The importance of technology in value creation: An executive Exchange roundtable with PE and C-tech leader
Facing powerful economic headwinds, many organisations are looking to transform their business both to increase value through delivering efficiencies, and drive growth through new markets and products. Technology plays a big part in both of these strategies, whether through automation to speed up processes, AI to augment existing skills, or data for better decision making.
To share insights on this topic, InX hosted its latest Executive Exchange roundtable at our London office on Wednesday 17th April. Hosts Natalie Whittlesey (C-suite engagement director, The IN Group), Terry Dawson (group solutions director, The IN Group) and Matthew Harvey (senior partner, private equity, InX) were joined by senior private equity and C-suite technology professionals to discuss value creation and the impact of technology. Among them were Sirous Wadia (practice director – customer success, K1 Investment) and Breno Gentil (CIO Europe, Heineken) who offered expert advice from their own value creation journeys.
The ‘north star’ approach to value creation
There are many ways of measuring success – whether it’s revenue, profit, or a balance of strong financials with net promoter scores. Whatever your chosen metrics, it’s about knowing what’s expected of you.
In a tricky few years for private equity, where money’s been more expensive and business leaders have had to navigate the market more thoughtfully, a single rallying cry – or north star – can keep the entire portfolio pulling in the same direction. It’s essentially a governance mechanism, with the board setting and monitoring performance metrics for its businesses.
Underpinned by perhaps four or five smaller objectives, the north star is kept in sight through regular board meetings, director summits and check-ins on metrics, along with roundtables and workshops. It helps to align priorities, remove surprises and strengthen organisational resolve.
Business value creation through technology
There’s an increasing realisation that without a digital strategy, companies put their existence at risk. Where can technology transform your business?
Customer experience
You can deliver significant value through your customer journeys, particularly when it comes to efficiency. In a consumer goods business, for example, look at where you can optimise the process through which your products reach the marketplace. The more you digitise your customer interactions and the more processes you automate, the lower the cost to serve your customers.
Promotions
There are many opportunities to create value through data and AI in supply chain and sales. This is particularly the case when it comes to promotions. You can train an AI model to spot your most negative return on investment, identify what leads to the success or failure of a promotion, and accurately predict how many sales will come from a particular promotion. Similarly, in pricing and advertising, you can use historical data to recommend what you should advertise and where. AI can also be used to strengthen customer ticketing and support.
Supply chain
Technology and data are essential to efficient logistics, demand and supply planning. By identifying if you have an excess supply of a product in one country and insufficient supply in another, AI can enable you to redress supply imbalances and make significant cost reductions in your supply chain.
To standardise or not to standardise?
Thoughtful investment in the right technology, whether it’s generative AI or automation software, can help you get where you want to go. But there was a great deal of debate over the value of prescribing a technology stack. In PE, where you have a portfolio of companies, adopting shared platforms can drive simplification and cost reduction. Some of our attendees have found that individual businesses are rarely amenable to having a tech stack imposed on them, which has a detrimental effect on collaboration. Being too standardised and rigid can also restrict innovation.
At the same time, when your businesses have different exit periods, you might not want them to be connected and co-dependent. You might prefer to let individual companies make their own decisions about tech, guided by your advice where necessary. Conversely, if your businesses look at data in different ways, this will slow down decision making. When you share the same KPIs and work from the same data, you might want to have the same underlying platforms.
It’s about finding the right balance of standardisation to help you move at pace, and there was general agreement that the ideal is a standardised, homogenous core with a flexible edge that allows your businesses to be adaptable. There was a feeling that the focus should be on your service and objectives. The technology you use to achieve them shouldn’t be prescriptive as long as it provides value.
Talent trumps all
Technology’s a massive enabler when it comes to value creation, but your biggest value creator is your people. Remember that bringing in big name executives from global companies is no guarantee of success. They need to be built for the specific expectations of PE, and supported by the right staff and infrastructure to concurrently run several projects.
Pairing the executives at each majority owned portfolio company with someone who knows the business can be a real enabler to success. The CEO might have an executive chair alongside them while the CFO might be supported by a CFO operating partner. This will free up your executives to make deals, fundraise and bring in business.
External partnerships are another profitable growth lever. You might partner with heads of Fortune 500 companies, for example, to share new ideas and strategies.
Summary
Private equity drives organisational performance at an asset level, and technology is key to that performance by identifying, and facilitating, opportunities for value creation. At the same time, it’s important never to lose sight of your north star or to underestimate the value of your people. Through a unified strategy, the right technology and talented people in the right places, you can achieve increased margins and portfolio value.
The Executive Exchange was created to bring the C-suite community together to share insights, challenges and opportunities with their peers. If you’d like to be a part of our next Executive Exchange event, please contact Natalie. If you’re looking to add a C-suite executive to your team or you’re a C-level professional looking for your next opportunity, please get in touch with the InX team.
