No one dares to raise the root issue that the previous Sales leads failed because of the same broken Sales to Finance to Product handoff that was never fixed.

Most companies have a system problem, but most investors only get to see the people problem.

The limitations of performance reviews

A few years ago I lived in New York and worked for NBC Universal, a General Electric subsidiary.

GE had a very famous annual performance rating ritual, originally established by Jack Welch to rank and rate all employees. It was a highly structured feedback process, resulting in a bell curve of performance where you are force ranked against your peers. The top ranked get access to advanced training and a fast-track managerial track. The bottom 10% are shown the exit.

This traditional approach to people performance reviews was then found to be deeply flawed and demotivating. It has now changed significantly and companies including GE have moved to real-time feedback and discussions on immediate goals to focus on true constant improvement.

Still, most companies still line up employees once or twice a year to assign ratings, provide feedback and discuss bonuses. It feels rigorous and scientific but it is built on the false premise that individual performance can be separated from the system in which people operate.

The truth is, underperformance in most companies isn’t about individuals. It’s about the design of the system with the incentives, workflows, and feedback loops that shape behavior.

Dr. W. Edwards Deming, the father of modern quality management and statistical process improvement, considered performance appraisals one of management’s Seven Deadly Diseases. In his words:

“A bad system will beat a good person every time.”

Private Equity is especially vulnerable to this trap

Performance reviews in isolation often reward visible effort rather than systemic improvement. The best companies do something different first: they review the system before they review the people.

When margins slip or growth stalls, most organizations under private equity ownership replace the CFO or bring in a new CRO. The new leader inherits the same misaligned incentives and cross-functional friction to then end up stuck in the same trap.

Of course, this doesn’t mean hiring the right people doesn’t matter. A great CFO can redesign the planning cycle; a strong CRO can rebuild the go-to-market engine. But those hires only create value when they work in companies that are open to reshaping systems and processes across departments.

Private equity backed companies are especially vulnerable to this trap. Timelines and board pressure reward speed over structure. Everyone tends to get into firefighting mode. You hear more often“Who failed to deliver?” rather than “What in the system made this outcome inevitable?”.

We have a tendency to be more comfortable discussing people performance, we often don’t know when to start when it comes to systems thinking.

Systems Thinking Is Rare - where to start?

Systems thinking is slower, less visible, and requires cross-functional cooperation. Leaders prefer the optics of “heroic” interventions with new hires or new dashboards over the hard work of redesigning feedback loops and incentives.

One portfolio company I know replaced performance reviews with weekly workflow reviews between Sales, Ops, and Finance to focus on bottlenecks instead of blame. Within six months, time to market reduced by 20%. The fix wasn’t in the individuals, it was in addressing the lack of collaboration that was grinding work to a halt. The best companies run some level of system reviews as part of their operating rhythm.

Focus on your system health

To get started, you need to raise awareness of the issues at exec level, and a good way to do that is through a simple “system health ratio” that helps align the team on the urgency of change.

The health ratio is simple:

System Health Ratio = Value-Add Time / Total Lead Time

Do would do this for 1 or 2 of your critical processes that drive value and capture:

1. Total Lead Time: From start to finish (include all waiting, approvals, handoffs)

2. Value-Add Time: Only the hours/days where someone is actually creating something the customer would pay for

Sales example: Consider all the time between “customer says yes” and “we deliver value,” how much is actually productive work versus waiting, approvals, rework, and handoffs?

An enterprise SaaS company closes a $200K deal, then reality bites:

• Day 1-3: Contract sits in Legal’s queue

• Day 4-7: Legal reviews, sends back redlines

• Day 8-11: Sales and Customer Success argue over who owns onboarding

• Day 12-14: Finance won’t provision the account until IT creates the license

• Day 15-17: IT is backlogged, waiting on Security approval

• Day 18-22: Customer Success finally onboards the client

Total lead time: 22 days

Actual value-creating work: 4 days (contract review, system setup, onboarding)

Your System Health Ratio: 18%, which means 82% of the elapsed time added limited value in poorly designed system processes.

What does good look like

It really varies by industry, and this is what I have come across in past experiences:

• In professional services firm, you are lucky to get to 20% health ratio.

• In tech-enabled businesses you are looking at a 30-50% range.

• In digital pure plays you should be able to push above 50%.

Would love to hear about your own experiences and stats!

Getting the conversation started at board level

At board level, there are some exploratory questions that can help the CEO understand the importance of truly understanding the system issues:

• Which two departments blame each other most often?

• What incentive misalignment causes it?

• If we removed one layer of approvals to improve velocity in the company, which one would that be?

Exploratory questions then open the door to doing proper process reviews. It takes time to embed that cultural change, but when you successfully tackle one bottleneck you will start getting higher engagement from employees on this and it becomes easier to make system reviews as routine as financial reviews.

If you change the incentives and process design you can change the behaviour faster than changing the individual.

In summary: Average companies review people to fix a problem. Great companies also review systems to drive value creation in a scalable way.

Stop blaming the players and start redesigning the game,

Juan

The views, opinions, and content expressed on this Substack are solely my own and do not reflect the views, policies, or positions of my employer, clients, or any affiliated organizations

Here are some good reads to decode what is going on in AI ... and sound smart at your next dinner party:

💡 The Economist’s View
Azeem Azhar (Exponential View) offers a balanced essay in “Is AI a bubble?”, arguing that “genAI remains in a demand-led, capital-intensive boom rather than a bubble.” He cautions, though, that booms can sour quickly and recommends staying vigilant.
Link


🧗 The Builder’s View
Daniel Hulme (cofounder Faculty.AI, now Chief AI at WPP) compares the AI cycle to climbing a mountain: steep, painful, but full of hidden riches. “Technologies DO become overvalued... but that’s how progress works.” The takeaway: hype is a feature, not a bug - if you’re actually building.
Link


🎭 The Cultural View
Joshua Rothman (The New Yorker) dives into how AI is reshaping art, creativity, and meaning in his fascinating essay “AI Is Coming for Culture”
His reflection: “The danger isn’t that machines will replace us - it’s that we’ll start creating like them.” As AI floods the world with infinite imitation, the real challenge becomes keeping human imagination original, intentional, and alive. Link


💰 The Market View
Ian Harnett (Absolute Strategy Research) warns in the FT that AI firms are increasingly “doing deals between themselves, inflating valuations, and buying each other’s products.” It’s a familiar dance of excess capex, vendor financing, and balance sheets stretched thin.
Link

The band is still playing, but no one knows when the lights will come up.

