Private Equity Funds can unlock substantial value creation with the digital transformation of their portfolio companies. The briefing, prepared together with my colleague Giovanni Calia, shows how we support digital value creation in three areas:
i) eCommerce - Even laggard industries see (B2B) eCommerce gain traction
ii) Process Automation - There is on average 20-40% attainable efficiency potential
iii) New Products & Services: Especially, value-added digital services represent a major growth driver
Most portfolio companies lack internal capabilities to identify and address this potential. goetzpartners applies sound diagnostics including our digital maturity survey, internal belief audits, and external market sounding to create full transparency on the digital value creation potential of portfolio companies. In an expedite second project phase the north star strategy and a roadmap with prioritized quick wins is developed jointly with the management of the companies. The subsequent implementation of initiatives is supported by applying agile methods, leading technology partners, effective tracking with a P&L link, and a hands-on enabling approach.
goetzpartners is a trusted partner of private equity clients with a strong track record of more than 450 projects. For our digital value creation work, we leverage the experience from various digital transformation and performance improvement programs with hundreds of implemented digitalization initiatives. We bring to the table a unique network of highly regarded digitalization experts and technology partners to assure that every recommendation and planned action is set up for success.
As always, feel free to let me know if you would like to discuss how this applies to your situation.
Harvard Business Review.pptx | Navigating Labor Unrest (March-April 2024)
Digital Value Creation for Portfolio Companies
1. Digital Value Creation for Portfolio Companies
INTRODUCTION TO GOETZPARTNERS APPROACH | NOVEMBER 2019
2. 2
Executive Summary
ROBUST APPROACH
FROM DIAGNOSTICS
TO SCALING
2
◼ We apply sound diagnostics including our digital maturity survey, internal belief audits, and external market
sounding to create full transparency on the digital value creation potential of the portfolio
◼ In an expedite second phase the north star strategy and a roadmap with prioritized quick wins is
developed jointly with the management of the companies
◼ The implementation of initiatives is supported on a as-needed basis applying agile methods, leading
technology partners, effective tracking with P&L link, and a hands-on enabling approach
UNTAPPED
DIGITAL VALUE
CRATION POTENTIAL
1
◼ There is substantial value creation potential in three areas:
i. eCommerce: Even laggard industries see (B2B) eCommerce gain traction
ii. Process Automation: There is on average 20-40% attainable automation potential
iii. New Products & Services: Value-added digital services represent a major growth driver
GOETZPARTNERS IS THE
RIGHT DIGITAL VALUE
CREATION PARTNER
3
◼ goetzpartners is a trusted partner of private equity clients with a strong track record of >450 projects
◼ For our digital value creation work we leverage the experience from various digital transformation and
performance improvement programs with hundreds of implemented digitalization initiatives
◼ We bring to the table a unique network of highly regarded digitalization experts and technology partners
◼ Portfolio companies lack the internal capabilities to identify and address this potential
3. 3
The three biggest digital value levers are
intelligent automation, increased eCommerce
sales, and new digital products and services
Core Beliefs
Source: goetzpartners
The customer is the arbitrator judging all
efforts, who has to be involved as early as possible
and with the perspective always end-to-end
Think and act in networks, build ecosystems and
involve different players and experts in their field to
deliver robust solutions at speed
Agile working methods are at the core of
digitalization success; efficient prioritization,
iterative development, fail fast or aggressive scaling
Most companies can create a self-funding journey
by using efficiencies from digitalization to finance
enablers
Organizational buy-in assures sustainable results,
thus we apply a workshop-based approach to
assure that people “make it their own”
As digital moves at a different speed, rapid and
