Baker Tilly has unveiled the conclusions of its report titled “The Mid-Market Labyrinth”, which centers on an emerging challenge for the coming decade: how to integrate artificial intelligence into the growth strategy without eroding the pathways for talent development and the grooming of new leaders.
The report describes a business landscape marked by volatility, constraints, and a rapid pace of change. Looking ahead to 2035, surveyed leaders anticipate stricter and more variable regulation, as well as tighter access to critical resources such as capital, talent, and raw materials.
In that context, artificial intelligence emerges both as a driver of growth and as a source of tensions. According to the study, 7 out of 10 leaders believe that technology and digital transformation, including AI, will contribute significantly to growth over the next five years. That ambition is already translating into investment: 60% say that technology and digital transformation are a top investment priority; the share rises to 66% among high-growth organizations. However, institutional volatility has impacted these decisions: more than a third of organizations (35%) report having postponed or canceled significant investments due to rapid shifts in public policy.
Leadership, Talent, and Ethical Leadership Crisis
The study places talent shortage as the primary growth barrier in the middle market: six in ten executives consider that the competition to attract and retain top-tier talent will be the biggest restraint over the next decade. The pressure intensifies, according to the report, in critical and highly specialized areas such as artificial intelligence, electric grid engineering, supply chain management, and regulatory affairs.
In this scenario, Baker Tilly’s report flags a specific risk associated with automating entry-level professional roles. More than half of leaders (57%) foresee a future leadership crisis as AI transforms entry- and mid-level positions, weakening traditional pathways for talent development. The study also finds that 68% believe that leaders who fail to balance technology and talent will put their organizations at risk—an assessment that reinforces the need to safeguard early-career development pathways while modernizing processes.
Conversely, the report notes that, in a technology-saturated world, the competitive edge will tend to strengthen the human element.
Thus, seven in ten leaders believe that organizations capable of demonstrating their “human value” will be the ones to succeed.
Ethical leadership emerges as another advantage vector. Nearly three-quarters of leaders (73%) believe that ethical leadership will become a critical differentiator over the next decade, although only 5% identify ethical decision-making as one of their top three personal strengths. That gap, the report notes, exposes a vulnerability at a time when scrutiny and regulatory complexity are rising.
Francesca Lagerberg, CEO of Baker Tilly International, underscores the backdrop: “The main factor shaping business confidence today is political volatility. When the rules of the game keep changing, innovation slows and large strategic bets are postponed; that is precisely what we are observing in some regions of Europe.”
Looking ahead to the next decade, the study concludes that middle-market organizations have structural advantages for navigating uncertainty, such as more direct access to senior decision-makers, agility, and lower levels of bureaucracy. Thus, the report concludes that the main challenge for these organizations is to convert their responsiveness into sustainable growth, operating in a more regulated environment with tighter resources, and integrating technology and talent successfully without losing the human element, which, according to surveyed leaders, will be the differentiator.
