It’s no longer just about cutting costs to boost profits — it’s about boosting the long-term viability of the asset via a more fundamental strategic change in direction.
“The only way you’re going to be able to outperform is when there is something you can do to make it a better business, and that something is within your control,” says Glenn Hutchins, Chairman of North Island and Co-Founder of Silver Lake, in our report.
To increase the scope of what is within their ability to control, PE executives increasingly must bring deep strategic expertise to assets in their portfolio, in order to transform those assets’ business strategies, processes or business models in ways that drive top-line growth.
By doing so, private equity firms will be in a position to build sustainable businesses that can thrive long after they have exited the investment.
New strategy, new skills
As the PE industry transforms into one that drives “positive equity,” PE executives will have to rethink and reshape their own business models — and talent pools. The skills needed to identify cost savings are often different from those that are needed to drive growth.
The best-in-class PE firms of the future will be able to do more than just spot deals and cut overhead. They will have experienced, strategically minded talent on everything from heavy industry to white-collar services to technology, and be able to deploy that talent with precision.