effective decision making processes and clear
accountabilities are needed
4. 4
Digital Value Creation | Building Blocks
There are five interlocked building blocks to capture the digitalization value potential
Source: goetzpartners
NORTH STAR STRATEGY
TRANSPARENCY ROADMAP IMPACT TRACKING
ENABLEMENT
A C E
B D
iterative
process
iterative
process
iterative
process
5. 5
Approach | Overview Phases
With a battle-proven approach the digitalization opportunities are identified and captured with value-creating initiatives
Source: goetzpartners
1 DIAGNOSTICS
4-6 weeks
3 QUICK WINS
3-6 months
4 SCALING
6-12+ months
2 STRATEGY & ROADMAP
2-4 weeks
DEVELOPMENT OF NORTH STAR
STRATEGY AND ROADMAP OF
INITIATIVES
Operationalization
of digitalization strategy
Vision &
Mission
Corporate
Strategy
Digitalization
Strategy
Execution
FACT-BASED assessment of
opportunities that are detailed and
prioritized in JOINT WORKSHOPS
IMPLEMENTATION OF
SELECTED INITIATIVES TO
DELIVER IMMEDIATE IMPACT
Vision &
Mission
Corporate
Strategy
Execution Implementation
of quick wins
Validation and IMPLEMENTATION of QUICK
WIN initiatives through Agile Design Sprints and a
structured approach to IMPACT MEASUREMENT
Digitalization
Strategy
PROGRAMMATIC SCALING
ACROSS THE ENTIRE
ORGANIZATION
Vision &
Mission
Corporate
Strategy
Execution Scaling
Programmatic approach to ENABLE THE
EMPLOYEES and multiply the
implementation of VALUE-CREATING
INITIATIVES
Digitalization
Strategy
IDENTIFICATION AND
PRIORITIZATION OF DIGITAL
VALUE CREATION POTENTIAL
Vision &
Mission
Corporate
Strategy
Digitalization
Strategy
Execution
Diagnosis of digital value creation
potential through INTELLIGENT
AUTOMATION, ECOMMERCE and
NEW PRODUCTS and services
Fact base
6. 6
Digital Maturity Survey
Source: goetzpartners
With the digital maturity survey we take the digital pulse of the organization in a highly comparable manner
▪ Detailed assessment of the
organization to provide comprehensive
view of digital maturity of the
organization, departments and
countries
▪ Assessment of current and targeted
digital maturity via ten dimensions
▪ Each dimension is detailed with up to
eight maturity attributes
▪ Attributes are ranked on a five
responses Likert scale (fully disagree to
fully agree)
▪ The survey is tested in English and
German language
„AT A GLANCE“1
2
3
4
5
6
7
8
9
10
Strategic Ambition: Is digitalization anchored in the overall business strategy?
Digital Leadership: Is digitalization part of the C-level agenda?
New Ways of Working: Are agile and collaborative work methods established?
Digital Operations: Do operations leverage digital means? What is the degree of automation?
Digital Sales: How strong is our eCommerce and multi-channel sales?
New Products & Services: Are we leveraging new technologies to advance our portfolio?
Data & Insights: Is data used to enable fact-based decision making?
Technological Enablers: Are new technologies trialed to identify new opportunities?
Skills & Capabilities: Do we have the right people to enable digital transformation?
Customer Centricity: Is the customer at the center of new ideas and developments?
DIGITALMATURITYDIMENSIONS
SURVEY
7. 7
Digital Maturity Assessment | Overview Analyses
Source: goetzpartners
goetzpartners brings a comprehensive toolkit of analyses to benchmark and assess the digital maturity of companies
SELECTION
Channel
Perspective
Customer
Perspective
Process & Product
Perspective
I II III
eCommerce Good Practices
Benchmark
eCommerce Good Practices
Database
Logistics Cost Benchmark
Process Automation
Heatmap
Service Check
Business Model
Comparison
Sales Channel Profitability
Process Mining
Return Ratio Benchmark Digital Use Case Repository
Simplified Conjoint AnalysisOnline Customer Survey
Customer Review Analysis Customer Pathways
Funnel Analysis Conversion Rate Benchmark
Paid Traffic Channels Un-Paid Traffic Channels
SEO Visibility
Traffic Volume & Quality Traffic Development
Price Crawling
Sales Channel Marketshares Amazon & eBay Fee
Structure
8. 8
eCommerce | Overview Good Practices
Source: goetzpartners
Along the digital marketing funnel there are 30+ good practices to fully capture the ecommerce potential
Content Development Management Visibility & Awareness
Engagement &
Experience
Conversion Data Processing Analytics
CREATE ACTIVATE MEASURE
Content generation and
administration.
Advertising, distribution, and
client interaction.