Enjoy the weekend,

Juan

-

The views, opinions, and content expressed on this Substack are solely my own and do not reflect the views, policies, or positions of my employer, clients, or any affiliated organizations

Board members don’t need to become CTOs, but they do need to ask sharper questions that cut through the noise and reveal whether a strategy will actually create value or just fund another expensive R&D project.

When a Board nods silently to a Technology presentation or gets lost in the buzzwords flying they are not doing their jobs properly. We can all do better.

It is better to be the Board Director who risks looking foolish by asking one “stupid question” to the CTO than the one who pays for a very expensive answer.

Based on past experience from being in the CTO seat, here are 7 questions every board member should be asking about a technology strategy, but often don’t:

1. What problem are we really solving?

What is the critical problem the CTO is trying to crack, and how do we all know whether these are actually the right problems to solve?

A good strategy starts with an impact metric that truly matters. Are you solving for something critical like revenue, margins, customer retention… or tinkering on side projects that just look good on paper and are fun to do R&D on?

2. What is your definition of done?

Perfection is expensive, and so is failure. What level of error or downtime is tolerable for this project? At what point does the error rate force a rethink of the approach? Too often, goalposts shift mid-project. Boards should insist on honesty and commitment on a definition of done upfront so they don’t get played later.

3. Who are you building this for… and are they onboard?

If the technology strategy is designed for generic “users” or “clients” who don’t exist in the real world, you’re setting yourself up for a big expensive headache.

Instead, insist on having a key sponsor outside the Technology team accountable for the impact metric who will be involved in discovery, testing, and rollout. The hero of the story should not be the CTO.

4. What are the buy vs. build vs. borrow trade-offs?

Every architecture choice (off-the-shelf SaaS, tightly integrated systems, or bespoke build) has implications for cost, risk, and future flexibility. Don’t just ask what is being built, but why this route was chosen.

5. What’s experimental vs. proven?

Boards should be allergic to brochureware. Ask for first-hand references, not consultant case studies. For traditional tech, demand evidence of previous rollouts at similar companies and lessons learned. For AI, push for transparency on training data, testing, and safeguards.

6. What happens if we’re very wrong—or very right?

Too often, boards only hear the promise of the upside. But reputational risks, customer backlash, or unexpected scaling challenges need equal weight. The best boards foster a safe space where companies can experiment responsibly while holding technology projects to tougher scrutiny around data usage, cybersecurity and worst-case scenarios.

7. What is the fully costed version of this?

Technology isn’t just software licenses and cloud credits. Make sure the true cost includes all the plumbing, the talent, the vendors and the ongoing maintenance costs. Ask for the “all-in” number upfront—better a realistic figure today than a series of budget surprises tomorrow.

Why this matters now

In today’s private equity environment (where exits are delayed but every portfolio company needs to be exit ready) technology is no longer a “support function.” It’s a lever of value creation, margin protection, and differentiation.

But only if boards ask the right questions. Otherwise, you risk funding mediocre ideas or falling for the hype cycle to play catch up.

So, next time a CTO discussion comes up at the board table, don’t nod politely and do ask these difficult questions.

The uncomfortable questions are the ones worth asking,

Juan

The views, opinions, and content expressed on this Substack are solely my own and do not reflect the views, policies, or positions of my employer, clients, or any affiliated organizations

But strategy is none of these things - it isn't fluffy, it isn't a compromise, and it certainly isn't an umbrella statement crafted to describe your company's purpose in a catchy way.

I was revisiting some of the classic books that shaped my thinking, and there's one I consistently return to: "Good Strategy Bad Strategy: The Difference and Why It Matters" by Richard Rumelt, one of the most influential boks on strategy.

The book's premise is powerful:

Strategy is not about ambition, leadership, vision, planning, tools, or slide decks. Bad strategy is like a verbal tic, used everywhere. Marketing teams start taliking about marketing strategy, data processing became IT strategy, and acquisitions morphed into growth strategy.

Instead, good strategy is as simple as discovering critical factors within a situation and designing coordinated, focused actions to address them.

Stripped to its essentials, a good strategy comprises three elements:

1. A diagnosis that defines or explains the challenge's nature, simplifying reality's complexity by identifying critical situational aspects

2. A guiding policy that specifies the chosen approach to overcome the critical observations identified in the diagnosis

3. A set of coherent actions, including resource commitments, to accomplish the guiding policy

As a shorthand to the above, I often use the Why, the What, and the How.

While diagnosis remains crucial, the findings might vary depending on the CEO that the company has at that time (“if all you have is a hammer, everything looks like a nail”).

Even if the diagnosis is flawed, it is useful in expressing a strong viewpoint to inform subsequent actions. Without a strong viewpoint, the company starts going into a spiral. E.g. if you are simultaneously pursuing international expansion, reducing costs of goods sold, and improving employee engagement… and you'll struggle to prioritize between sales teams' requests for rush custom orders and manufacturing's preference for uninterrupted production runs.

You can't have employees running around guessing what aligns with strategy, as too many decisions would escalate and paralyze the company.

The book emphasizes this clarity over complexity to ensure everyone understands how diagnosis, policy and actions come together.

"Without action, the world would still be an idea"

- INSEAD founder Georges Doriot

A good example of this in powerful simplicity in action is from the excellent podcast "Acquired" and its deep-dive company analysis of CostCo.

Here's how Costco aligns with these principles:

Diagnosis of the Problem

Costco identified traditional retail models' struggles with inefficiencies, high operational costs, and price-sensitive customers. They diagnosed that offering value through low prices and simplicity could address these challenges while fostering customer loyalty.

Guiding Policy

Costco adopted a clear guiding policy centered on cost leadership and differentiation:

• Membership Model: Charging membership fees generates a stable revenue stream offsetting their low-margin pricing strategy.

• Limited Selection: Offering around 4,000 SKUs (compared to 30,000–40,000 in traditional supermarkets) enables better supplier deals, reduces overhead costs, and simplifies operations.

• Private Label (Kirkland Signature): Differentiating through high-quality private-label products at lower prices builds customer trust and loyalty.

Coherent Actions

Costco's actions align tightly with their guiding policy:

• Bulk Purchasing: Encourages high inventory turnover and reduces holding costs, enabling lower customer prices.

• Operational Efficiency: Minimal advertising, streamlined logistics, and disciplined product selection maintain low costs and operational efficiency.

• Intelligent Loss of Sales: Costco foregoes unnecessary product variety or services that might compromise efficiency or profitability.

