Private Equity

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.

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.

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Thomas

Here’s a short story that might resonate from working with your portco tech teams to value creation programmes.

I’m part of a local Triathlon Club; we set a goal for 2022 to increase member engagement; we already have enough members; we just needed them to do more stuff with the club.

We decided to do three things to increase engagement: communicate more, reduce fees and introduce a new club kit!

Triathlon kits aren’t inexpensive; the average kit costs $200 and lasts a long time; our last new kit was 12 years ago!

We wanted to incentivise people to buy a kit now by offering: A simple online shop, buy-back if you got your sizing wrong and subsidising the kit, so it would only cost our members $50.

They had two weeks to order.

After one week, there were only two orders.

One of them was me.

One email to our members changed everything, “Reminder on club kit; we have only five more discounted Tri suits left!”.

Within 2hrs, we had all the orders we wanted and more!

What does this have to do with technology value creation?

We’ve talked before about how ‘when your site fails, it can be great for business!’

FOMO can be a key-value creation ingredient, but would they still have ordered if the fiction to buy was too high: If they got the wrong size and couldn’t exchange or if they had to fill out a form, they could only get on the 2nd Tuesday of the month or if they had to pay $200!

Tech value creation needs to do to reduce friction, both in complex technology change and for your customers.

What fiction do you usually encounter with your tech teams? How does this affect their customers, internally and externally? Could you make the whole process that much simpler?

If you can find and eliminate sources of friction in your portcos tech estate, there could be considerable value made as a result.

Keep leading; it matters.

–

Thomas

This morning I went on a cross-country mountain bike until the world’s end, in Maldon, Essex, UK; here’s a picture and a map.

On the left was the sea, and on the right farmers’ fields.

One hour in, I came across a sign, no exit from sea wall for 4 miles (6.44 km); when you exit, it’s another 4 miles to the main road; consider turning back, 3 miles (ca. 5 km).

Every hundred meters, I was greeted with a trail that would take me back to civilisation along with a ‘private, no access’ sign. It might as well have said trespassers would be shot.

I was desperate to get back to the main road; I was supposed to take the kids to school…

It got me thinking about the value that could have been created if these farmers had done something different.

There is a significant footfall on this long coastal path and a lot of nothing in the middle.

What if instead of ‘turn back now’ the sign said, “access to the main road here, via our farm shop and café”? Or what if they sold maps and rented bikes for the intrepid traveller who might have walked there!

What a difference would that make to the weary traveller looking for a quick drink or a spot of lunch?

When it comes to technology value creation, the value of doing something different is massive.

Challenging the technology status quo in 2022 typically falls into three categories:

Improving the overall customer experience

Increasing practice efficiency

Acquiring and onboarding new firms, brands, or customers.

How will you challenge the status quo?

What value could you bring to your customers?

What might you not even know they are missing?

What’s your farm shop equivalent?

Keep leading; it matters!

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Thomas