When time is of the essence for private equity to realise value from portfolio companies, digital transformation often holds the key to catalysing returns more quickly. Through our work with clients facing this challenge, we have found that seven themes consistently emerge as success factors, ensuring a high pace can be maintained in a business-led, data-driven and risk-informed manner:

  1. The future state of tech needs a compelling vision, driven by business objectives
    Customer-facing technology needs a clear line of product and technology ownership and a vision that is clear and compelling for teams to buy into. Alongside a persuasive business offer, consolidation, cost reduction, and improved agility all become much more achievable objectives.

  2. Data driven decision making in any transformation is key
    The complexity of technology, particularly in older companies or those that have grown through acquisition, makes creating a fact-base early a highly valuable tool throughout the investment lifecycle. This needs to be granular enough to show the tech and associated costs in multiple dimensions, including business divisions, products, and geographies, for example.

  3. Assess risk as well as future state opportunity in due diligence
    Legacy technology in particular can expose significant operational and cyber risk, although these can be quickly addressed with the right investment. Failing to build the risk into an investment case from the outset will likely lead to surprises that can range from expensive to catastrophic.

  4. Tech carve-outs need particular expert focus
    Fully negotiate on relevant tech TSAs to ensure that they provide the appropriate flexibility in timelines and financials. Ensure that remainCo is effectively incentivised to support the carve-out and any associated dependencies for the overall transformation.

  5. See effective digital transformation delivery as sets of agile building blocks
    All transformations can be broken down into sub-projects, prioritised (using a fact base) and delivered using agile and iterative approaches to de-risk and deliver incremental value. Sponsorship from the CEO and board will be essential in securing broader buy-in and ongoing support towards each individual milestone.

  6. In-flight tech or Digital transformation programmes should be reviewed and assured
    Unfortunately, 45% of tech-driven projects fail or don’t meet their objectives. In-flight projects often ‘market’ the huge benefits that they will deliver, but it is essential to get under the hood and ensure that they are set up for success. This should be done at the earliest opportunity in the investment, with corrective action implemented swiftly to protect the desired outcomes.

  7. Use and retain the best talent
    Make sure the best talent is involved and communicated to intensively throughout digital transformation efforts. Driving the transformation must be viewed as a career-boosting opportunity rather than a career-limiting task. Build an environment for dedicated focus, reinforce the high value of the work being completed, and add external support where needed to strengthen the team.