Once you start looking at strategy through the Good Strategy vs. Bad Strategy lens, you quickly realise how most companies still pursue laundry lists of desirable outcomes, without doing the hard work of thinking clearly.

Let’s make 2025 the year of Bad Good Great strategies,

Juan

The views, opinions, and content expressed on this Substack are solely my own and do not reflect the views, policies, or positions of my employer, clients, or any affiliated organizations

It is a beautiful film exploring how memory, identity, love (and pain!) is an essential part of human experience.

The movie is based on a key question: Is it a blessing or a curse to be able to remember painful experiences?

I was thinking about the movie when reading a great article by Kimberly Tan at a16z: RIP to RPA.

The article argues that while RPA promised to automate repetitive office tasks, its rigid, rules-based approach fell short. AI-powered automation could now fulfill RPA's original vision through by increased flexibility, ease of implementation and better handling of exceptions.

I love working in Technology. The hype, hysteria and hope of every technology wave can be intoxicating.

At the same time, we tend to forget (or conveniently ignore!) the messy reality of implementations.

AI is making RPA obsolete. It is able to adapt without reprogramming. It can handle unstructured data and understand context to make better decisions in ways RPA never could. And it can self-monitor for process stability and security to mitigate risks in real time.

AI is already exponentially better, but can we just forget the lessons from rolling out RPA?

Like the movie, is it a blessing or a curse to remember how painful RPA was?

So, what happened with RPA? Well, it turns out RPA actually worked exactly as designed – it automated rule-based, repetitive tasks with high accuracy.

But then, why did a seemingly straightforward technology often fall short of expectations?

• What began as a promising technological solution often turned into rushed deployments driven by vendor hype.

• Organizations frequently underestimated the complexity of their processes and overestimated their readiness for automation.

• Legacy systems proved more challenging to automate than anticipated, and cross-system complexity grew exponentially as implementations scaled.

Meanwhile, the promise of DIY "citizen developers" created unrealistic expectations about maintenance and troubleshooting capabilities by assuming an average employee could run the bots without IT support.

• Unclear ownership between IT and business units, coupled with poor governance structures, led to a proliferation of poorly maintained bots.

• These issues were then compounded by insufficient process documentation and a lack of understanding about true exception handling requirements.

• And this is before risk and compliance teams arrived to try to understand what was going on in the bot "black box".

As a result, staff resistance across industry implementations grew. Automation became a contentious term that bred resistance among employees fearing job displacement.

Ultimately, we all saw lots of half baked implementations that often failed to deliver their promised value. But, when done right, the net benefit was great in back office processes optimisation, yielding true savings.

As we now look forward as an industry, we can all do so much better this time around:

We can be cautiously optimistic, listening to the sales pitches from vendors, but not taking them always at face value

We can engage execs and staff more honestly, being clear and transparent on the objectives and limitations of the automation

We can focus on the right processes to automate, being realistic about the costs incurred, ongoing maintenance and ultimate benefits

If we get the people, processes and politics of any technology rollout right, we increase the odds of the rollout being successful.

In the movie, Jim Carrey and Kate Winslet found out that erasing memories did not solve underlying relationship issues.

In our industry, we grow stronger by embracing our implementation scars rather than erasing them.

May we always live in interesting times, with the eternal sunshine of a spotless mind,

Juan

But sometimes companies find themselves in a deep mess.

I rewatched “Pulp Fiction” on Halloween, and was thinking that Mr. Wolf is the ultimate company turnaround specialist… The way he arrives to clean up a mess after a shooting and takes swift action is a lesson in leadership.

I'm Winston Wolf. I solve problems.

If I'm curt with you, it's because time is a factor. I think fast, I talk fast, and I need you all to act fast if you want to get out of this.

Here’s what Mr. Wolf would say if parachuted into a corporate mess:

First, you got into trouble when you got complacent just because things are going well. The business world changes faster than you can say "royale with cheese."

Second, make decisions. Indecision is a killer. You have to be decisive but not reckless. Gather intel, analyze it, and then pull the trigger.

The knock-on effects of bad decisions—or lack of decisions—are what often take companies into turnaround situations.

I’ve seen many organizations stumble because they opted for easy decisions instead of what truly needed to be done. Here are some examples:

• Having a plan: I worked with a public company whose investors were focused on dividend yield. Our ability to innovate and disrupt the industry was hampered by concerns about cannibalizing existing cash cows and jeopardizing dividends. There’s never a good time to reinvent yourself; it’s expensive.

  • The easy decision is to milk a business dry, but that ends up costing more in the long run

  • The mess created was that the company eventually sold its best assets and became a regular target for activist investors looking to shake things up

• Getting the right people in, fast: I worked for an online company that had three CEOs in three years. During that time, the remaining employees engaged in political games just to stay relevant while waiting for the next CEO to arrive. Each leader had a different approach:

  • The CMO resorted to PR stunts to gain press coverage about her skills and fail upwards

  • The CFO shut down any investment in the business to make himself look good on paper through margin improvements. This effectively choked the business and led to a forced sale at bargain prices a few years later

• Executing acquisitions well: I've also seen companies leverage M&A beautifully as a key strategy for value creation alongside organic growth.

  • The easy short-term decision is to pursue M&A simply to buy EBITDA or customers—this works well when you have a standard operational and technology platform that can absorb acquisitions

  • However, for companies that don’t execute it properly, this can lead to a mess. You need clarity pre-deal and in your integration plan about how you will service those new customers and which parts of the acquired technology and operations you intend to integrate (if any)

• Cleaning up the tech stack regularly: technical debt and legacy platforms will slow you down if you never take the time to clean up and plan a sensible migration strategy.

  • The easy decision is often to cut back on technical architecture, documentation, and migration efforts or be overly optimistic on its complexity

  • The mess the tech debt and migration creates can grind your new feature development to a halt, and competitors will catch up with you

A good mental framework to make the right decisions early is to put yourself in the position of your future self.

How will this decision feel today?

… how will it feel this quarter?

… how will it feel next year?

… will you be happy you took this decision at the time of selling the asset?

It is easy to avoid decisions to make you feel good today, but if you forget about the long term and don’t make the hard calls, you will make a mess.

Don’t have Mr. Wolf come see you, don’t make a mess,

Juan Lopez-Valcarcel

"Technology is a word that describes something that doesn't work yet." — Douglas Adams

The promised land of AI

Artificial Intelligence has become a potential key to unlocking value creation. It is now often top of the agenda to unlock the $3.2 trillion traffic jam in Private Equity exits.