Data gathering, evaluation,
and analytics.
SEO visibility
Proactive 3rd party mgmt. (e.g., review sites, forums)
Quality comparison tools
Authentic testimonials and case studies
User reviews
Rich media (e.g., video) presentation of products
Newsletter campaigning
Landing page with
compelling content
Targets social and
search ads
Affiliate marketing
Smart recommendations
Personalized experience
for return visitors
Live assistance by chat
Self help centre
Multi-channel
fulfillment options
“Few clicks” buying for
repeat customers
Competitive payment
options
Call a representative or
call back option
Social media presence
Curated content and frequent updates
Gamification and/or viral content
Performance dashboards
Cost per order (CPO), return on ad spend (ROAS)
Funnel analysis
Customer segmentation
Customer satisfaction (e.g., NPS, thumbs up/down)
Social monitoring
Retargeting and lookalike audiences
A/B Testing
Total cost of ownership
(TCO) calculator
Tutorials
Intuitive navigation
Mobile apps
Foundational elements Additional good practices
9. 9
Intelligent Automation | Overview Potential
Based on the digital maturity survey, the belief audits and the analysis of the organizational as well as process data provided,
a high-level assessment of the automation potential of the companies core processes is derived
§
Research &
Development
Procurement Logistics Production Proprietary
Process
Proprietary
Process
Proprietary
Process
Service
Management
Marketing Pricing Sales CRM
IT SAP Finance &
Controlling
Accounting/
Tax
Human
Resources
Legal/
Compliance
Source: goetzpartners
Proprietary
Process
High
potential
Lean and
highly scalable
10. 10
New Products & Services | Service Check
In many verticals, services are the main driver of growth and margin. Our Services 4.0 benchmarking provides a robust
indication of current position and potential
Source: VDMA, goetzpartners
EXEMPLARY
SERVICES
SUCCESS
FACTORS
Reactive
Maintenance
◼ Installation, flow business
◼ Time and material (spare
parts, repair)
◼ Maintenance contracts
Service 1.0
◼ Installed base coverage &
pricing
◼ Dispatching & Supply Chain
Excellence
◼ Warranty/ maintenance cost
management
◼ Systems integration
◼ High availability solutions
◼ Consulting (upgrade/
retrofit/ optimizations)
Service 2.0
Product related
professional services
◼ Own services P&L/ business
model
◼ Productization of services,
penetration management
◼ Skill specialization, partner
management
◼ Remote operations
◼ Business process
outsourcing
◼ “As-a-service” solutions/
products
Service 3.0
Solution provider
◼ Understanding/ creating
customer value by
software/hardware products
◼ Factor cost arbitrage
◼ Automation of services
delivery
◼ AI-supported analytics and
optimizations
◼ „Success-based“ models
◼ Platform services
◼ Integrated service offerings
for partners, customers &
developers
Service 4.0
Service as a product and key
differentiator
Digital performer
◼ AI-based/ cognitive
automation
◼ Usage-based/ results-based
business models
◼ Multi-sided platform
ecosystem
◼ Exponential org. characteristics
Benchmarking against our detailed Services 4.0
data basis of about 200 companies collected in
cooperation with the VDMA
11. 11
Digital Value Creation | Diagnostics Matrix
Source: goetzpartners
The result of the first diagnostics phase is full transparency on the digital value creation potential of the portfolio
DigitalValueCreationPotential
Digital Capabilities
lowhigh
low high
Criteria:
i) Current digital capabilities; ii) Current digital share of revenue; iii) Complexity of change
Criteria:
i) Digital market size
ii) Digital growth
iii) Automation potential
2
3
4
5
1
2 5431
Company #03
Company #01
Company #11
Company #04
Company #02
Company #07
Company #08
Company #06
Company #12
Company #05
Company #09
Company #13
Digital Attacker
Digital Laggard Digital Defender
Digital Leader ◼ Maximize long-
term value creation
◼ Continue
investments in
digitalization
◼ Avoid over-
investment,
manage for returns
◼ Consider transfer
of capabilities
◼ Focus on quick
wins and must
haves
◼ Limit investments
in digitalization
◼ Build leading
competitive position,
focus on few key
initiatives
◼ Stage investments and
measure progress
strictly
CASE EXAMPLE
12. 12
Example: Ideas-to-Actions Workshops
goetzpartners heavily uses several workshop formats to assure full buy-in of the client and the development of initiatives that
