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BI Strategies for 2023: Insights from PE and Mid-Market Executives

By Suzanne Rains on April 11, 2023 12:00:00 AM MDT

Topics: Private Equity Business Intelligence Value Creation Data Strategy Company Culture Portfolio Management Valuation Expert Insights Series
PE data strategies for 2023

What is your 2023 data strategy?

If the question leaves you feeling adrift, consider this your anchor: what will best position your company in 2023?

We know that uncertain economic seas are on the horizon. In December, the Leading Economic Index (LEI) signaled an oncoming recession (The Conference Board, 2022). While some economists foretell a softer landing with a mild recession (Dubay, 2023), those preparing for unsettled waters will be better positioned to emerge ahead of the fleet.

While we cannot control the forecast, we can control our instrumentation. Without clear visibility into critical data, your company will be a boat without a compass, reacting to, rather than navigating the waves and wind.

Companies with the clarity to make informed, real-time decisions can sail with intentionality toward their goals. Furthermore, clear visibility into key metrics creates organizational accountability that accelerates the value creation plan, fosters a healthier culture, and increases differentiation and valuation at exit.

So, pause and consider – how’s your instrumentation for weathering the storm?

If you need better visibility, you’re not alone. In fact, according to New Vantage’s 2023 Data and Analytics Leadership Survey, “93.9% of organizations are planning to increase their investments in data in the wake of potential economic uncertainty.” (New Vantage, 2023).

While essential, implementing a needle-moving data strategy isn’t easy, and the Expert Insights Series was created to shed light on just that. In 2022, we hosted over a dozen PE partners, industry executives, and business luminaries to understand how they leverage data for growth. Below are the year’s best insights for successfully implementing your 2023 data strategies.

Data Strategies for 2023:

 

Using Data to Accelerate Your Value Creation Plan

Blue Margin recommends that PE firms follow these steps during the holding period to accelerate the VCP:

  1. In collaboration with portco executives, define pillars of the VCP, then break it down into team and employee level goals and KPIs.
  2. Rapid-deploy a company scorecard in <4 weeks, surfacing and centralizing the numbers that define the VCP.
  3. Automate and expand with a simple, repeatable and best-practice dashboards across sales, operations, and financial reporting.
  4. Maximize value at exit with real-time data visibility that demonstrates mastery of the business and a narrative for growth.

For details on this proven process, see Blue Margin’s VCP Accelerator.

Sean Edmonson, Vice President of Tecum Capital, discusses how the firm and their management teams co-define pillars of the VCP, then work backwards to identify the processes and metrics that generate value. These are translated to dashboards to keep everyone aligned on the VCP. (Read more here)

“If you don’t have dashboarding or a KPI system, it’s a major deduction on the value of your company if you’re looking to sell to institutional investors as a platform.” – Sean Edmonson, Tecum Capital

Tania DiCostanzo, VP of IT at Trace3, tells how her PE-backed company implemented an OKR (objectives and key results) scoreboard to help galvanize focus on the value creation plan (their growth has been meteoric). Read the case study here.

How to Succeed with BI (and Pitfalls to Avoid)

Loaded Question: Is a BI initiative successful if it meets the technical requirements but doesn’t change behavior and outcomes? Clearly not. Avoid marginal results by gleaning from experts who have implemented high-impact BI strategies.

Andy Scott, CTO and owner of CognITival, explains why data initiatives fail, and how to make sure they succeed:

  • BI project leaders should plan with culture in mind and incorporate individuals’ processes into the design.
  • It’s critical to keep projects simple -- a minimally viable product that can be evolved is infinitely better than a complex project that stalls.
  • Adoption levels increase when tools are easy to use and understand.
  • Use external resources to fill gaps in capacity and expertise, define success in measurable outcomes, and go for quick wins. (Read more here)

“Build a strategy that defines the destination, and then define the journey by building a roadmap that gets you there. The destination will move, and the journey will be a windy road, but you’ve got a vision of where you want to go.” - Andy Scott, CognITival

Tania DiCostanzo of Trace3, discusses her BI not-so-secret secret sauce – keeping the scope narrow and working within your resources. When the scope is narrow enough to execute in a brief time, teams can build momentum and gain buy-in for follow on projects. (Read more here)

“Start with what you have (e.g., data, tools, resources). Show value. Then expand. Don't wait.” -Tania DiCostanzo, Trace3

Increasing Company Valuation and Differentiation

Data analytics boost company valuation during all stages of the investment life cycle. Companies that are not data-driven are limited to the heavy lift of process engineering, culture shaping, and systems integration; in contrast, companies with data-driven cultures enjoy a lighter lift and greater potential, producing 20-30% improvements in EBITDA (Forbes, 2017). Deal sourcing, diligence, the hold period, and the exit all benefit from data visibility.

