As a result technology budgets are trending upwards (by up to 60% over the past three years, according to our research). For businesses chasing growth or transforming their business through deals – and private equity portfolios in particular – the pressure to invest in tech is particularly intense.
With deal margins remaining tight, it has never been more important to create value from the outset of every deal. But rather than throw money at the challenge, the organisations I work with today want to talk about a more agile form of value creation through technology. How can they do things better, faster, and cheaper without having to transform their entire technology landscape?
Tech can and should drive value creation in a business, but with so many options available and so many decisions to be made, it’s easy to lose sight of the way forward. The starting point is to bear in mind these golden rules:
- Do more with what you have.
The priority when creating value through tech investment should be to maximise the value from what you already own. Would investment in legacy tech, and/or operating model changes deliver results? Can the business and data processes be streamlined through simplification of existing technology?
- Not all tech spend is created equal.
The ‘plumbing’ of the businesses – the vital ERP systems that manage core operations and gather financial and management data – require ongoing investment if they are to remain of value to the business. This must be balanced with the need to evolve and defend their position, and to maximise emerging and innovative tech (e.g. AI and machine-learning) to effectively use the data that exists in their core applications. When working with clients, we routinely analyse the value delivered by tech solutions against the spend, taking a practical view and focusing on productive use cases is critical in our experience to ensure the most value can be created.
- Invest in the right areas to drive value.
In a competitive, innovative environment, the fear of missing out or being left behind can make it difficult to identify the game-changing tech investments. The latest innovation isn’t necessarily what the business needs to create value. The beauty company Coty, for example, has put tech at the heart of its value creation. It uses tech to help it understand the business and its customers, develop new products quickly, target advertising effectively, and operate more productively. And it has done this by choosing its battles wisely – working out which tech investments will genuinely create value, and which are just eye-catching gimmicks.
We often talk about the importance of starting any deal with a value creation mindset. Tech investment is so intrinsic to value creation that it requires expertise and a strategy of its own, so our Deal Technology Architects use a range of technology value levers, working closely with companies that want to realise maximum value and accelerate growth through technology at every stage of the M&A lifecycle. This might mean, for example:
- Identifying tech-led value creation opportunities before a deal
- Exploring ways in which tech innovation such as AI, machine-learning, can improve business performance - taking a practical approach based on ‘use case’ and the value it enables
- Protecting the value of data, a vital strategic asset, during integration
- Exploring the expansion and growth opportunities of a cloud-first strategy
- Replatforming applications
Tech value creation is a process, not a single event. You don’t need to do everything and you don’t necessarily need to spend a lot to make an impact. The best solution will emerge from thoughtful collaboration between those who understand the business, and those who understand technology.
