Deloitte provides a clear and simple answer to this question in their “Analytics for Manufacturers” guide. Their bottom line? Data-driven insights are a strategic necessity.
In recent years, there is no business discipline that has moved to the forefront of the business community’s collective consciousness more than business intelligence.
The following chart illustrates Google search interest in “business intelligence” topics over the past 5 years.
In the race to increase portfolio company value through add-ons, improved gross margins, and operational efficiency, private equity managers and their operating team counterparts often find themselves too busy chopping wood to stop and sharpen the axe.
Successful companies that are attractive to future investors need actionable data and clear KPIs to provide transparency and focus.
Management teams are selected for the expertise needed to usher their companies to a liquidity event. Without clear visibility into performance, deal teams can't responsibly give their management teams the latitude they need to apply their efforts and talent to their highest and best use.
"If you want to motivate employees, stop following your instincts and adopt a data-driven approach." - Harvard Business Review
Data is trending, and while private equity deal teams increasingly give lip service to the importance of data-driven operations, their tactics often miss the mark. Of the hundreds of companies we've consulted for, nearly all default to Excel spreadsheets, PowerPoints, and PDFs to promote data intelligence.
"Transparency is not just a buzzword; it may be a necessity for business survival in the 21st century." - Glassdoor
Successful execution is what matters most, even if the model has been around for decades. Airbnb wasn’t the first clearinghouse for C2C home rentals, but its execution was unprecedented. Excite, Yahoo, and Ask Jeeves came first, but none delivered as successfully as Google.
“If you want to improve the quality of performance in any area, improve or increase the frequency of the feedback.” — Charles Coonradt, The Game of Work
For many private equity firms, managing a portfolio of companies can feel more like controlled chaos than strategic execution. Rather than spending time on key partnerships, hires, and acquisitions, deal teams are often consumed chasing down performance data in an effort to understand what's happening on the ground. Why? Because manually harnessing data is often a herculean task that interferes with daily operations.
Middle market private equity firms share a common denominator: their portfolio companies rely on a menagerie of software platforms to manage finances, sales, locations, product lines, services categories, ad nauseum.
As “Business Intelligence” (i.e., data analytics and dashboards) plays an ever-increasing role in day-to-day business, the systems for harnessing your data are increasingly accessible. Data collection is no longer the most challenging piece of the data puzzle – separating signal from noise, and communicating insights that trigger better decisions and increase focus is where the real value lies. Unless your dashboards “touch a nerve,” compelling users to adopt BI as part of their daily routine, your investment will go to waste. And according to Gartner, that goal can be elusive, with over 60% of BI initiatives failing to meet the goals of the business.
Complex logistics, multiple data sources, tight order-to-cash timelines . . . for virtually every manufacturer, these stressors constantly plague production and profitability. Managers are bombarded daily with issues that demand prioritization and agile adjustments. To meet that demand, managers must wrangle data from disparate sources, with limited resources and little margin for error.
Private Equity investors make investment decisions based on balance sheets and P&L statements – typically in Excel, the tried-and-true tool of choice. Yet most firms struggle to keep up with running the real-time reporting race needed to move companies forward, post-acquisition. Portfolio companies are often saddled with multiple ERP systems and fragmented financial and operational data. Too many reports originate from too many disparate sources, and there’s too little time to separate signal from noise.