From my perspective, AI represents a generational change in technology, on par with the web, mobile, cloud, and social media revolutions.

Our natural instinct to view intelligence as a human characteristic leads us to evaluate these AI technologies through a human lens. And this is where the fun and weirdness starts.

When we look at AI, are we ready to ponder if "it" has a body, a mind, and a soul?

Does "it" have a body?

“Crazy evil genius” Elon Musk unleashed an army of robots at his latest promotional Tesla event launching Robotaxis.

The robots walked, talked and served drinks to the press. Everyone was amazed by those robots. The future is here! We will soon have a robot in every home!

However, it was later revealed that these robots were actually remote-controlled by event staff and the amazing interactions where robots have a chat with you and serve you a drink were an illusion.

This should not come as surprise considering Elon hosted an event 3 years ago where he introduced the futuristic robots and their capabilities by having a dancer dressed in a robot costume.

So it would be easy to be disappointed by the limited progress in humanoid robots. But then we saw, in the same week, how SpaceX's robotic arms were catching the returning Starship rocket booster at the launch pad. A truly amazing feat of engineering and software that will change space travel.

So sometimes we want our futuristic machines to be humans with a body, but we forget how amazing these machines already are.

Does "it" have a mind?

I have been running and advising data science teams for the last 10 years, and the pace of progress is truly phenomenal.

However, when it comes to assessing the reality vs the potential of the technology, there is a always a question to be asked: Can "it" truly reason or are we looking at probabilistic machines that are directionally correct but precisely wrong?

A recent study on mathematical reasoning in LLMs revealed some interesting findings:

• LLMs remain sensitive to changes in proper names and numbers in problem statements. I.e. a math problem: “Mary had 5 coins and then spends 3, how many coins does Mary have?” gets a different (and wrong) answer if Helen is the one with the coins.

• Including irrelevant information in math problems causes performance to drop across all models. I.e. introducing a comment about the air temperature that day might change the answer on how many coins Mary has.

• As questions increase in difficulty, not only does performance drop, but variance also increases, making models less reliable. I.e. good students don’t do predictably better than average students when answering harder questions.

While workarounds and new tools like chain-of-thought reasoning will help address these issues, we need to adjust our current expectations about AI having a "mind" like humans do.

Therefore, it is currently challenging but not impossible to use LLM's top capabilities in situations where accuracy and consistency is critical. e.g. healthcare or regulated financial services.

This does not take away from the huge progress in repetitive predictable tasks that have large training datasets and require no or low reasoning such as customer service scripts and routine data crunching or code development.

Does "it" have a soul?

There is probably nothing as intrinsically human than music.

Music can transform how we feel, boosting our joy and healing our sorrows. The connection that we feel with our favourite singers and bands is unique.

So what happens when the AI starts singing?

This is happening in the US Billboard charts with a country song where the singer cannot speak in the real world due to a medical condition but AI recreates his voice from past records.

It also happened in Germany with a viral europop song that was AI generated and got into the Top 30 charts on Spotify.

This progress is unstoppable. New software like Suno (aka ChatGPT for Music) makes it so easy for anyone, irrespective of talent, to push a button and have AI create professional quality songs.

So, does "it" have a soul that connects with us? Will it win a Grammy?

Or is it all a trick, a mathematical probabilistic model that generates the music you want to hear the same way gmail autocompletes your email responses predicting your needs?

It's a kind of magic

As the AI technology develops exponentially, it is easy to fall into the trap of constantly comparing to a human body, mind or soul. We are wired to use a human lens when assessing something that approaches intelligence.

We might be better off thinking of AI as a magician's illusion that keeps improving until you can't figure out how the illusion is made.

It's the illusion of humanity, not humanity itself – for now.

I sincerely believe AI will be one of the most transformational technologies of our lifetime, I also believe we are not yet ready to fully absorb its implications for what it means to be human.

In the meantime, let’s enjoy the magic show,

Juan Lopez-Valcarcel

PS: This was a light-hearted view on AI. For an in-depth look at AI technology progress and its future, I highly recommend the always outstanding annual "State of AI report” by Nathan Benaich.

We are a month away from the U.S. presidential election. Regardless of your political preferences, it’s always fascinating to follow the prediction models on who will move into the West Wing next.

One of the leading figures in political forecasting is Nate Silver, the poker player turned election statistician. He gained prominence during the 2008 election cycle—around the same time "Moneyball" was bringing statistical thinking to the world of sports.

Nate Silver’s methodology got me thinking: Are we able to apply the same probabilistic thinking to PE value creation?

The Signal and the Noise

In his first book “The Signal and the Noise”, Nate offers a compelling guide on how to combine historical and real-time data to predict outcomes in fields as diverse as elections, sports, climate change, and financial markets.

His forecasts don’t offer certainty and are not always “right”. Instead, they provide probabilities — an important distinction that echoes through many areas of life. Silver’s approach reminds us that making predictions is never as simple as we’d like it to be. It also explains how thinking in probabilities, rather than absolute outcomes, can often lead to better decision-making, especially in unpredictable environments.

Living with Uncertainty

One of the biggest challenges to adopting probabilistic thinking is our own psychology. Uncertainty triggers stress. We become hyper-alert, as our brains scramble to assess potential threats and decide between "fight or flight." Over time, this uncertainty morphs into anxiety, leading to erratic, often irrational, decision-making.

Humans crave certainty. Whether it's in our personal lives or in the workplace, we feel more comfortable when we can lock in defined outcomes.

For many professions—scientists, market researchers, and doctors, to name a few—working in probabilities is standard practice. However, in the world of business, especially when it comes to leadership, certainty often reigns supreme.

We prefer leaders—whether in business or politics—who exude conviction, even if they might be wrong. Doubt or indecision is viewed as a weakness.

The Comfort Blanket of Managing with Certainty

In the early stages of a PE deal, probabilistic thinking is very much in play.

Valuation models consider multiple scenarios. Lenders assess the probability of default. Due diligence teams aim to verify the likelihood of various financial outcomes by assessing commercial, operational, and talent strengths.

However, once the deal is done and the value creation plan is underway, this probabilistic thinking often gets lost.

As plans are cascaded down to management and staff, everything becomes more precise and concrete. An initiative needs certainty in timelines and impact. A budget needs certainty in costs. Planning becomes mechanical and communications to staff become hard coded rather than expressed in probabilities.

The comfort of hard targets replaces the nuanced thinking of scenario planning.

While it reduces anxiety in the short term, this deterministic approach often leads to headaches when plans don’t unfold as expected, and management is left scrambling to explain why.

