Jeremy Hocter shares his thoughts on how Private Capital firms can leverage the Holland Mountain Digital Maturity Scale to map their digital transformation.

Over the past 18-months, we’ve seen an increase in Private Capital firms hiring digital experts to focus on technology and data transformation. Firms are using this expertise to drive a step-change in digital capability, signalling their commitment to streamlining the firm’s operating model and providing an enhanced investor experience, as well as continuing to improve the quality and accuracy of reporting.

Fewer barriers to technology adoption

In 2022, it’s clear that the Private Capital systems landscape is bigger and better than ever. With so much choice and a constantly evolving list of solutions, firms need to have robust IT infrastructure to rapidly incorporate new tools as they become available. The shift to remote working during the Covid-19 pandemic has been a key factor in moving cloud capability forwards. In short, there are fewer barriers than ever to implementing the latest technology.

Incoming regulations around ESG are also driving changes around business intelligence and data strategy. As lead times around the provision of regulatory data become shorter, firms are under increasing pressure to improve responsiveness. This has resulted in many GPs reconsidering their reporting requirements to look at how users across the firm can gain access to real-time data and be able to report on this accurately and quickly.

Firms that are taking a fresh look at their digital strategy and operating model are advised to plan carefully to ensure success. It’s nearly impossible to implement every solution at once and the so-called ‘big bang’ approach tends not to work for Private Capital firms. Rather, it’s critical to consider phasing in changes and ensuring the firm can evolve sustainably, without overloading users. The Holland Mountain Digital Maturity Scale is a useful framework for technology and operations leaders to benchmark the current state and plan for the journey ahead.

You can’t skip the basics

The early part of the maturity scale contains foundational activities that can be built on over time. Streamlining data capture and improving data integrity will allow firms to eventually become more innovative in their approach. Whilst these essentials cannot be skipped, there are improvements that can be worked upon in parallel, depending on available resources, to help firms progress up the scale.

One area that benefits from leaders taking a long-term view of change is culture and behaviours. User adoption is key to embedding a new system effectively, but this takes time to achieve, which is another reason why ‘big bang’ change can be problematic.  Identifying business owners for each system and data set is vital, ideally with senior sponsorship. This helps shift the view that change is owned by one team and makes the transformation a firm-wide effort.

Using the Digital Maturity Scale to define an end goal

It’s also important to consider how a transformation plan can be adapted to meet the needs and goals of a specific firm. Using the Digital Maturity Scale, it’s conceivable that every firm will want to aim for ‘state of the art’. Yet, in reality the goalposts are going to keep moving as business requirements become more complex and technology capability evolves. Towards the upper end of the model sit the opportunities for firms to differentiate themselves and build on their USP. One of the current hot topics for this industry is the use of artificial intelligence (AI) and machine learning (ML) in deal sourcing. Increasing numbers of Private Capital firms are developing unique strategies to apply AI and move from proactive to predictive. Reaching this point, unlocks a radically different way of operating and thinking. The firm is no longer working through a step-by-step process to improve digital capability – at this point, digital leaders have the scope to innovate, leveraging all the available tools and people within the firm to create competitive advantage.

Where to begin: The Digital Maturity model as a tool for planning

Before embarking on change, take some time to devise a clear strategy and define the desired operating model, incorporating feedback from users and leaders across the firm. Technology change previously affected a handful of people; today, it impacts just about everyone in the firm. Involving teams and sponsors up front will help to bring them along the journey with you.

Once agreed, the firm’s digital transformation plan will form the backbone of the next few years of change, although don’t be afraid to adapt and adjust as you go along. The Digital Maturity Model can help as a guide to measuring progress and setting realistic goals at each level. Many of the firms we work with also use this to benchmark themselves against peers, which helps provide context for the proposed changes.

Jeremy Hocter

Head of Consulting

Jeremy is a leading expert in Private Capital operations, technology and data. He has 20 years’ experience advising GPs and LPs on operational strategy & best practice, alongside delivering successful change management engagements. He has a wealth of experience working with all the major industry software vendors & service providers, and a detailed understanding of the capabilities & limitations of available solutions.