What is Digital Transformation
The term digital transformation is used consistently to describe the influence of software and technology on the modern world.
Digital transformation is the process of how digital technology is impacting and evolving the way business is done.
The private equity industry faces significant changes in the decade ahead as digital transformation becomes a requirement. In this post, we will explore the four steps to digital transformation in private equity.
Set a Digital Transformation Mission Statement
The first step to embracing digital transformation is to define a mission statement. Not all VCs or PE firms will choose full digital transformation. Some firms will participate in some aspects of the digital transformation while they choose to forgo other parts.
Establishing a digital mission statement will help your firm stay clear and focused.
For example, a firm may embrace data-driven CRM systems but wish to maintain traditional face-to-face meetings. This could mean that video conferencing tools won’t need to be a major element of the budget.
Firms that understand where they plan to invest in digital, and where they will choose to maintain more traditional approaches, will have an advantage. They can spend more responsibly, prioritizing key growth areas and software investments.
Connect with stakeholders from across your private equity firm and open up the conversation around your plan for digital transformation. A few questions to consider:
- What is the digital vision for your firm?
- What functional areas are ready for digital transformation?
- What areas are working well in their current state?
Formulate a Data Strategy
One area of digital that all private equity firms must embrace is data. Leveraging financial data to make profitable decisions is the lifeblood of any private equity firm.
Private equity firms can establish a data strategy by answering some of the following questions.
- What business areas would be improved with more data?
- What problems exist in your ability to capture data?
- What data do you need to make better decisions for your GPs?
- What data would you like to have but don’t currently?
- How usable is your data in its current format?
- Who do you depend upon to make your data usable?
Choose an Industry-Specific Data Platform
The last decade was all about firms embracing data. The decade ahead promises to focus on using data strategically. Private equity firms need a data management system to support that strategy.
It’s critical to work with a data platform that is fully equipped to handle the nuances of the VC and PE landscape.
Engage with a SaaS partner for your data management strategy and be upfront about your expectations and requirements. The implementation should be custom-fit to your firm.
Now that your internal team and technology partner has a clear plan for how the data in your new software will be used, it’s much easier to install and configure it for your team’s needs.
Support Behavioral Change
Training your team is the final piece. The last step of digital transformation is often where the process can fall apart.
Training your team on new digital systems is more than simply training. Along with digital transformation, you must also help your team transform.
Transformation involves consistently creating opportunities to change behavior, learn new data-driven tools, and adopt new technology.
Transparency is key. Your firm should communicate internally throughout the process of integrating any new data management systems so your teams can be a part of the process.
The more you include your stakeholders and individual contributors in the process, the more likely they will be to adopt your new tools.
There will invariably be challenges along the way. Try to anticipate possible issues and prepare with tech resources to help when your team faces roadblocks. If the team can work through problems quickly, it will help them feel a sense of optimism about the new system regardless of any hangups.
Remember, change happens incrementally, over time. Don’t expect your firm to instantly adopt new technology. Consistent use over time is a necessary component of training. Resistance to change is also a natural part of the transformation.