How to Turn Your Firm Into a Digital Transformation Leader

Every company is becoming a software company. Today, no company can make, deliver or market its products well without a digital transformation. 

Two decades ago, Watt S. Humphrey, widely known as the father of Software and CMMI, predicted this shift and the transition to a world of software companies is undoubtedly here. 

We’re living in a “modern environment.” With the popularization of artificial intelligence (AI), machine learning, and the normalization of digital communication and remote work due to the urgency of the pandemic, the sentiment has never felt more real. 

Not only does technology connect us digitally, but it also helps sort through data, predicts outcomes, and warns of emerging issues faster than ever. 

Before long all companies will become data-driven, using data to improve their physical operations and using customer data to improve every aspect of the customer experience. 

Technology has climbed the ladder to become a vital lifeline and a differentiating factor for countless businesses in almost every industry. This digital transformation is not only beneficial for Private Equity (PE) firms but essential for future growth.

Defining “digital transformation” in Private Equity

So, what is digital transformation? “Digital” refers to  technology. PE technology should be high-tech such as the internet of things (IoT) and AI. “Transformation” refers to the evolution from a traditional company into a strategically digital company. Adopting any old technology doesn’t count, it needs to create value and scale.

For today’s portfolio companies, digital transformation with the right technology stack can provide the edge they need to stand out from the pack, increase returns, and reduce overhead costs. 

It’s not always a straightforward journey to the perfect tech stack, but by identifying your firm’s needs, choosing platforms that are equipped to handle the nuances of the VC and PE landscape, and supporting the digital transformation with internal training, you’ll put yourself and your firm in a stronger position to win.

Gain a competitive advantage

PE is a highly competitive environment. There’s a lot on the line and with increasing competition, details matter. Firms that find new ways to create operational efficiency and increase internal value will come out ahead. 

Investing in a digital evolution is one of the best areas to focus your efforts.  

It’s easy for PE to adopt a “good enough” or “it’s worked in the past” mentality. But the highest performing firms challenge the status quo and continually keep in step with new AI and IoT technologies. 

Not only do successful firms embrace the latest technologies, but they also monitor how these technologies impact their firm, how they affect their portfolio companies, and how they can use the technology to strengthen relationships with clients. 

Historically, PE investment decisions were rooted in gut feel and balance sheets and profit and loss statements, often created and managed in Excel. Not only is this data real-time, but it is limited in scope. Excel is a powerful, flexible tool, but it wasn’t created to help firms manage funds. PE needs to look towards holistic, industry-specific solutions, like Altvia.

For PE and VCl firms, the right technology leads to added efficiency and more accurate numbers reported, faster. PE firms can now amass unprecedented volumes of data that can inform—or derail— their investment decisions. 

Real-time intelligence allows data visualization to transform, normalize, and display your data to empower stakeholders to take fast action. 

The firms that rise to the top will be those that leverage technology and data to inform their decisions. Working in an outdated Excel spreadsheet will not help your firm stand out or make profitable decisions. 

How to Increase value with digital transformation

Operational value has become one of the most dependable, primary sources of value creation. 

A successful adoption of digital operations furthers that reality and is a value boost that multiplies any of the firm’s existing efforts. Focusing on operational value creation will make your firm more competitive and more likely to deliver top returns. 

Centralized data management and automation from a solution like Altvia provides a cohesive view of contact information conversations, email exchanges, and leverages 3rd party data all in one place. Bottlenecks that appear in operations are minimized with increased transparency. 

Another operational advantage that technology can provide is the ability to leverage data for unparalleled insights into the engagement levels of LPs. LPs can be given access to a secure, self-service information portal. They are pleased with the ability to get the information they need exactly when they need it and their engagement can be tracked so firms can pull insights and further personalize interactions.

Not only will firms engaged in digital transformation experience operational value increases, but they will also increase value for their portfolio companies. With data being within reach at all times, insights and opportunities are spotted faster so action can be taken quickly to capitalize on the moment. Streamlined reporting and communication will ensure your investor relations team drives high-impact outcomes for your investors.

Reduce overhead

There are numerous ways that technology can reduce overhead costs. One of the biggest cost savings has to do with the reallocation of your team’s energy. With the right tools in place, your team can be freed up to do more strategic work that supports the future of the firm. 

For example, firms need a dynamic hub where everyone can enter and find data quickly and efficiently. This is especially true as organizations increasingly adopt a “dispersed workforce” model. 

Effective deal flow management is no longer possible using water-cooler conversations, emails, documents, and spreadsheets.

Purpose-built private equity databases make it easy to collect data, help teams prioritize, and identify top-performing deal sources and top conversion rates at each stage of the funnel. 

Team members spend much less time digging through data and guessing at the most valuable opportunities. The technology allows teams to vastly improve their performance and success rate, saving the firm time and money in both the short and long term. If you’re considering embarking on a digital transformation, talk to the Altvia team about our holistic, industry-specific solution for Private Equity, Venture Capital, and more.

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