Last night I was racing a 5 km run; it’s a handicap series with the idea that everyone should cross the line simultaneously.; I even convinced my non-running wife to attend.
Last night’s event used a new timing system.
This used to be a piece of paper, a stopwatch, and some guesswork. Now, It’s a phone, an app, and QR codes.
The race committee was worried the change might confuse their runners and had put off doing so since 2018; it didn’t. The new times are accurate enough to give a certified race time.
It got me thinking about conversations I’d been having with Private Equity partners and some research we completed that you’ll probably get value from.
Did you know that only 10% of PE firms make transformative tech changes in their portfolio companies?
Put another way; our research showed that 9/10 of operating partners actively avoided making transformative tech changes! In 2022 doesn’t that feel like a massive slam dunk?
The best firms are looking at their portcos and thinking, how could we change how this business works using technology? Transformation is at the heart of this.
Just like the run committee, they cite risk aversion as the reason they avoid it.
Risk aversion is a genuine issue; you invest your GP’s money. The decisions you make impact the returns they will see. The inverse is also true. If there were an opportunity to drive higher returns with a traditional value creation method, you’d take it, right?
Why is technology any different?
Data is the key.
Can your portco CTOs tell you the scaling limits of their systems? Do they have defined NFRs? Is the cost per user/customer reported to the board?
If they can, you should feel more confident in transformative change.
If they can’t, then you know where you can add value.
We’ve talked more about this in the report ‘Creating value when it comes to technology change for Private Equity Portfolio Companies.’
If you’d like a copy, please let me know; you can contact me at: firstname.lastname@example.org.
Keep leading; it matters.