will actually work in the specific situation of the client
1. Prioritized short-list of use cases
2. Defined and agreed initiatives with responsibilities assigned
1stPart2ndPart3rdPart
Group work Plenum discussion Presentation / speech
Source: goetzpartners
IDEAS-TO-ACTIONS WORKSHOP
INTRO - REVIEW & OUTLOOK
◼ Short review of kick-off workshop and use case challenge phase
◼ Outlook for the day and way forward
USE CASE PITCHES & CHALLENGER ROUNDS
◼ Presentation of generated use cases (pitches) by workshop participants
◼ Discussion and challenging of use cases in breakout groups (approx. 4 workshop
participants in one group) based on a set of defined criteria
◼ Summary of challenger group results in the plenum
USE CASE VOTING & INITIATIVE DETAILING
◼ Voting and prioritization of use cases based on findings from presentation and
challenger rounds → Selection & definition of three to five concrete focus use cases
◼ Compilation of teams (interdisciplinary and cross-everything) to further work on three to
five concrete use cases (potential lighthouses)
◼ Introduction to google design sprint and agile working
◼ Wrap-up of the day and definition of next steps
PREPARATION
◼ Continuous reviews and feedback loops with team during the use case challenge
◼ Clustering of use cases and distribution to workshop participants for pre-screening
Pre
CASE EXAMPLE
13. 13
Use Case Example #1: Customer Credit Check
Automating the customer credit check process for a client in the manufacturing industry not only improved quality and
speed, but also allowed to realize ~50 FTE efficiencies
Source: goetzpartners
BACKGROUND
PROCESS
PAIN POINTS RESULTS
◼ Credit check department of ~50 FTE was
outsourced to India to benefit from labor
cost arbitrage
◼ The function is critical, because of two value
drivers: i) time-to-approval; ii) non-payment
◼ i) time-to-approval: delayed approvals result
in lost revenue because customers conduct
the business with the faster competition
◼ ii) non-payment: risky clients need to be
identified up-front (receive only pre-payment
offers)
◼ Efficiency gain of ~50 FTE
◼ Average time to approval <1h; 92% of
requests approved within less than 10 minutes
◼ Non-payment ratio stable after adjustment
for overall economic default rate
◼ Outsourcing agreement was discontinued and
resources in headquarter responsible for
managing outsourcer now manage
exceptions
◼ Outsourcing did not improve the time
required to complete the credit check
◼ While varying greatly with fluctuation in
demand, the average time to approval over
the last 12 months was 3 business days
◼ Further, intelligent automation was assumed
to substantially drive down the operating
costs of >1.2m Euro p.a.
ORDER SUBMITTED ASSIGN AGENT
CHECK
COMPLETENESS
CHECK HISTORY
AND CREDIT
LIMIT
CONDUCT RISK
REVIEW
CREDIT DECISION
MADE
EXCEPTION
HANDLING
AUTOMATED MANUAL
ADDITIONAL
INFORMATION
REQUESTED
INFORMATION
RECEIVED
CREATE NEW
PROFILE
IDENTIFY NEW
CUSTOMER
PERFORM RISK
EVALUATION
CLIENT EXAMPLE
14. 14
Use Case Example #2: Automated Invoicing
Automating invoicing enables large savings per invoice while simultaneously decreasing the error rate and enabling account-
specific payment and cash management optimization
AI = artificial intelligence, RPA = robotic process automation, PAS = process automation software
[1] Initiatives are rated according to their implementation complexity (technical feasibility, regulatory requirements, acceptance) and their financial
impact (breakeven duration, steady state improvement, investment volume)
Source: goetzpartners
ISSUE TO ADDRESS
◼ Large and decentralized
organizations have
heterogeneous layouts for
their AR and AP systems
requiring standardization and
transposition
◼ Dealing with large amounts of
invoices can stress the
accounts payable function
◼ Usually, invoices that need to
be processed come in
different formats (PDF, Word,
Excel, Email)
◼ Manually entering
information for purchase
amounts and items takes
valuable time and is prone to
error (e.g. transposition errors
with decimal points)
SOLUTION / OPPORTUNITY
Automatic entry of sales inquiries and initiation of delivery
process (e.g. spare parts) incl. posting revenue entry into system
Automating invoicing drastically reduces processing time and
manual effort as well as the error rate
Automation solutions such as RPA (UiPath, blueprism) or AI (e.g.
