% 13% 23%

Increased by 1-9% 50% 53% 48%


No impact 28% 31% 27%


Decreased 3% 3% 3% *Excludes respondents that did not make digital investments in the last 12 months

All Respondents Lower Middle Market Upper Middle Market

 BUILDING TOMORROW’S BUSINESS: HOW THE MIDDLE MARKET IS TACKLING DISRUPTION TODAY / 2020 DIGITAL TRANSFORMATION SURVEY 32

The COVID-19 pandemic has impacted certain industries much

more significantly than others, but on the whole, digitally mature
organizations have the capabilities that enable a resilient
response to the crisis. To benchmark your digital maturity and
transformation readiness against your industry peers,
explore sector-specific survey findings in our industry
breakout reports:

For a personalized assessment of

your organization’s digital strengths
and weaknesses, check out our
Digital Transformation Accelerator
 and SMARTDiagnostic tools.

LEARN MORE 

 BUILDING TOMORROW’S BUSINESS: HOW THE MIDDLE MARKET IS TACKLING DISRUPTION TODAY / 2020 DIGITAL TRANSFORMATION SURVEY 33

Conclusion
Digital transformation plays a critical role in the future success of a business
by enabling data-driven decisions and greater efficiencies, which can
help clear many different roadblocks. As the COVID-19 response has
demonstrated, businesses need to align their current strengths with how
they address external threats and emerging opportunities. An effective
digital strategy has the potential to increase existing revenue
sources and identify new ones, in addition to improving the
customer experience across multiple channels and increasing
engagement. To achieve true market differentiation, you
must have foresight into how the forces of change today
are reshaping the business environment of tomorrow— EXPLORE HOW BDO HELPS CLIENTS
all while maintaining constant peripheral vision into INNOVATE AND TRANSFORM 
the competition.

About BDO Digital

A subsidiary of BDO USA, BDO Digital, LLC, provides a holistic portfolio of technology and transformation services and solutions, tailored by industry
and designed for the middle market. The collaborative, cross-disciplinary team is comprised of more than 400 professionals, including digital strategists,
systems integrators, data scientists, software developers, change management professionals and industry-specific advisors, who work together to solve
clients’ immediate digital needs and unearth new opportunities to drive competitive advantage. Learn more at bdo.com/digital.

 BDO Digital, LLC, a Delaware limited liability company, is a wholly-owned subsidiary of BDO USA, LLP. BDO USA, LLP, a Delaware limited liability
partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of
independent member firms.


 Contacts

MALCOLM COHRON ESKANDER YAVAR

National Digital Transformation Services Leader BDO Digital Principal and National Leader,
[email protected] / 404-979-7109 Management Advisory
[email protected] / 713-407-3293
ANKUR LAROIA
BDO Digital Managing Director and Client Executive MICHAEL LEE
[email protected] / 713-548-0710 BDO Digital Principal and Senior Client Executive
[email protected] / 630-286-8126
MAURICE LIDDELL
BDO Digital Principal and Senior Client Executive SUSIE CUMMINGS
[email protected] / 713-407-3265 BDO Digital Principal and National Leader, IT Services
[email protected] / 630-286-8127
ROBERT BROWN
BDO Digital Managing Director and Client Executive KIRSTIE TIERNAN
[email protected] / 714-913-2581 BDO Digital Principal and National Co-Leader, Data Analytics
[email protected] / 312-616-4638

 BDO Digital, LLC is a Delaware limited liability company, and a wholly-owned subsidiary of BDO USA, LLP. BDO USA, LLP. BDO USA, LLP, a Delaware limited liability partnership, is the U.S.
member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO
network and for each of the BDO Member Firms.
Material discussed is meant to provide general information and should not be acted on without professional advice tailored to your needs.

© 2020 BDO USA, LLP. All rights reserved.