Uncertainty takes many forms. Some firms cite revenue unpredictability. Others attribute it to regulatory volatility, shifting consumer behavior or competitive pressures. For heads of product, operational uncertainty represents a firm’s ability to grow its top and bottom line while navigating those unpredictable factors. Many firms are adopting technology-driven strategies to manage these challenges in this environment. For example, among middle-market firms, 42% consider innovation a primary or significant factor in their competitive strategy. Forty-eight percent of this group operates in low uncertainty, reinforcing the connection between strategic innovation and greater stability. In contrast, firms that view innovation as a moderate or minor factor are far more likely to face high uncertainty.
Competition from startups further drives uncertainty. Thirteen percent of middle-market product leaders now see startups as their biggest competitive threat, a 2.6x increase from six months ago. These new entrants — often leaner, AI-driven and well-funded — are forcing incumbents to rethink market positioning and adapt their strategies to maintain a competitive edge.
Add in the uncertainty of regulations and policy. The ability of larger incumbents to navigate regulatory shifts adds another layer of unpredictability. Firms with high uncertainty are twice as likely to cite policy changes as a primary competitive obstacle.
These are just some of the findings from “Navigating Uncertainty: How Middle-Market Executives Adapt, Compete and Innovate,” a PYMNTS Intelligence study. In a survey from Jan. 9 to Jan. 17, we collected data from 60 heads of product, each representing companies generating annual revenues between $100 million and $1 billion. This time frame means that we conducted this study just before the Trump administration’s trade policies and new tariffs started to come online. Consequently, regulatory uncertainty may have escalated, particularly for goods producers navigating shifting trade policies. These policy shifts introduce another layer of uncertainty that PYMNTS Intelligence plans to examine through this series soon.
Startups Disrupt Middle Markets, Fueling Uncertainty
New entrants intensify operational uncertainty
Startups are emerging as a significant threat to middle-market firms. Thirteen percent of product leaders now name them their primary competitors, up from 5% six months ago — a 2.6x jump. Meanwhile, large corporations remain the most frequently cited rivals, though their share dropped from 33% to 27%, suggesting that the middle market feels pressure from smaller upstarts and established incumbents.
Rival middle-market businesses also saw a slight uptick in being named top competitors, rising from 12% to 15%. This increase suggests that smaller firms within the same revenue band are vying for mindshare. Meanwhile, private equity-backed competitors dipped from 10% to 6.7%, hinting that startup urgency overshadows larger funding vehicles. These shifts point to a fragmented competitive environment where mid-sized companies must counter revenue compression from above and below to sustain overall growth.
AI-powered startups drive sector-specific uncertainty
In service industries like real estate and finance, 16% of leaders now view small businesses or startups as their main competitors, up from 11%. By contrast, large service corporates increased to 44% from 32%. This decrease points to a growing impact of lean, tech-focused newcomers who thrive on lower costs and higher scalability.
Meanwhile, international entrants and private equity-backed rivals declined in prominence, hinting that AI startups have captured near-term attention. Middle-market firms may need to accelerate tech innovation in tandem with their business differentiation strategies to avoid further disruption. Otherwise, heads of product suggest that uncertainty could become a defining feature of the middle-market landscape.
Innovation Slashes Uncertainty by 54%
Innovation-driven product strategies mitigate uncertainty
Innovation is a key driver of stability in an unpredictable market. In particular, heads of product prioritizing tech-driven strategies report 54% fewer instances of high uncertainty. The link between the success of these strategies for mitigating uncertainty and strategic resilience is clear. These firms focus on business models that privilege product differentiation, brand elevation and emerging technology adoption. They’re not simply reacting to competitive pressures.
This mindset also shapes how firms perceive market challenges. Thirty-six percent of innovation-driven firms cite tech advancements and regulatory shifts as the top factors shaping their innovation priorities — more than twice the rate of their less innovative peers. Yet innovation introduces its own risks.
In the past six months, the share of middle-market firms citing technological advancements as a competitive challenge has risen fivefold. Additionally, 30% of firms now identify regulatory uncertainty as a significant obstacle, up from 17% six months ago. These changes suggest that innovation buffers uncertainty and requires careful navigation of shifting industry conditions.
Firms that view innovation as moderate or minor tend to focus on competitors improving their offerings (38%) over regulatory or technological shifts (15%) and new entrants (29%). This incremental approach can exacerbate operational uncertainty, as these companies often respond to rivals rather than shape emerging trends. In contrast, firms that make innovation a primary or significant factor are likelier to emphasize industry shifts (36%) and customer demand for more advanced solutions (24%), enabling them to pivot faster and reduce uncertainty.
Regulatory Shifts Boost Competitive Uncertainty
Policy unpredictability compounds uncertainty for already anxious firms
Thirty percent of product leaders cite policy changes as a primary obstacle. This share almost doubles the 17% reported six months ago. The sharp increase highlights growing concerns over shifting trade policies, evolving ESG mandates and evaporating financial regulations. These factors remain beyond the control of any firm.
Firms already experiencing high uncertainty are particularly vulnerable. They are more than twice as likely as their lower-uncertainty peers to report regulatory shifts as a top barrier to staying competitive. For goods producers, tariffs pose an increasing risk to supply chains and cost structures. Meanwhile, service-based firms — previously focused on cost pressures — are more concerned about unpredictable compliance demands.
With the regulatory landscape in flux, it’s difficult for businesses to plan long-term. In contrast to July 2024, cost pressures are no longer the dominant source of uncertainty. Notably, this measure of uncertainty has declined from 33% to 15% as firms shift their focus toward adapting to unpredictable regulations and rapid technological changes.
With technological advancements also emerging as a greater challenge — rising from 3.3% to 20% — middle-market firms must balance policy compliance with innovation to avoid falling behind in an increasingly complex business environment.
Regulatory uncertainty weighs heaviest on high-uncertainty firms
Firms experiencing high levels of uncertainty are disproportionately affected by regulatory shifts. More than half (56%) of these firms cite regulatory changes as their biggest competitive challenge, compared to just 22% of low-uncertainty firms. This gap suggests that firms already struggling with unpredictability lack the flexibility to adapt to evolving policies, making them more vulnerable.
Similarly, 31% of high-uncertainty firms cite technological advancements as a significant challenge, compared to 17% of low-uncertainty firms. While innovation offers opportunities, it also introduces disruptions that require strategic agility. These firms must balance regulatory adaptation and technological evolution to stabilize their market position.
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Methodology
This edition of the 2025 Certainty Project, “Navigating Uncertainty: How Middle-Market Executives Adapt, Compete, and Innovate,” is a PYMNTS Intelligence study based on a survey conducted from Jan. 9 to Jan. 17. It examines how operational uncertainty — defined as the ability to sustain revenue growth amid shifting market forces — affects middle-market firms’ competitive strategies. The survey collected responses from 60 heads of product at companies generating annual revenues between $100 million and $1 billion. It explores the role of innovation in mitigating uncertainty, the impact of rising startup competition and how regulatory changes shape competitive positioning. The findings offer insights into how firms adapt to evolving external pressures and their strategies to maintain stability and growth.
