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Working on big, expensive, complicated technology problems.

Private Equity

Incidents, overspending and firefighting, product value creation, a short story.

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Last time, you learned the typical ways portcos are currently trying to tackle product value creation in 2022 and why Private Equity involvement is a must!

Following this, readers asked excellent questions about the results product value creation delivers.

Let’s not forget, that most tech programmes waste time and don’t deliver value.

Here is a short, true story that you might recognise from working with your portco tech leaders.

PortCo A found its growth strategy under threat with platform outrages and customer complaints.

They had recently developed a new Multi-tenant SaaS platform and were deep into alpha testing. But, something wasn’t right; customer incidents, complaints and outages snowballed, their product team was continually firefighting.

At peak, they had received 100+ platform incidents a week, with churn reaching 20% in only three months!

Their teams’ solution; keep responding to incidents and release code changes faster

The fix forward approach.

A big challenge for Portco A was convincing the teams to invest their time out of the day-to-day long enough to address these challenges head-on.

(If you haven’t read ‘The Phoenix Project, you’ll probably enjoy it; it’s all about this. )

They needed a plan focused on understanding, organising and resolving these incidents

The best PE firms run QVCMs, in this case, it showed that the current method for classifying incidents didn’t provide the level of detail their teams needed.

We guided them in designing a simple method for extracting, analysing and categorising this incident data based on the TVC framework. And helped them to implement the finding and facilitate triaging of the incidents found, this data was presented to product teams twice daily.

As a result, their teams found five common areas where the incidents originated and were able to fix the root cause.

In 3 months, incidents were reduced by 300% and 17 cost-overspending areas were identified, creating around $20m of additional value.

A simple process, a small mentality change, a big upside.

Most firms are seeing at least a $0.5 – $1M tech value creation windfall per portco per product theme in 90 days or less.

Does that sound like it’s worth taking action on?

Keep leading; it matters.

–

Thomas

You can sign up for more ‘unconsidered needs’ below.

Getting the value you deserve from product delivery in 2022

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Last time, you learned the themes product value creation takes, and you’ll have taken a small test to see if your product teams have considered them.

Following this, readers asked for the typical ways portcos are currently trying to tackle these themes in 2022.

They are, of course, doing something, but the effectiveness of these programmes is limited.

Otherwise, tech programmes wouldn’t be spinning out together, costing more than planned and delivering less value, right?

The stages to bringing your portcos tech products to life.

The Product Strategy> The Product Roadmap> Product Delivery

The strategy is your team’s definition of your product’s 5-10 year vision and evolution to keep ahead of market trends using internal and external data.

The roadmap takes the strategic product vision, breaks down the required actions and forms this into steps to be delivered over the next 1-3 years.

Product delivery is taking the plan and getting the job done, delivering change pragmatically, along with the firm’s current needs.

What typically happens.

At the product stage, some fantastic ideas are created, a confident vision, but can often have gaps based on the protcos knowledge of their market.

As a result, the product roadmap can be under ambitious or over expensive. It may not consider PE exit timelines which may be shorter than the product lifecycle. CTOs can struggle to deal with these demands.

The knock-on effect is that 9/10 product delivery timelines will overrun as releases get delayed and competing programmes are created to deliver value to the failed main programme.

We are some of the best PE firms doing to solve this

For Private Equity, the clock is always ticking, and seeing significant value delivered within your investment horizon is critical.

In addition to the QVCMs, we mentioned previously. The best firms build consistent product frameworks that identify and predict which portfolio company needs intervention, when, and how much. The TVC Portco Heatmap

Throughout the quarter, we’ll build, assess and make recommendations for intervention from the TVC Portco Heatmap.

This is where you can influence the technology roadmap and align this to value creation

Most firms are seeing a $0.5 – $1M tech value creation windfall per portco per product theme in 90 days or less.

Does that sound like it’s worth taking action on?

Keep leading; it matters.

–

Thomas

A simple product review meeting framework for success in 2022

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This week I was invited to a product review meeting, and like most product review meetings, the first time out, it was chaos!

What is a product review meeting, and why should Private Equity be involved?

Technology teams can seem random, unorganised, and slow to make changes. You’ve probably found yourself frustrated by tech teams as a private equity operator. The product review meeting is your chance to work with your tech leaders. Your chance to influence the technology roadmap. Your opportunity to align this to the value creation strategy.

There are five key elements to agree on at a great product review meeting.

What we will build and why we will build it.

How long do we think it will take.

How much do we think it will cost.

The value will we create as a result.

How confident we are with those estimates.

Great PE firms run product review meetings with their tech leaders twice per year.

The best PE firms run quarterly product review meetings, including leaders and doers from tech, sales, marketing, operations and support. They are bringing together small teams of 5-8 people at most. And with a value creation review, goals and accountability.

The QVCM. 

Throughout the quarter we’ll guide them to implement and facilitate the QVCMs. 

Product review meetings, not board meetings, are where the success of your portcos is decided in 2022.

Keep leading; it matters.

–

Thomas

You can sign up for more ‘unconsidered needs’ below.

Overcoming Risk aversion, why technology is treated differently from the rest of value creation.

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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: thomas@themarkethill.com.

Keep leading; it matters.

Thomas

How can you afford not to focus on Data Science?

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Last weekend, I raced my first Triathlon since 2019; I spent some time speaking with the race director; he was a fun guy.

He talked about how they were being asked by people racing their events to do more with their data. He said we need an app; I said probably not.

We talked about how they could compare their racer’s times to predict future results, help them find their closest competitors, and use this to make race recommendations!

Not bad for a post-race discussion.

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.

If you aren’t investing in Data Science, you can be sure your competitors are. Data science has fast become a differentiator in sourcing, dealing and value creation.

However, less than half of all PE firms have Data Science capabilities. Those that do are struggling to scale up their capability—both internally and within their portcos.

Can you afford not to focus on Data Science?

It would help if you created ‘innovation sandboxes’ to make this process scale. This approach should reduce the reliance on tech leads to start building models. These should be templated technical implementations. You can use them to scale your capabilities across multiple portcos simultaneously. You can repeat this same process for your firm’s internal teams.

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: thomas@themarkethill.com.

Keep leading; it matters.

Thomas