Assessing data and technology assets at diligence or post close provides a strategy to drive all levers of growth and value creation. The construct of value drivers will include:
- Growth Drivers
- Efficiency Drivers
- Financial Drivers
Frequently in assessing reporting and analytics an Operating Resources Group for a Private Capital Investor can be focused on helping the weakest companies or companies in need of professional transformation. The logic makes some sense. The reporting is weak, the month end is bad and hence any help would work. However, finance assessment and addressing people, process and technology to strengthen controllership functions is the focus. It’s about reporting integrity. Data management and governance is a vital activity overall.
Can a data exercises alone provide a reporting upgrade while providing metrics, KPIs and strategies through growth or a transformation period? The need to have finance excellence through controllership and effective reporting is the more pressing requirement for a middle market sized firm. The results of the reporting package usually guide the KPIs and metrics (especially in the shorter term). Analytics can be valuable to drive value and strategies not previously considered from the diligence phase or thesis development stages.
What can analytics bring a strong firm? An analytics journey begins with the understanding that data has value from both a governance and board level point of view. Data is a strategic asset. The beginning point is defining of the data sets and assessing current state and desired use.
The first level data management questions to raise and use to frame the data journey include:
- How confident are you in the quality of your data?
- Do you know where all data sources are coming from?
- How do you ensure the data is good?
- Once data is cleansed, how do you make sure controls are in place to keep it clean?
- Is your data secure? Have you had a penetration test?
- Are you complying with privacy regulations?
- How do you assess data as an asset?
Weaker middle market firms cannot get their hands around such questions so early in ownership without other reporting and infrastructure addressed. The shared workload and need for ongoing consultants would require more hours than needed by a stronger organization. Underwriting the management team from diligence to first two years is so difficult and so important at diligence and through these decisions. It will cadence the type and depth of initiatives that can be done.
When using data for an edge or an advantage the journey that the steering committees (from firm and family office’s resources group) must address include:
- Are you getting the most out of your data with BI tools?
- How does your organization collaborate and share information?
- Are there ways you would like your Data & Analytics capabilities to be more responsive to the changes in your business?
When viewed through the lens of a firm; the goal is better performance and better decisions through data to set performance measures and drive value creation.
These are some of the considerations of why the upgrading and focus of a data journey is a better bet in stronger and better run organizations. If additionally, portfolio wide optics at the fund level is the long-term goal then an early success at a stronger firm should be the test case. A fund needs to understand the how, the cost and value it provides and the method to scale and replicated before consideration of portfolio wide real time optics
CFO excellence and reporting integrity is a short-term need but a longer-term asset especially at times of add-on integration and sale preparation process.
Data excellence for strategy is a present day want but a longer-term need.
Leadership is looking to frame the upside but be clear about the challenges to turn data into an asset and as an advantage. What are the data issues that leadership will encounter and need education and help with?
- Quality
- Lack of historic engagement or focus with data
- Lack of historic investment
- Availability
- Ownership of the journey
- Capacity and capability
The development of a cross functional committee with champions and sponsors at both the fund and portfolio is the sensible first step. The next step is to take a current state inventory as to “the where” and “the who” have managed data assets and used them in some form.
- Where does data currently sit within the organization?
- Finance
- IT/IM
- Risk & Compliance
- Marketing & Sales
- Is there someone who owns/has responsibility for the data?
i.e., quality, maintenance, reporting, etc.?
- Are stakeholders actively engaging in data – i.e., are reports
generated for stakeholders, and do they read them?
- What level of data acceptance/understanding is there within the organization, i.e., does the organization see the value data can bring?
- Where is the data? Systems/spreadsheets/people?
- Where is, data used?
- Marketing – client
targeting and business development activity
- Finance – performance, regulatory compliance
- Risk & Compliance
- IT – Service delivery performance – KPIs, other
- HR – people related metrics
- Procurement – supporting spend analytics
- Supply Chain – logistics, distribution performance, tail spend.
Data Management and Governance can drive better decisions at the company and family office. Competition and the pace of business demands its use and making data work for a firm. It’s a change management and transformation journey blended eventually impacting CFO excellence. All areas vital to having value creation plan through human and data assets leveraged more effectively.
Value drivers can only be exploited once the data-reporting and technology capabilities are more thoroughly known and can be enabled for value creation. Understanding the scope of the entire technology asset group can a firm more clearly understand how to leverage them. Taking the ownership of the technology and data somewhat way from the CTO/ CIO construct from diligence through close through first year planning could potentially manage transformation through technology enablement rather than having assets managed by one group without a clear path of how they will be best utilized for strategic planning.
