The way many of us think about data is binary: digital or consumer. Digital data is generated through channels such as websites, social media platforms, mobile applications or online transactions.

Consumer data, on the other hand, refers to data collected through surveys, feedback forms and transactions. However, there’s much more to it than digital and consumer data.

You might think that migrating to a data-first approach requires an entire operational transformation.

Thankfully, this isn’t the case. Instead, think of it as operational adjustments that can be handled in a way that doesn’t break the entire process. Before you know it, you’ll have a data-rich company that uses advanced data and analytics to operate in a smoother, more efficient way. 

Most importantly, the decisions made due to a data-first approach are accurate and objective – say goodbye to gut-instinct decision-making that may or may not yield the desired results.

It all starts with knowing what can be turned into useable data. 

Transforming key metrics

Transforming key metrics into unified data is the goal for many private equity firms and their portfolio companies. However, a recent study in the field found that while firms embrace data, many expressed that the single most taxing element of modern data management is the ever-increasing complexity of the data available.

Data is all around us – it just needs to be translated into a standardised, useable form. But that’s not all. Unified, standardised data can also be used in conjunction with other datasets to make informed decisions. This may sound like some sort of arcane numerical alchemy, but it isn’t. 

Think of how you used to track sales in a spreadsheet – the most basic form of data collection. Now, think of the benefits that would come with adding other important metrics to your spreadsheet, such as spend, cost-per-click, shipping time, carbon-emissions volumes, average response time, customer NPS or staff churn. Very quickly, you have an extremely valuable set of metrics that allow businesses to create personalised, seamless customer experiences and generate higher returns when properly standardised and leveraged.

Private equity firms are already consolidating financial data from their portfolio companies, so why not do so with other data sources by turning them into a standardised format to gain valuable insights? By unifying data from several sources, including but not limited to accounting software, sales management tools and fleet services management, private equity firms can identify areas of inefficiency in portfolio companies, optimise cashflow and make informed decisions on the allocation of resources.

Firms that are consolidating customer data into standardised formats are more able to gain robust insights into operational and customer needs, preferences and behaviour – across all sectors. Unifying data is no easy feat due to the sheer volume of data available across several platforms. For instance, in the case of customer data, businesses have several data sources: sales, customer feedback, web analytics, social media, customer service and loyalty programmes. But by unifying customer data from various sources, private equity firms can tailor products and services in their portfolio companies more effectively, leading to higher returns.

Similar to financial and customer data, operational data is typically sourced and stored in separate applications. For example, private equity firms unify a wide selection of data, including production volumes, inventory levels, stock turn rates, lead and delivery times, repair costs, and energy and carbon emissions costs, to identify areas of inefficiency.

So, with so much data at their fingertips, how are private equity firms and their portfolio companies unifying and leveraging data in practice?

Data discovery

Step number one is discovering where data lies and hides. Recognising what data is and what can be turned into data is something of an art as well as a science, and is something that firms and consultants are happily becoming more adept at. Understanding that qualitative metrics are also data sources is important so as not to dismiss the importance of narrative. But there is a plethora of quantitative data within and outside of a firm that can be leveraged to make much more accurate forecasting and comparative benchmarking decisions that, in our experience, are underused in some cases. However, some firms are doing it really well.

Data collection

Using a tool designed to integrate disparate data sources on, for instance, property holdings and present them in a clear, accessible way to investors to manage deal pipelines and portfolios is something we know to have been implemented within the PE world. A key part of this kind of buildout involves creating bridges between internal PE tracking systems and those at portfolio companies, enabling the collection of data in all source formats. A further step would be the standardisation and triangulation of these for robustness, which we promote strongly.

Data connection

There is enormous potential to leverage data in a transformative way, and a data-driven approach will play a central role in any firm’s value-add evolution. One of a firm’s key goals should be to connect the data dots to maximise returns.

Data is ubiquitous, and the ability to effectively unify and leverage valuable data is non-negotiable for private equity firms and their portfolio companies. Data standardisation and unification may feel like an exercise in alchemy, but finding the right technical solutions reveals almost endless opportunities for firms across all sectors.

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