Private Equity and Digital Transformation – Creating Value Through Vision

The Holy Grail for private equity is to find a business you can grow rapidly and profitably. One area of growth that private equity (and everyone else) cannot ignore is the power of Digital Transformation. OK, that sounds a little like the start of a super-hero film but give this a moment.

Actually, a superhero doomsday setting isn’t that far off the mark. It’s a fact that a huge number of businesses are not prepared for the digital age. They don’t have a digital strategy and they are going to begin to fail more frequently, more rapidly as all aspects of digital marketing and digital buying continue to be felt.

So what does that mean for private equity firms? First and foremost, there are going to be some pretty good deals out there soon, but only for firms that understand the power of Digital Transformation. Instead of just growing value through acquisition and better management, prudent firms can target companies that can’t figure out how to transform their business model or processes to cut costs, gain more market share, and profit through digitization. Turning around these companies might be as simple as instituting a CRM system, or putting up a truly strategic transactional website to attract and convert more visitors. These are going to be the Private Equity Rockstars in the coming years. But that is the future – it’s now that counts.

The private equity firm that starts Digitally Transforming now is going to be way ahead of the curve. Look at the possibilities, the CRM, the strategic website, but look up, way up – two words: mission and vision. Think of the best companies on earth and you know what their vision is. Apple’s vision is to provide their customers with endless tech toys that all link together seamlessly. Netflix is all about bringing you endless entertainment for a monthly fee – and smashing the cable companies along the way. U.S. Steel is – steel. Nothing fires up a company more than knowing who it is and where it’s going.

This is an area that Digital Transformation excels at – transforming a company through vision. And in this case the vision is not a core principle – but the idea that the core principle needs to be transformed. Digital Transformation is about taking a company and growing profitability while you move the company into the 21st century. And that is exciting! Not only does it mean employees enjoy their work more as you eliminate duplication and admin work, but it conveys to everyone a new sense of purpose. Digital Transformation is really about changing HOW a company operates and not necessarily WHAT it does. Steel is steel – but that doesn’t mean U. S. Steel can’t digitally transform.

Think about that from a private equity setting. Supercharge a portfolio by transforming companies from within utilizing best practices for the 21st century – make them more profitable, revitalize entire cultures – maybe a Digital Transformation is a little like a super-hero movie! If you want to build ROI, create efficiencies, and drive a successful portfolio, you have to know how to implement a Digital Transformation.

Just one thing – stay in the suit – form fitting spandex is definitely a step in the wrong direction!

Why Are Some Small & Medium Enterprises Averse to The Idea of Digitization?

The impact of the internet on businesses needs no explanation. It has opened up new horizons for businesses thus, enabling them to reach out to countless prospective online customers across the globe. However, many small businesses shy away from digitization due to various misapprehensions.

Here are few myths that are preventing some small and midsize businesses from going digital:

1. Digitization is a fad that will soon fade out.

2. Digitization is a costly affair that suits big brands.

3. Small companies do not require undergoing digitization.

4. Digitization is quite convoluted; we need a simplified process.

5. We are short of resources.

6. We do not cater to young tech-savvy customers.

These are some of the myths that are standing as obstacles in the path of digital transformation, thus, preventing few enterprises from realizing the potential of digitization in creating long-lasting business value.

Facts about Digitization:

1. Digitization is certainly not a fad and holds all the aces in the present time.

2. Digitization is not as expensive as you think; in fact, it is cost-effective.

3. Digitization is not meant to be implemented only by the big brands; small and midsize companies are equally reaping the benefits of going global by means of digitization.

4. Small companies need to digitize themselves as much as the giant industry players. The internet is rampant with stories of how small businesses have been transforming themselves via digitization.

5. Digitization is a simple and innovative way to streamline any business– big or small. It saves your time as well as money.

6. Digitization is not meant for catering only to the younger generation of customers. The bug of digitization has bitten the young and the old alike.

The ever-increasing popularity of smartphones in every nook and corner of the world is motivating more and more businesses to go digital. Cloud-based technology, real-time mobility, data analytics, Internet of Things (IoT) and social media platforms are helping small and midsize enterprises significantly to digitize their businesses. Thus, considering the current global scenario, it is not sensible to pay no heed to the power of digital transformation as it has kindled many positive developments by bringing incredible business opportunities to countless small and midsize businesses.

How Digitization Helps Small/ Midsize Companies?

1. It increases the opportunities of boosting the number of potential customers in digital space.

2. Offers flawless user experience to prospective customers worldwide.

3. Helps businesses sustain a long-lasting relationship with global customers by developing an emotional connection.

4. Helps businesses cater to customers’ needs by providing a comprehensive picture of the target market with the help of data analytics.

Way Forward: Don’t get left behind

The 21st-century consumers expect every small and big business to provide them with a seamless digital experience, and failure to meet the expectations of the consumers can spell disaster for businesses. Digitization offers multiple benefits to businesses– from new marketing opportunities to greater productivity and efficiency, besides enabling you to eliminate the unwanted and cumbersome business processes. Thus, it is imperative for small and medium businesses to break out of their comfort zone by leaping into the digital era.

Digital Transformation – What It Means for Global Enterprises

Fundamentally, a business enterprise would exist in a ‘going concern’ to make profits and maximize the shareholders’ value. To be able to deliver business results consistently then becomes most important objective. There could be a number of strategies, programs and policies that an enterprise would practice to deliver business results. Digital transformation is one such innovative strategy that an enterprise could look to practice in a structured and time bound manner.

Here is an important dimension that I would like to highlight, and to put it simply, digital transformation would bridge the gap that always existed when Digital (in business parlance this would mean Information and Communication Technologies) became necessity for efficiency, but remained a huge cost center and avenue of change inertia for a majority of times. It is all about getting closer to transforming this cost center to a revenue center, by consistently and selectively applying Digital to get closer to customers and stakeholders alike to make difference to the way they live, or do business, or collaborate.

For global enterprises what this means is that when its digital interests are driven by keeping its customers at large in focus they can be construed as making significant strides in their digital transformation strategy. Depending on what stage of technology adoption they are into (1st, 2nd or 3rd generation) the DT intensity would vary. For instance, recently I wrote an article on how GRC solutions can be revenue enablers – GRC then becomes a part of a broader digital transformation strategy.

A majority of new age business enterprises would have made substantial investments in implementation of most grass root enterprise systems. That is a whole reasons why from the technology provider ecosystem do we get to hear about mobile, analytics, social and cloud most of the times when it comes to digital transformation, which is a contemporary articulation. The fact remains that it is up to the CIO and other CxO executive team members to figure out what would be a right beginning of their digital transformation program and what would its life cycle look like in their company. In other words, an enterprise could really be ready for digital even if they aren’t talking about social, analytics and mobility, similarly, even if a relatively new enterprise (such as a start-up) can still be talking of massive investments into DT even if they do not use large enterprise systems, for instance an ERP. As we said, the key to remember, and hence to derive most benefits of amazing digital transformation program, is to know how and if digital investments made by an enterprise are taking it closer to a customer to make difference to the way they live, or do business, or collaborate.