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Technology, driving competitive advantage in Private Equity

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In today’s fast changing world, the digital and technology revolution continues to impact on businesses worldwide. The Covid-19 pandemic forced organisations to fast-track their plans for digital transformation simply to maintain successful operations, whilst making digital channels the key source of connecting with customers. Those businesses and organisations unable to swiftly adapt fell by the wayside.

Private Equity was no different and indeed, ‘digitalisation’ is now recognised as providing an undeniable source of competitive advantage. The ability to drive leading and bleeding edge technologies such as Artificial Intelligence (AI), Robotic Process Automation (RPA), Machine Learning (ML), and the Internet of Things (IoT) through portfolios is increasing multiples and has become a ‘must do’ for prudent, forward-thinking funds. Not only are funds being granted more access to unprecedented volumes of data than ever before, but the investment community themselves must also become more digitally literate, both in their own diligence processes and in their approach to portfolio value creation.

Every sector has been positively impacted by the advances of clever technology. We examine some of these in this blog through the lens of Private Equity investments, and how technology has driven, and continues to drive, competitive advantage.

We are delighted to co-author this piece with Leon Koutsovasilis, a recognised independent expert in technology-enabled strategic business transformation, innovation management, consulting, advisory, buy/sell-side M&A transaction support, post-deal value enhancement and M&A exit preparation. Leon supports numerous mid-market and large cap funds as their ’go-to’ expert for technology diligence and post-acquisition technology led value creation.

Digitalising healthcare to provide quicker access to patients

In the General Practitioner world, there has been a drive to remove ‘non-sensical’ practices, in essence, those manual and inefficient administrative processes which take up the GPs time unnecessarily, to allow greater time for GPs to interact with patients and provide critical patient care. RPA tools have enabled processes to be digitally streamlined and SaaS enabled, multi-tenanted platforms, which allow use by multiple GP practices, provide a fast, efficient solution to GP appointment scheduling and more innovative business and staff sourcing models.

Further, the rise of Telemedicine, enabling virtual doctor or nurse consultations, allows faster, quicker access to GPs. Similarly, in relation to medical surgery and operations, there has also been an increase in the use of AI and ML, both to diagnose medical ailments as part of the initial triage process, itself a major development, and to support in post-operative care, with IoT allowing remote monitoring of a patient’s recovery, for example, smart heart monitors.

The impact on Wealth & Asset Management

Both AI and ML are now regularly used for the Know Your Client (KYC), and Know Your Business (KYB), diligence process, as part of the wider Anti-Money Laundering (AML) requirements, ensuring a multi-faceted approach to any diligence checks. In terms of assets, be they capital, financial or physical, AI and ML impact on them all. AI and ML are increasingly used to on-board assets, for example, commercial buildings, industrial pumping stations and distribution centres, whilst IoT is used to remotely monitor those same assets to ensure they remain in good operational, commercial and financial health, increasingly employing a preventative mindset, and to undertake any necessary asset maintenance remotely and often, automatically. ESG compliance is also able to be met with AI and ML, allowing greater and more timely insights and data to maintain operational efficiencies and drive commercial and strategic objectives.

Technology enabling Field Service/ Mobile Workforce Management

Field Service/ Mobile Workforce Management is a well-documented area in which AI, ML and IoT have helped to better organise mobile field workforces, both in terms of scheduling and physical mobilisation, allowing a field force to nimbly handle exceptions or anomalies as they arise. The provision of mobile devices to a field force allows them to have instant, up to date information at their fingertips, ensuring a more self-sufficient and efficient field force. Further, automated meter readings and updates provided via IoT are changing historic ways of working every day.

Digital learning solutions with unparalleled access

There can be little doubt that technology has transformed the way that education is delivered to people around the world. The emergence of highly sophisticated communication technologies, mobile devices and apps has given today’s consumer unparalleled access to information and opportunities to sate a thirst for knowledge on demand, without the need for either a physical teacher or the need to attend a physical location to be taught.

The world of workplace Learning Management Systems is no different. Today, clever SaaS-based digital education and user onboarding software tools allow businesses to train their staff and provide on-going learning in a far more personalised, effective and efficient manner than ever before. The influence of RPA, AI and ML in this space has undoubtedly led to higher levels of maturity in HR management, providing online training materials, and personal development in one easy to navigate, user friendly package leading to further digital transformation of businesses and the way in which they operate.

Easy to use video, audio and text features score highly in increasing both the speed and efficiency of, for example, the on-boarding of new starters.

Multi-touchpoint retail and fulfilment

Multi-touchpoint retail is the most recent iteration of multi-channel retail. More and more, we are seeing how ‘intelligent’ product and service recommendations lead to both upselling and cross-selling, with AI driven recommendations and ‘next best’ actions now fed to retail store staff. This has led to greater, specific targeting of consumers, behavioural profiling and reliable data on individual buying habits. Furthermore, using AI, ML and IoT improves versatility, real-time transparency and optimises both operational reliability and efficiency of inventory management, warehouse management and overall retail fulfilment processes.

Today, RPA is used to improve and better-standardise client onboarding and management of issues arising in the fulfilment process and also, to manage the return of goods cross border/ internationally, with an ability to predict goods return rates in a multitude of scenarios, i.e., replace, repair, re-sell, detecting fraud, and allowing for seasonal variations.

All of these technologies combined, lead to clear profit optimisation, improvement of resource utilisation and an increase in customer satisfaction, along with an ability to better predict, and manage, end to end risk.

Digital transformation

To attract new capital, it is no longer enough for funds to highlight outstanding operational excellence, or point to operational related improvements, strong corporate governance structures and longer-term objectives across portfolio. Yes, together these provide a clear basis to improve a business, but do not constitute a clear competitive advantage when everyone else is doing the same!

Instead, it is the early movers in Private Equity – those bold enough to have the courage of their convictions, who place digital transformation firmly at the heart of their operational toolkits, who have been able to seize on technological advances which, in themselves, do drive clear competitive advantage.

Technological advances allow synergies to be driven across portfolio at pace, supporting aggressive buy and build strategies and providing higher returns on exit, all whilst allowing those far-sighted funds to build and evolve their technology playbooks, which can be replicated time and time again.

Whatever the future holds, we can be sure that the continuing digitalisation of portfolios by Private Equity will only increase as funds seek to differentiate themselves from their competitors, and technology is at the sharp edge of value creation.

Co-authored by Leon Koutsovasilis, a recognised independent expert in technology-enabled strategic business transformation, innovation management, consulting, advisory, buy/sell-side M&A transaction support, post-deal value enhancement and M&A exit preparation. Leon supports numerous mid-market and large cap funds as their ’go-to’ expert for technology diligence and post-acquisition technology led value creation.