Thinking in Probabilities for Better Value Creation

From my experience driving value creation initiatives, embracing probabilistic forecasting can significantly improve outcomes.

Some teams naturally will already think in probabilities: Sales will look at pipeline revenue forecasting as a probabilistic game, Operations will run statistical analysis on workflows and KPIs to identify improvements, HR might be thinking about the odds that a new hire will fit into the company and hedge the outcome by putting forward a probation period, etc.

However, other teams will need more coaching to embrace this mindset. Here are a few examples of how probabilistic thinking can be applied in various functions:

1. Project Management: Timelines are often pre-set and mandated in an arbitrary way, but critical path identification and tools like PERT can offer more realistic ranges. I’ve often seen CTOs and CDOs set overly optimistic hard dates for complex migrations to “give our PE owners confidence”, only to see that credibility blow up when the project inevitably runs over.

2. R&D and Innovation: Experimentation is inherently uncertain, yet companies often expect breakthroughs on a tight schedule. In VC environments, the "fail fast" and “spray and pray” mindset allows for probabilistic thinking, but even in private equity it is possible to set expectations that not every initiative will succeed as planned and should be seen as a learning experience.

3. Pricing and Packaging Strategy: Assuming that customers will accept higher prices or that competitors won’t react is a recipe for disappointment. Running war games or role-playing exercises can test assumptions and provide a clearer understanding of the range of possible outcomes.

4. Exit Readiness: Preparing for an exit means thinking creatively about who might acquire your company and what their needs are. The range of assumptions on how to get the best "exit multiple" needs to be revisited and discussed rather than taken for granted.

So, the next time you’re making a decision, whether in business or as a political pollster, try to embrace the uncertainty.

Instead of pretending we have all the answers, let’s ask ourselves:

What if this goes well?

And what if it doesn’t?

Are you feeling lucky?

PS: I highly recommend Nate’s “Silver Bulletin” to follow the US Presidential election

1) when the initiative lives on a PowerPoint or Excel before execution

2) when the initiative has been completed and everyone talks about it retrospectively, inevitably embellishing the story as if giving a TED talk.

In between these two points of start and finish, lies the messy reality of life, which can derail even the most well-intentioned teams.

The Truman Show

While any initiative might look like it is going well on the surface, like a Truman Show on TV, the reality of what is actually going on is often much more real and human.

Over the years, I've encountered multiple variations of this scenario when assessing value creation initiatives with working teams and stakeholders.

Several factors often come into play:

1. Theory vs. Reality: While the business case creation process is necessary, it often paints an unrealistic picture of deadlines, resources, challenges, and lessons that will be learned along the way. Most companies operate their finance departments with waterfall sign-offs, while delivery teams function in some flavor of agile. This disconnect can lead to misaligned expectations.

2. Who is in charge?: Often the people executing are not the ones who came up with the plan in the first place, or there might be team members joining half-way. While fresh perspectives can be valuable, it disrupts momentum and takes initiatives in unexpected directions.

3. Shiny object syndrome: Competing priorities will take precedence, drawing resources and attention away from ongoing initiatives. This will lead to delays, reduced effectiveness, or leaving half-baked initiatives as done.

Given some of these real life challenges, it's truly a small miracle when initiatives are completed on time, on budget, and aligned with the same ROI assumptions under which they were launched.

Breaking through the dome

Just as Truman Burbank in "The Truman Show" eventually realises his entire world is a fabricated set, it is important for any value creation team leads to always see (and share!) the real picture beyond their carefully constructed plans.

This moment of clarity can be both unsettling and liberating. Once everyone moves away from the ideal picture of what was in the original business case excel and talks about what is actually going on, the truly valuable conversations can happen to:

1. Realign efforts with the most critical value drivers

2. Identify and eliminate non-essential elements that may have crept into the scope

3. Leverage lessons learned from challenges encountered to improve future planning

4. Adapt strategies and tactics to get the project back on track

5. Celebrate incremental wins and progress despite challenges, maintaining team morale and momentum

Remember, the goal of value creation in private equity isn't to maintain a perfect, controlled environment like Christof's elaborate set. Instead, it's about navigating the real, messy world outside the dome to achieve meaningful improvements that enhance the portfolio company's value.

By remaining adaptable, teams can overcome the inevitable challenges and still deliver substantial value.

When faced with the chaotic realities of value creation execution, channel your inner Truman. Don't be afraid to question your surroundings, challenge the status quo, and forge ahead into uncharted waters.

Let's embrace the mess and create value,

Juan Lopez-Valcarcel

The Illusion of Progress

Many companies pride themselves on this bias for action, quickly rattling a list of 30 initiatives they are working on and talking about their entrepreneurial culture of "getting things done." However, this frenetic activity often masks a big problem - you might be moving faster but in the wrong direction.

I have often fallen into this trap. I once worked for a large company where I was asked to rebuild the technology function to deliver code faster. A few weeks into setting up the new team and changing the ways of working, one of my best team leads pulled me aside and said: "Juan, I have good news - we are now able to ship code faster than ever before; I also have bad news: we are achieving mediocrity at the speed of light".

What he meant was that what we were building and shipping from the Tech function made no sense, these were terrible products with poor reviews in a highly competitive market.

The project charter was about speed, the real issue that we actually needed to solve for as a company was the product strategy. So we went back to the drawing board and fixed that first.

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Getting Lost at Sea

Another example is from many years ago, when I spent a summer working with an American Cruise Ships Line on the expansion of their European Operations. Yes, I know this sounds like a tough project and you are getting images of cocktails by the pool, but I was looking at spreadsheets all day in an office without windows, I promise.

The initial project charter was to optimise the ship routes through European cities to maximise the number of cabins sold and pricing. Sounds straightforward, right? Well, the real issue, once we did a proper diagnosis, was that mixing nationalities onboard without care and consideration was a recipe for poor experiences and terrible reviews. The real issue was: what is the maximum number of loud and large Italian families you can put on the same boat for a week with German couples looking for some quiet time without getting 1 star reviews on TripAdvisor.

The project charter was about operational efficiency, the real issue was about the customer experience. So we started looking at the right mix of nationalities that would make the experience more pleasant, with family-oriented ships having different schedules than party ships.

Why does this keep happening?

We often think of companies with a rational mindset. We image a factory floor or office space. We think of inputs, processes, and outputs. We talk about value creation "levers". The reality is often far messier.

In the fog of war, of the daily hustle of a company, it is easy to forget what is truly important. It is also really hard to get to the bottom of the root causes of what is happening.