Arago) can decrease costs and take the load of employees in the
accounts payable function
IMPACT POTENTIAL
First order effects
Employees with invoicing-related tasks 100
Time spent handling invoicing process (Ø) * 30%
= FTE working on invoicing tasks 30
Effort reduction through automation * 50%
= Capacity effect (in FTE) 15
Personnel expenses per FTE (Ø €) * 75,000
= Potential savings p.a. ~€1.1m
➢ Calculated 1st year savings: ~€0.3m
➢ Calculated 3rd year savings: ~€0.9m
Second order effects
▪ Automated optimized payment and cash management
▪ Account-individual payments and financing preferring
either cashback, trade credits or bank credits
depending on current liquidity, cost of capital and
each account’s discounts and interest
VALUATION[1]
Implementation
Feasibility
Financial
Impact
“Do Now“
Low
High
TECHNOLOGY AND TOOLS
AI PASRPA
Cronacle ETL Tools
Batch Scheduling
CLIENT EXAMPLE
15. 15
Use Case Example #3: IT Ticket Automation
Even highly complex cases in IT ticket management can be resolved by machine reasoning and overall automation rates of
more than 90% are attainable
Source: goetzpartners
0
1,000
2,000
0
10
7,000
30
50
40
20
60
5,000 70
80
4,000
90
6,000
100
3,000
month
02
# of Tickets
month
03
Automation Rate (%)
month
01
month
04
Not Automated Tickets Automated Tickets
After one month training
on development system,
already at production go-
live ~50% automation rate
Iterative additions of knowledge items
through three months achieved >90%
automation rate (incl. complex software
issues and hardware break-fix tickets)
Complete hand-over to
client after three months
CLIENT EXAMPLE
16. 16
Use Case Example #4: Financial Statement Closing
Financial statement closing is a major and often repeated activity for any finance or accounting department with various
repetitive steps making it a worthwhile process to automate – especially in large and complex organizations
AI = artificial intelligence, RPA = robotic process automation, PAS = process automation software
[1] Initiatives are rated according to their implementation complexity (technical feasibility, regulatory requirements, acceptance) and their financial
impact (breakeven duration, steady state improvement, investment volume) [2] avg. 5 working days per month on reporting
Source goetzpartners
ISSUE TO ADDRESS
◼ The aggregation of
information and the creation
of (financial) reports is a
repetitive and time-
consuming process for
accounting and finance
◼ The larger and more
decentralized the organization
is, the more time and effort is
spent by accounting sorting
paperwork and checking and
reconciling (account, bank or
intercompany) data
◼ As not all data is
standardized and as it is
gathered from more than just
one system, the creation of
reports is prone to human
error
◼ Manual effort and human
errors slow down the process
significantly threatening the
quality and decreasing
employee morale
SOLUTION / OPPORTUNITY
Automating report generation drastically decreases processing
time and improves report quality while being able to
automatically process certain consequences of the reporting
HIRO™ can automatically classify and reconcile balance sheet
items (e.g. map working capital items)
HIRO™ can for example automatically create bridge file to
support transfer from balance sheet to tax balance sheet
IMPACT POTENTIAL
First order effects
Employees in Finance department 1,300
Percentage working on reporting * 10.0%
= FTE working on fin. reporting 130
% of time spent on fin. reporting (Ø) * 25%[2]
Effort reduction through automation * 40%
= Capacity effect (in FTE) 13
Personnel expenses per FTE (Ø €) * 90,000
= Potential savings p.a. ~€1.2m
