What's Killing Digital Transformation in PE

Technology
Private Equity
Investment Banking
Last updated:
November 10, 2021

Is your private equity or investment banking firm struggling to complete digital transformation? If so, you’re not alone. In a recent webinar hosted by Private Equity Insights, the audience ranked most dealmakers’ digitization progress a 2out of 5, with 5 being fully transformed.

The benefits of digital transformation are significant and statistically proven. More than 90% of PE firms say they plan to focus on digital transformation within portfolio companies as a key driver and indicator of growth. So what’s holding dealmakers back from making better use of data and technology?

The fastest and most sure-fire way for a digital transformation initiative to fall flat is without active support from the very top. And while putting the right technology stack in place is a critical step toward digital maturity, firms must invest in far more than just the latest software.

With the right leadership and commitment, dealmakers that follow the three new school strategies outlined in our latest guide will get more from their technology investments and improve operational excellence, deal flow, and IRR.

Turn Data into a Proprietary Advantage

One of the biggest driving forces behind digital transformation is data. But without a clear strategy and unique point of view, data is just a commodity. Digitally mature firms understand that the true value of data lies in its ability to yield proprietary insights that create competitive advantage.

The technology your firm integrates, the data it collects, the experiments it runs, and the models it develops should be determined by asking questions like:

  • Which data points will effectively stress test specific investment theses?
  • How can we most accurately predict deal flow and conversion rates?
  • What formulas best indicate transaction-readiness for bootstrapped companies?

Hire the Right Talent at the Right Time

Successfully completing digital transformation requires dealmakers to create roles, build teams, and hire skillsets that may not have been necessary before. While each firm is unique and has its own organizational structure and needs, there are 5 key roles that most technologically mature firms focus on.  

The first is an IT Manager or Director. Ideally, firms hire this person during the CRM evaluation process so they can ensure the platform is properly configured and adopted. An IT Manager or Director is ultimately responsible for choosing applications that are scalable and secure, being available to help team members troubleshoot them, and integrating them correctly with the rest of your tech stack.

Manage Change with Agile Processes

Digital transformation can feel scary to dealmakers who have been doing things a certain way for decades. One of the best ways for firms to overcome resistance to change and begin the cultural shift necessary to reach digital maturity is to adopt agile processes.  

Agile processes stem from a software development methodology where teams break larger projects down into smaller, iterative parts, typically called “sprints.” Not only is this an effective technique for easing teams into digital transformation, but it also empowers them to harness data and technology to move quickly, learn from mistakes, and improve constantly.

Don’t Be a Digital Transformation Statistic

Research shows that 78% of digital transformation initiatives fail. That’s why new school firms are taking a different approach to achieving digital transformation — one that combines the power of technology with data, people, and process.

To learn more about these three proven strategies and start getting your digital transformation strategy on track, download our latest eBook, Why 78% of Digital Transformation Initiatives Fail & What to Do About It: A Guide for Modern Dealmakers.

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