Nearly eight in 10 executives agree with the following statement: "If we could harness all of our data, we would be a much stronger business." Business intelligence can help companies do just that, significantly improving their data and reporting capabilities, and ultimately their bottom line.
And now is certainly a good time for private equity firms and their portfolio companies to look for opportunities to strengthen operations in any way they can. After another year of high M&A volume in 2019, private equity firms found themselves in a completely different environment navigating the COVID-19 pandemic in 2020, characterized by high uncertainty and rapid changes. During the initial weeks of the pandemic, firms focused a considerable amount of time on working with their portfolio companies to address immediate business impacts — from cash flow and working capital to personnel decisions. In addition, companies have adopted a more agile planning process, creating projected timelines that are measured in days rather than weeks, months or even years.
To remain agile, private equity firms and their portfolio companies must have timely and accurate data at their disposal. Below are four steps private equity firms can take to improve their data and start down the path toward improved decision making and business intelligence maturity.
1. Follow the Strategic Direction
Understanding your firm’s or portfolio companies’ strategic goals and desired business outcomes will ultimately drive the key performance indicators (KPIs) and functionality that will be required of your BI platform. Whether the goal is attaining 25% year-over-year sales growth or better managing workforce utilization, understanding and prioritizing KPIs will dictate the data requirements and reporting visualizations, and enable improved decision making.
2. Assess Your Data Quality Upfront
With the data driven world we live in, now is the time to take control of your enterprise systems and transform your data into business insights. However, before you can realize that goal, you need to ensure that the foundation of data on which you build your business intelligence house is solid. Poor data quality is a leading cause for organizations to hesitate adopting business intelligence solutions. Or they simply don’t adopt them at all. Spending time to determine your current state and ensuring your data is correctly structured and reliable will set you on the correct course toward more advanced BI reporting.
3. Start Small, Think Big
Addressing the low-hanging fruit is a great place to start. Often, portfolio companies may have enterprise resource planning (ERP) or customer relationship manager (CRM) systems in place that are not being used to their full potential. Companies may not have the systems integrated (talking to each other) or they may not be fully utilizing the functionality of the tool. Evaluating the current state of your data systems, and potential reporting gaps or opportunities, will allow you to starting thinking about the future state possibilities.
4. Develop your Business Intelligence Roadmap
Having taken the previous steps, you’re now prepared to put a plan in place that is both agile and attainable. With a desired end-state in mind, you can begin mapping out the required BI tools, data sources, stakeholders and timeline required to begin implementation. Keep in mind that as you progress through your roadmap and hit milestones, it’s okay to monitor and adjust your plan as needed.
A note on evaluating various BI tools: in doing so, be selective. While many depend on tried-and-true Excel for housing and analyzing data, this generally creates an inherently inefficient process and only gives leadership a snapshot in time of the business. To close reporting gaps, the use of data analytics and business intelligence (BI) dashboards are instrumental tools in driving consolidated and automated reporting from multiple portfolio companies. BI dashboards, such as Microsoft PowerBI or Tableau, can help private equity firms unlock the ability to monitor the success of each portfolio company with near real-time access to data, and foster a culture of transparency and proactive decision-making.
And, while data analytics and BI reporting can unlock insights, improve decision-making and provide a competitive advantage, ensure that you have an internal executive sponsor who can provide the leadership to mobilize the necessary resources and support buy in from key stakeholders to drive the project to success. Executive support coupled with the four steps above can equip your organization to start a data maturity journey that will provide greater accountability and empowered decision-making.
Contact John Cavalier at firstname.lastname@example.org or a member of your service team to discuss this topic further.
Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.