➢ Actual 1st year savings: ~€0.5m
➢ Calculated 3rd year savings: ~€1.1m
Second order effects
▪ Automated reporting saves time and costs for audits
▪ The increased real-time-visibility enables management to
save costly errors by prioritizing tasks of high risk
VALUATION[1]
Implementation
Feasibility
Financial
Impact
“Do Now“
Low
High
TECHNOLOGY AND TOOLS
AI PASRPA
Cronacle ETL Tools
Batch Scheduling
CLIENT EXAMPLE
17. 17
goetzpartners Digital Ecosystem
Through strategic partnerships and own investments we have access to leading technologies which we implement to deliver
measurable impact for our clients
18. 18
“I skate to where the puck is going to be,
not where it has been." Wayne Gretzky
19. 19
goetzpartners at a Glance
goetzpartners is an owner-managed and independent consulting company, providing advice along the core issues of
entrepreneurial thinking: Strategy, Transformation and M&A
EXCELLENT PERFORMANCEINDEPENDENT
TOP-LEVEL NETWORK
14OFFICES
WORLDWIDE IN 11COUNTRIES
INTERNATIONAL
PRESENCE
UNIQUE PORTFOLIO
WORLDWIDE>350ADVISERS
ENTREPRENEURIAL THINKING
199125+ YEARS OF UNIQUE
GOETZPARTNERS
ADVISORY APPROACH
SINCE
Source: goetzpartners
BLUE CHIP CUSTOMER BASE
For five years running,
goetzpartners has received
awards as part of the renowned
“Best of Consulting” contest
(“WirtschaftsWoche”)
20. 20
64%
Mid Cap
24%
Small Cap
12%
Large Cap
6%
Organization
17%
Value Creation
8%
Exit
>80
successful transactions with our
involvement in form of a due
diligence in the past 5 years
underline our execution
capabilities
Deep Dive | Private Equity Consulting
Strong track-record of more than 450 projects with various mid- and large cap financial investors executed all over the world
– goetzpartners has successfully supported various clients with multiple value creation projects.
Source: goetzpartners
DISTRIBUTION BY GLOBAL FOOTPRINT
~3/4of our projects
are due diligence on the
buy- or sell-side
DISTRIBUTION BY PROJECT TYPE
~40%
of our projects involved
cross-border
50%
of projects with each
strategic investors and
PE investors
>450completed projects
worldwide
~20Dedicated due diligence and value creation
professionals with strong expertise
In addition, goetzpartners has dedicated local teams covering
complementary management consulting and corporate
finance expertise and knowhow
Source: goetzpartners
69%
Acquisition
CLIENT DISTRIBUTION BY FUND SIZE
~3/4
of our projects
involve mid- or large-cap PE-Funds
60%
International
40%
DACH Region
>25
different countries in
which targets and clients
of projects are
headquartered
21. 21
www.goetzpartners.com
BJÖRN RÖBER
Partner | Head of Digital
bjoern.roeber@goetzpartners.com
M +49-151-18236034
Contact
DÜSSELDORF
Königsallee 60 b
40212 Düsseldorf, Germany
FRANKFURT
TaunusTurm, Taunustor 1
60310 Frankfurt/M., Germany
LONDON
goetzpartners securities Limited
The Stanley Building
7 Pancras Square
London N1C 4AG, UK
MADRID
Calle Marqués de Urquijo n 30°, piso 1°
28008 Madrid, Spain
MILAN
Piazza Fontana, 6
20122 Milan, Italy
MOSCOW
Gagarinsky Per. 25
119034 Moscow, Russia
MUNICH
Prinzregentenstr. 56
80538 Munich, Germany
NEW YORK
250 Greenwich Street, Suite 4620
New York, NY 10007, USA
PARIS
19, Avenue George V
75008 Paris, France
BEIJING
Unit 1601
237 Chao Yang North Road
100020 Beijing, China
PRAGUE
Melantrichova 17
110 00 Prague 1, Czech Republic
SHANGHAI
Unit 2104-05
1045 Middle Huai Hai Road
200031 Shanghai, China
ZURICH
Kantonsstraße 1
8807 Freienbach/Zurich, Switzerland
DUBAI
Central Park Towers OT 37 Floor 37, DIFC
PO BOX 507270 Dubai,
United Arab. Emirates
GIOVANNI CALIA
Managing Director
giovanni.calia@goetzpartners.com
M +39-389-8354071