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Digital disruption is changing the way companies in all sectors develop and tackle strategy. We ask why private equity consider themselves better placed than most to transform the companies they own into leaders of the digital era.
Olof Hernell supports the management teams of EQT's portfolio companies in driving digital change in his role as Head of Digitalisation at the private equity house. Alongside Fredrik Lindblad, Partner from PwC, he talks to Alice Murray at Unquote about how EQT approaches the issue of business in the digital age.
Alice Murray: Why is it that private equity can play a critical role in turning businesses into digital leaders?
Olof Hernell: Even though we know that companies need to change and organisations adapt, it's very hard to do. The corporate immune system is pushing back against change. Private equity, however, has the level of engagaement, power and timeframe to do that in an easier way than if you were in a traditional company.
Fredrik Lindblad: It's also important that the track record around private equity in developing companies particularly during turbulent times is very strong. It's proven the engaged form of corporate governance (that which is the secret sauce of private equity) is proven su[pperior to other forms of ownership in terms of taking them through change. And that's whats needed now in this digital era.
AM: What can private equity do within themselves in whic they can make changes within their portfolio businesses?
OH: I'm a firm believer that change needs to come from the inside. Of course, we need to walk to talk and show what good looks like. The trustworthiness of us going out to companies telling them they need to digitise and adapt is zero if we havent done it ourselves.
AM: What kind of steps can be taken?
OH: It's about being more data driven and how we can begin to make data-driven decisions in addition to gut-driven decisions. How we can use tools and ways of working that have a strong heritage in the consumer side - because that brings speed, innovation and performance.
FL: On the strategic viewpoint, what companies need in order to be able to do this is that they need to be very curious. Unless you're willing to learn and evolve it's going to be dificult to turn into a digital kleader. And you're also going to have to have courage because even if you're curious, as you explore new frontiers, nothing is forgiven so you need to be wlling to take the risk. And lastly that requires passion, because unless you have the passion because unless you have the passon to muster up the curiosity and the courage to say "yes".
AM: What are the biggest challenges in pushing for digital change?
FL: The most important attribute is a leadership that drives for change. And you also need to introduce new types of talents because it will be difficult for organisations to learn and re-learn.
OH: It's very easy to bring in [consultants] to lead this change but if you don't have a CEO on board then they become a digital alibi and organisations continue as they always have done. And the questions about digital strategy or digital marketing should be combined with conversations around marketing strategy or product strategy in the digital age, because the two are now combined.