There is no easy way to fix this, but avoiding jumping into conclusions and doing a proper diagnosis upfront before jumping into action will help.

Do take the time to:

1. Document a thorough diagnosis of organisational challenges and opportunities

2. Rank the "problems to be solved" by impact and solution feasibility

3. Check with the full team and make sure everyone is aligned

4. Be realistic about bandwidth - most companies can effectively tackle up to 5 major initiatives simultaneously

5. Solve real problems sequentially, moving to the next once you've addressed the current priority

Let's get ready to move fast – but in the right direction,

Juan Lopez-Valcarcel

In my last posts, I wrote about the $3.2 trillion Private Equity traffic jam and the 5 types of people you meet in a a typical PE deal.

It is now clear that the longer holding periods due to higher interest rates are putting enormous pressure on portfolio companies ahead of what will likely be a hyper-competitive exit environment.

What happens when you are 3-5 years into an investment and the world looks very different than it did on day one with no exit in sight? Maybe you've hit some unexpected headwinds or uncovered new growth opportunities. Whatever the reason, there comes a point in most PE deals where you need to ask: is it time to see the doctor?

There are telltale signs that it might be time to refresh your value creation plan, particularly for companies that should be successful but struggle to execute. You might recognise some of these symptoms:

• Lack of clarity in priorities and incoherent decision-making

• Consistently missing budget or falling behind plan

• Initiatives not delivering the expected ROI or losing steam

• Significant leadership turnover or constant changes to the org structure

• Primary value creation levers have played out, and you need to find new ones

If you have any (or most!) of these symptoms, it's time to review your value creation plan.

While it will be very tempting to start that review by looking at changes in market dynamics, pricing, competitors, and other external factors, it is far more insightful to start the analysis looking at the “health” inside the company.

I recommend a "check-up" diagnosis to review execution to date. Do this jointly as a team, to understand that company “health” and ability to delivery on the current value creation plan, or future value creation plan.. or frankly any plan.

Here is a simple list of 5 questions that I like to use as starting point:

1. Do we have a clear strategy with hard choices? Specifically, is the strategy explicit about what the company WILL and WILL NOT pursue? Bonus points if you can provide examples of initiatives that were shut down because they didn't fit the strategy.

2. Do we have a shared understanding of the business model and unit economics? Specifically, what percentage of the direct reports to the executive team understand profitability at the product level and the unit economics behind that profitability so that they can make informed decisions? Bonus points if the whole executive team understands this.

3. Do we have a budget that fully reflects the priorities we often talk about as a team? In other words, are we putting our budget where our mouth is? Bonus points if the money and headcount assigned to priorities are higher than for business as usual.

4. Do we know who is in charge of execution for each priority initiative? For starters, check that you have the two key names for each: who is accountable (owns the ultimate decision) and who is responsible (does the actual work).

5. Do we listen enough? How often does the executive team listen to help desk calls or read customer feedback? A culture that welcomes internal and external input will adapt faster.

This checklist is a good place to start. It will give you a quick diagnosis.

If you successfully pass the "check-up” below, it is then easier to change the value creation plan with the confidence of a healthy organisation that will adapt and deliver it.

What would be on your checklist to assess your company’s health?

I would love to hear your perspective,

Juan Lopez-Valcarcel

- Homage to the opening monologue in the Trainspotting movie.

Thank you

Thank you all for your great feedback and lively discussion about my last newsletter on the $3.2 trillion traffic jam in private equity. And welcome to the new subscribers to this value creation plan newsletter and community.

In the last post, we talked about what portfolio companies can do to get out of the current exit traffic jam successfully. I thought it would be important, before we move on to discuss meaty topics like how to refresh a value creation plan, to highlight a key point about the different people and personalities in private equity deals.

It’s the people, stupid

No matter how good your strategy and value creation plan is, it ultimately boils down to people (and behavioural psychology) to make things happen at the portolio company level.

If you've worked on a private equity deal, you know that from the early days of sourcing and diligence, through the intensive post-acquisition value creation phase, to the eventual exit, you will interact with a colorful cast of talented characters, each with their own unique motivations, personalities and quirks.

In this post, we'll take a tongue-in-cheek look at the 5 types of people you're most likely to meet in a PE deal, so you know what to expect and how to make the most of working with them:

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1. The Deal Partner: The Thrill of the Deal

Deal partners are the adrenaline junkies of the PE world. They live for the rush of sourcing and closing great deals, and they're always on the lookout for the next big opportunity. They are often former investment bankers and highly competitive.

Deal partners get excited by proprietary deal flow and the chance to uncover hidden gems. They're worried about missing out on the next big thing or getting outbid by a competitor. They care most about the IRR and the success they can generate for their firm and personal reputations.

Key personality trait: impatience

Typical hobby: kitesurfing

Most frequently asked question: "Can we do this yesterday?"

2. The Operating Partner: The Maestro of Value Creation

Operating partners are the unsung heroes within PE firms. They're the ones who roll up their sleeves and try to get into the nitty-gritty of the business, working closely with deal partners pre-deal and with management post-deal to drive the value creation plan.

Operating partners are often former management consultants or C-suite execs and get excited by the opportunity to transform a business and unlock its full potential. They worry about the management team's ability to execute, the processes and tools that they use, and the potential for unforeseen hiccups. They dislike surprises and care about a good dashboard to track the impact of current initiatives on the EBITDA growth that needs to get delivered.

Key personality trait: analytical mindset

Typical hobby: marathon running

Most frequently asked question: "Can we get more margin improvement out of this workstream?"

3. The External Advisors: The Specialists

External advisors are the hired guns of the PE world: lawyers, due diligence consultants, accountants and other subject matter experts that are brought in to provide deep expertise on specific areas of the business, whether it's sales, technology or procurement. They're the ones who move the deal through key stage gates and help answer questions like, "How does this company stack up to industry benchmarks?" and "What best practices can we implement here?".

Advisors are systematic in their approach and try to be as fact-based as possible. They need to move at the pace of the deal and often rely on their armies of junior staff to provide that extra bandwidth for due diligence, deal completion and value creation. They worry about scope creep, project extensions and sustaining their reputation in the PE ecosystem. They might not worry as much about whether the deal is ultimately successful or the recommendations implementable as they will have moved on to another project.

Key personality trait: storytelling

Typical hobby: golf

Most frequently asked question: "Have you thought about doing things my way?"

