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Mid-tier North East companies turn to digital innovation

Mid-tier companies in the North East are turning to digital innovation to deliver on growth ambitions, but lower than average investment plans risk their competitive position, according to a new report from KPMG Enterprise.

‘Digital to the Core’, KPMG Enterprise’s report, based on YouGov research, found that more than a third of Northern mid-tier businesses (36%) said transforming the customer experience was their primary motivation for investing in digital initiatives. This came just ahead of the 33% prioritising the development of digital channels to expand into new markets.

More broadly, digital was classed as a business priority by nearly seven in ten Northern companies (69%). However, the commitment to actually investing in technology was markedly lower across businesses in the North than the UK average. Just over half (55%) plan to increase spending on digital over the next two years, with one in five intending to do so by more than 10%. This compares to a national average of 68% and 35% respectively.

Caution is still the watchword for many mid-tier companies. Only 11% in the North describe themselves as digital pioneers who “strive to stay at the cutting edge”, while 37% said they would prefer to wait and see if a new technology was proven before investing. At the other end of the spectrum 16% acknowledge they are simply playing catch up with their peers in the field of digital technology.

This ‘wait and see’ approach was particularly pronounced in certain sectors across the UK. While IT & telecommunications sector, media organisations and finance and accounting companies are placing a high priority on digital for the future, organisations in the manufacturing and construction sectors are much less likely to view it as a strategic priority.

Mick Thompson, office senior partner at KPMG in Newcastle, said: “Digital innovation is dramatically reshaping the business landscape so focusing on it is crucial as companies vie for growth opportunities. It’s undoubtedly positive news that our mid-tier regional businesses do indeed see digital as a transforming force.

“There is particular focus on using data to understand and respond to customers’ behaviour; impacting their experience through brand, service, content and fulfilment. Some sectors – notably construction and manufacturing – remain to be convinced but they must not feel immunised from the impact of this technology. There are real threats and opportunities across all sectors.”

He added: “It’s a concern that this region’s mid-tier corporates have lower than average forecasts for investing in technology. Combined with the fact that more than three times as many are adopting a ‘wait and see’ approach, as opposed to aiming to be at the cutting edge, Northern businesses could be putting their future competitiveness at risk.

“While there is nothing inherently wrong in waiting for technology to be proven, there is a danger that such an approach could give rise to a ‘two-track digital economy’ where some mid-tier organisations end up falling behind and being overtaken by more innovative businesses.”

Thompson concludes: “Mid-tier companies in the North East can carve out a competitive position in the increasingly digital economy, using technology to bring specialised products and services to global markets.”