A Shift in Value Creation Levers
For those tracking macro trends in the private equity industry, a recent article from the Goldman Sachs Alternative Investments team, The New Math of Private Equity Value Creation, offers a clear signal of how value creation will evolve over the next decade.
The authors argue that revenue growth and margin expansion will become the primary drivers of value in this new regime. Factors beyond today’s higher-for-longer interest rate environment—including expectations of a shrinking labor force and slower economic growth—are reducing the effectiveness of traditional leverage and financial engineering strategies.
The Role of Data in Navigating the Shift
For portfolio companies, trustworthy, automated data instrumentation is foundational to executing in this environment. Improving performance—particularly organic growth—requires precise execution and constant adjustment based on the best available version of the truth: data.
If organic growth and margin expansion are the key levers, the question becomes whether companies truly have command of their data. More specifically:
Do they have an automated system that converts raw data into actionable insight?
And more importantly:
Is that data visibility aligned directly to strategic objectives tied to growth and margin improvement?
The Reality of Midmarket Data Strategies
In our experience, very few midmarket companies execute this well. Some have “automated BI,” but in practice it often functions as a rearview mirror—reporting what already happened rather than enabling better decisions.
Consider sales reporting. Many companies can show what was sold, but far fewer surface the leading indicators that actually help sales teams increase performance. Without that, dashboards may look polished but do little to support top-line growth.
The same principle applies to margin expansion. Effective business intelligence should expose the drivers of margin compression and give leadership daily visibility into how operational decisions are improving—or eroding—performance.
When initiatives are clearly defined by metrics tied to strategic objectives, BI stops being “reporting” and becomes a tool for execution. It answers the questions that matter most, whether the goal is increasing revenue by 10% or improving margins by 3%.
The Need for Modern Data Platforms and Analytics
Modern data platforms and automated dashboards are essential for navigating this new regime. Opacity, manual data preparation, and imposter analytics platforms (sorry, Excel) simply won’t keep pace.
Instead, companies should invest in modern data analytics platforms that transform raw data into curated, objective-aligned insights in near real time. Once management teams experience how automated BI directly supports growth and margin initiatives, adoption becomes self-reinforcing and accelerates the shift toward a data-driven operating model.
That operating model—and the documented impact of data-driven execution on top- and bottom-line performance—is highly marketable at exit.