4. The Executive Team: The Ringmasters

The executive team of the portfolio company is the linchpin of any successful PE deal. They're the ones who have to balance the competing demands of the deal team, the operating partners, the consultants, and their own employees, all while trying to hit ever-more-ambitious targets.

Executives get excited by the opportunity to take their company to the next level and achieve a successful exit. They worry about managing the intense pressures and expectations of PE ownership while still maintaining the trust and engagement of their teams.

PE-experienced execs are highly coveted for their ability to hit the ground running. They know how to speak the language of value creation and can nimbly navigate the politics of their new overlords. But even the most seasoned exec can be thrown off balance by the sheer pace and intensity of a PE-backed transformation. The key is to push back when needed, ask for and provide realistic budgets and timelines, and never lose sight of the long-term health of the business.

Key personality trait: sleep deprivation

Typical hobby: cycling

Most frequently asked question: "Who is going to break the news to the PE guys?"

5. The Employees: The Jugglers

Last but not least, the employees of the portfolio company are the ones who ultimately determine the success or failure of the PE investment. They have to actually implement all the strategic and operational changes dreamed up by the higher-ups, often with little say in the matter.

Employees are also the ones on the front lines, dealing with customers, production issues, and all the day-to-day challenges of the business. They might get excited by the opportunity for growth and development under new ownership… but they are not as well compensated and also have to worry about job security and the potential for increased workloads and stress. They care most about understanding the new vision for the company they have worked so long for, and feeling valued for their contributions.

Key personality trait: equal measures of excitement and anxiety

Typical hobby: the pub after work

Most frequently asked question: "Can you believe the stuff they are making us do?"

A chaotic family

So there you have it - the 5 types of people you're most likely to meet in a PE deal. Each with their own unique role to play and different personality traits.

The key is to put yourself in their shoes to understand their different perspectives on what needs to get done during a PE investment.

The fund and advisor teams will often view the deal through the lens of spreadsheets and powerpoint presentations, focusing on financial metrics and strategic objectives. In contrast, the executive team and staff will often experience the reality of day-to-day challenges and triumphs of the organisation, pouring their blood, sweat, and tears into making it successful.

Motivations will vary among individuals: some will be driven by the financial rewards, others by the satisfaction of a job well done, and many others frankly will be very indifferent. Like any family reunion, it might be chaotic, but it can also be a memorable experience.

If you can get the 5 types of people to work as a team, you might have a shot at being one of the lucky few portfolio companies who makes it through the current traffic jam and comes out the other side with a successful exit.

Do you recognise these personalities from your own experience? Who else would you add to the cast of characters?

Eager to hear your perspective,

Juan Lopez-Valcarcel

Image credits: Trainspotting, the classic 1996 movie (Channel 4 films)

The perfect storm

Higher interest rates, cost inflation, and geopolitical tensions have created a significant disconnect between company valuations and their actual tradability. Buyout deal activity has hit a 6-year low, down 32% from its peak. Half of the companies waiting to be sold are now at least 4 years into the investment cycle, a stark contrast to the golden days when PE funds operated on a 3-year horizon.

This decline in dealmaking activity is most noticeable in UK&I, DACH and Nordics, with 40-50% drops in volume vs 2021. On a more positive note, activity in Spain, Italy and France has only seen a 10% slowdown, possibly due to more attractive lower entry multiples.

The La-La Land traffic jam

For the companies that actually traded, exit multiples in 2023 were down 30% from the peak. The market is hesitant to pay top valuations, even for superior quality assets. According to MSCI, 70% of companies held for four years or longer are below a multiple on invested capital (MOIC) of 2.5x, with 36% of companies acquired 6 years ago or more now just breaking even.

As the exit environment remains sluggish, many PE Funds are still hoarding assets in funds nearing the end of their term life. Pitchbook estimates that 2017 vintage funds are approaching their maturity wall with up to 26% of their invested capital locked in assets, instead of being distributed to investors.

Furthermore, many buyouts are financed with term loans that reach maturity 6-7 years after the deal closes, meaning we are about to see an overhang of debt maturing and needing to be repriced for transactions made in 2016-18.

Don't panic!

Despite the headwinds and bleak outlook, there are reasons to be optimistic about PE as an asset class:

• PE continues to outperform public markets over the long run. The 10-year IRR for buyouts in the US and Europe still exceeds the S&P500 and MSCI Europe indexes

• The economy has so far avoided recession and inflation has moderated, meaning interest rate cuts are on the horizon, even if there is disagreement on when that will actually start to happen

• There is $2.6 trillion in PE dry powder ready to be deployed once the traffic jam is cleared

GPs are buying time...

Structural tailwinds that propelled strong buyout fund performance over the past decade, particularly cheap leverage and multiple expansion, are unlikely to be as favourable going forward.

Getting liquidity back into the system will not happen over time. When the traffic starts to move again, it will be a multi-year process to work through the backlog of company sales. In the meantime, funds are using secondary sales, NAV loans (backed by their portfolios as a whole), or using continuation funds (moving assets from older to new funds) to provide partial exits and buy some time.

... but, at portfolio level, you can't just wait for the traffic jam to clear

Portfolio companies sitting in the traffic jam can't just let their assets languish. The urgency to sell this backlog of assets will become more pressing, and with it, the pressure to lower prices to complete transactions will increase.

Portfolio companies will need to show improved KPIs and position themselves in the best light in the crucial years before exit if they want to see good returns for all their hard work so far.

The urgency of now

If you thrive under pressure, now is a good time to be part of this industry. Lots of frantic activity is starting to happen across PE-backed companies in this environment, including:

• Refreshing (or completely rewriting) the original value creation plan, as it has gone stale

• Replacing C-suite talent halfway through the investment cycle, like a football team looking for fresh legs from the bench

• Getting back to the basics of cashflow preservation, including renegotiating supplier terms

• Getting the house in order now rather than wait for a buyer: lengthy ERP/CRM upgrades, complex post-merger integrations and messy customer data consolidations are back on the agenda

The above, plus a sprinkle of AI magic dust, will form the basis of a clear exit story backed with solid KPIs that you can show to future buyers.

Let's get ready to get out of the traffic jam,

Juan Lopez-Valcarcel

Join my ValueCreationPlan.com newsletter, where I cover best practices in revenue growth, margin expansion and operational improvements. Sign up to stay informed and join our growing community.

