Full speed ahead in PE Value Creation: Are you sure you are going in the right direction?
Value Creation Plan Newsletter #104
In the 1994 action movie "Speed," a bus must maintain a velocity above 50 mph or a bomb onboard will detonate. This high-stakes scenario mirrors a common issue in company transformations under Private Equity ownership: the relentless drive for action without having proper time to check that you are in fact going in the right direction.
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.
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:
Document a thorough diagnosis of organisational challenges and opportunities
Rank the "problems to be solved" by impact and solution feasibility
Check with the full team and make sure everyone is aligned
Be realistic about bandwidth - most companies can effectively tackle up to 5 major initiatives simultaneously
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