Adam Coffey, three-time PE-backed CEO, consultant, and #1 bestselling author of The Private Equity Playbook and The Exit Strategy Playbook (Coffey, 2022) discusses how a strong data platform correlates to higher valuations. In his experience buying and selling 58 companies, those with good visibility into data and analytics are perceived as better companies, closing with greater speed and higher multiples. (Read more here)

“All businesses trade for a multiple within a range… a company that has good visibility into data and analytics is going to be perceived to be a better company than one that does not. It's going to trade for higher in the multiple range.” -Adam Coffey, three-time PE-backed CEO and bestselling author

Marty Moore at Tenex Capital Management also points to the impact of data on valuation. His firm uses data analytics to track KPIs from the time of purchase through liquidity via dashboards. Data visibility, with its relative simplicity, drives tremendous growth. (Read more here)

“We have the historical data to show dramatic improvements.” -Marty Moore, Operating Advisor, Tenex Capital

John Parent at Industrial Growth Partners shares how IGP views and uses data analytics during diligence, the hold, and the sell. The ability to see granular levels of data corresponds to better decision-making and proactive, intentional management during the hold period. And at liquidity, data intelligence provides a detailed narrative for future growth. (Read more here)

“Every buyer is skeptical of the future. There is always an element of ‘Hey, prove it to me’. The amount of granularity and specificity that you can point to as a seller increases the confidence that a buyer has in underwriting that forecast.” -John Parent, Industrial Growth Partners

Improving Company Culture and Employee Engagement

One of the more surprising benefits of data analytics is the profound impact on employee engagement. Millennials make up over one third of the workforce, and as the most connected generation in history, they want more frequent feedback than their predecessors (Gallup, 2016). Data intelligence creates enables objective scorekeeping and set the stage for healthy coaching between managers and their teams. Furthermore, analytics enable distributed decision-making, empowering employees by spotlighting their role in, and impact on the value creation plan.

Marty Moore at Tenex Capital Management discusses how data analytics empower employees, reducing the burden of managerial oversight and giving employees an ownership mentality of the VCP. (Read more here)

“We want to make sure that an employee can see how their contribution is helping to achieve the higher-level goals for the entire company.” - Marty Moore, Tenex Capital

Dain Johnson, founder and director of leadership consultancy Rev 0 Consulting, explains the role of data in distributed decision making, and how to create a culture of change. Hint: make change a normal part of your culture. (Read more here)

“Distributed decision making makes sure that the right people have the right info at the right time to make the right decisions. That is why I love dashboards and data analytics which get that information into the right hands.” - Dain Johnson, Rev 0 Consulting

Chuck Coonradt, CEO, consultant, and 5x best-selling author of The Game of Work, discusses how gamifying work with scorecards skyrockets employee motivation and prevents “quiet quitting.” (Read more here)

“Humans are designed to win, and if they can’t figure out how to win, domino thinking says, ‘There must be no way to win.’ … Only when we successfully transform our measuring into something tangible, relevant, and meaningful do we allow management by measurement to really take off.” - Chuck Coonradt

Using Data to Navigate Economic Volatility

While it can be tempting to withdraw into a defensive, turtle-stance during periods of economic gloom and doom, experts advise otherwise. Data insights are key to breaking free of a contractionary mindset and capitalizing on an expansionary mindset during economic headwinds, when the opportunity to distance yourself from competitors stuck in holding patterns is greatest. With a clear view into performance, leaders can more accurately plan scenarios and measure risk. This inspires boldness and commitment.

Jill Belconis, career CEO, strategic consultant, and former YPO International Chairman, echoes this sentiment. She is no stranger to economic volatility, having grown Shelter Mortgage by an average of 20% annually even during the 2008 recession. Moreover, she embraces challenging macroeconomics as an opportunity to dig in with strategic thinking and differentiate your company. (Read more here)

“I believe that it’s times like this where there may be the best opportunities. A lot of other people will retreat or freeze. This is the time to peek around the corners and be curious.” -Jill Belconis, Jill Belconis Enterprises

And finally, Adam Coffey echoes our maritime metaphor when he shares how poor visibility into data exposes executives to the mercy of economic vagaries, limiting their ability to impact performance:

“If you are running a business that is in favorable economic times, [lack of visibility] may not kill you because the rising tide is floating all ships equally, but where it really makes a difference is in a downturn, a slowdown, a pandemic, or a recession. A storm or fog -- that's the analogy of a recession or a pandemic. It's during these times of poor visibility where the data matters.” -Adam Coffey, three-time PE-backed CEO and bestselling author

As we head into 2023, the seas may be rough, but as Franklin D. Roosevelt reminds us, "A smooth sea never made a skilled sailor."

About Blue Margin, Inc.

Blue Margin helps PE and mid-market companies quickly convert data into automated dashboards, the most efficient way to create company-wide accountability to the growth plan. We call it The Dashboard Effect, the title of our book and podcast. Our mission is to accelerate your value creation plan.

 

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Suzanne Rains

Written by Suzanne Rains

Suzanne Rains is Strategic Partnerships Manager at Blue Margin Inc. With a MA in Human Resources and BAs in Marketing and Management, Suzanne unites an understanding of human nature and a keen interest in industry research to author thought leadership articles for today’s business leaders.

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