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Sources for data above are highly recommended reads:

Global view from Bain: https://www.bain.com/insights/topics/global-private-equity-report/

US view from Pitchbook: https://pitchbook.com/news/reports/q2-2024-quantitative-perspectives-under-pressure

European view from Gain.pro: https://www.gain.pro/investor-reports/the-state-of-european-private-equity-report

Image credit: Lionsgate, the La-La Land movie opening scene (pun intended)

But what does "digital transformation" really mean? One way of demystifying the term is to acknowledge that it all really boils down to the ability to run a business more effectively, using technology to unlock new revenue opportunities and/or reduce costs.

"Digital Transformation is not necessarily about digital technology, but about the fact that technology, which is digital, allows people to solve their traditional problems." - the brilliantly simple definition of Digital Transformation in Wikipedia

One approach I use with clients is to walk them through a list of their key company departments and explore how each of them can be improved through the use of technology.

Using this approach, we are able to move away from the rather abstract “digital transformation” term and anchor the discussion on business improvements using technology to areas such as Sales & Marketing, Product, Operations & Technology and Organisational Design:

Sales & Marketing:

Why it matters: Digital transformation unlocks highly effective ways of finding customers and engaging with them across channels. Success is often measured by improvements in Customer Acquisition Costs (CAC) and their Long Term Value (LTV)

Where to start:

• Improving the cost of customer acquisition by using digital channels and best practices in SEM/SEO, newsletters, social media and data profiling

• Improving customer service and responding more rapidly to Ratings/NPS feedback in ways that increase overall satisfaction and inform product development

• Improving the way the Sales teams operate through more actionable metrics in CRM systems and increased transparency of digital pipeline dashboards

Product:

Why it matters: Digital transformation can unlock a new portfolio of products and services. Success is often measured by the % of revenues that come from new vs. legacy products.

Where to start:

• Improving the options for customers to buy your products, particularly through the use of multichannel e-commerce

• Improving the overall end to end user experience of engaging with your company and not just the purchase of individual products and services

• Improving the speed with which products are updated and improved, based on constant feedback, testing and more agile ways of working

Operations & Technology

Why it matters: Digital transformation unlocks cost savings, better analytics and more transparent ways of working by modernising the technology stack.

Where to start:

• Improving the transparency of internal business intelligence and production tools, with a focus on a) making key business performance metrics and reporting instantly updated and accessible to staff; b) making production tools easy to use for rapid prototyping

• Improving the flexibility and cost effectiveness of the back-end stack through open source tools, migration to cloud modular architectures

• Improving the capture and analysis of key data as a foundation for Data Science that helps your business make better business decisions that based on the capture and analysis of data to test hypothesis rather than relying solely on intuition

Organisational Design

Why it matters: For any transformation (not just digital) to succeed over the long term it needs an organisational design that creates the right focus, resource alignment and speed of decision making.

Where to start:

• Improving the overall organisation design to ensure full alignment with priorities and decision making. In simpler words: put your budget money and decision making authority where your PR mouth is

• Improving the approach to sensible risk taking by behaving more like a VC and less like a stale annual budget approval process when discussing innovation initiatives

• Improving training and recruiting to re-energise the company culture and embrace values such as speed, transparency and shared learning

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The approach above often helps turn the rather abstract “digital transformation” discussion into a practical and actionable plan on how to improve your business. The suggested starting points are just representative examples, as the needs of each business and their starting point will be different.

Is there a silver bullet for "digital transformation"? I don’t think so. I believe true change requires a portfolio of of interlocking initiatives that build on each other. And, by the way, you are never "done" improving your company as you can always do better. It is an iterative improvement process.

Hope you find this approach useful to have have a more practical and less ethereal discussion the next time your team mentions "digital transformation”. As always, would love to hear your thoughts and experiences in dealing with this topic!

As I drove back home, I wondered: What items should be on a checklist to help leaders understand the health of their companies?

Often, we come across companies that should be very successful but struggle to execute. Common symptoms include: Lack of clarity in priorities, incoherent decision-making, wasted resources, and people churn.

So, let’s imagine there was an “annual check-up” for businesses. A quick way of checking if the company has the focus, talent, and speed to deliver whilst identifying areas that require fixing.

Maybe the checklist of questions would look something like this:

1- A CLEAR STRATEGY WITH HARD CHOICES

A strategy is – and should be – about making clear choices on how to use your resources. However, most companies think of strategy as an all-encompassing motto; an umbrella for everything they are currently doing; a marketing exercise with great intentions but poor value.

Checklist question: Is your strategy explicit on what the company WILL and WILL NOT pursue? I.e. Can you provide examples of initiatives that were shut down because they didn’t fit the strategy?

2- A SHARED UNDERSTANDING OF BUSINESS MODEL AND UNIT ECONOMICS

Most companies accumulate products and initiatives over the years and lose track of what pays the bills. Financial and management reporting should provide this clarity but often falls short. For example, profitability reporting is usually set up to follow country-level P&Ls or business unit P&Ls but does not provide a true understanding of product-level profitability and unit economics.

Checklist question: How many people in your company understand the profitability at the product level and the unit economics behind that profitability?

3- A CLEAR LINK BETWEEN PRIORITIES AND BUDGET 

Talk is cheap and writing a report about the exciting new initiatives a company is doing is even cheaper. What is actually hard, though, is allocating funds to new initiatives and sticking with them. One way to ensure the company is truly taking the priorities seriously is to “follow the money” in the budget.

Checklist question: Are you putting your budget where your mouth is?

Step 1: Write down a list of what the company considers to be “high priority” initiatives. Step 2: Go through the budget and org chart meticulously and identify how much money and how many people are assigned to these initiatives as a % of the overall budget and staff size.

4- A SIMPLE WAY OF KNOWING WHO IS IN CHARGE OF EXECUTION

This is probably the hardest thing to get right. You have to consider your ability to attract and retain the right talent, to make agile decisions with the right information, and the need to balance team autonomy with “command and control” structures. There are, however, ways of knowing whether you are on track in this area or need to dramatically improve.

Checklist question: If you go through your list of priorities for the year, does your team all understand and agree on the 2 key names against each initiative? I.e. Who is accountable (the one who “owns” the ultimate decision) and who is responsible (the one who “does” the actual work)?

5- A FEEDBACK LOOP

Companies need to adapt to thrive. A culture that welcomes internal and external feedback will always adapt faster.

Checklist question: How often do your executives listen in to help desk calls or read customer feedback (NPS verbatim comments are great for this)?

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These are just some thoughts on the basics of business efficiency. Obviously, there are other considerations like a company’s market positioning, financials, and approach to talent.

Would love to hear your perspective. What would be on your checklist when you “kick the tyres” on the health of your organisation?