2021 in review: The common findings from Operational Strategy Reviews

Holland Mountain’s Jeremy Hocter reflects on the key findings and recommendations from Operational Reviews for Private Capital firms over the past year.

Private Capital Operational Strategy experts, Holland Mountain, have completed Operational Reviews for over 40 of the leading Private Capital firms globally. Operational Reviews help firms to evolve processes and technology in line with their growth, to realise the full benefits from investments in technology, and to keep up with the rapid pace of digital & data transformation among their peer group.

The most common reasons firms engaged Holland Mountain for Operational Reviews this year were:

• They had a variety of operational systems in place across different teams, with no clear picture of how it all fits together
• Operations leaders were hearing about AI & Machine Learning in news and at conferences, but weren’t sure where to start or what was achievable for their organisation
• Teams were working in siloes on new technology & reporting projects, without any overarching strategy.

During Operational Reviews, our team provides a series of detailed findings and recommendations, drawn together in a Target Operating Model and Operational Roadmap that shows how the firm can most efficiently achieve their goals over the next 3 -5 years. We typically focus on four key themes: people, process, technology and data. Below, we explore the key common findings and recommendations  across each theme.

People

It won’t come as a surprise to learn that many of the firms we’ve worked with over the past twelve months are keenly interested in unlocking benefits from enhanced technology and data solutions. However, without the right people in place, in the right roles, these digital initiatives will fail.

Getting the right combination of ownership and advocacy can be hard. It’s important that systems have a dedicated owner to ensure the software is appropriately maintained and can evolve to meet ongoing business needs. Once an implementation has been completed, it’s vital that the firm has the right person identified to manage the system and realise the full value of the investment. Ideally this person will have experience of driving successful user adoption which is a common problem post-implementation.

It’s not just technology that requires ownership. Poor data quality leads to mistrust in perfectly good technology and processes which quickly impacts system adoption. Private Capital firms that invest in a dedicated data governor will reap the rewards of a robust data strategy. Analytics and reporting skills are also in-demand. It’s not unusual for firms to improve their reporting tools but then realise that there aren’t the necessary skills in-house to build or maintain the reports.

Process

When we map out a firm’s processes, we frequently find that whilst processes are robust, they’re performed in spreadsheets or over email. Without the proper controls in place, firms are faced with significant operational risks.

We often see inconsistent processes across different regions and teams, which makes digitalisation difficult. Firms often need help asking the right questions to challenge why processes are different, and to establish how best to simplify and standardise them as much as possible.

Firms can be limited by a lack of internal skills around process improvement. There’s often no one within the firm with the skills to look at the systems they have and identify processes that should be managed within them. When a process changes, there’s no one with the remit to look at how the operating model needs to change to meet that. As a result, people often revert back to Excel and siloes are created. The solution to these challenges is to have a cross-functional operational committee in place that can evaluate how business changes will impact the operating model, and make good decisions as a result.

The importance of creating and maintaining detailed process documentation is often overlooked, which can make training very difficult. It also creates dependencies on key individuals who know the processes inside-out. Without proper management of change procedures in place, the information is lost when these individuals leave the organisation, leading to an eventual drop-off in systems usage.

Technology

One of the most common software challenges we’ve seen this year is where technology is being used for a different purpose to the one it was designed for. An example might be where we’ve found portfolio monitoring or performance data within a CRM system. It might seem like an efficient way to keep more data in one place, but typically we find that over-engineering systems at the start makes them very difficult to maintain. This tends to result in users becoming frustrated and ultimately, they stop using the system and revert to spreadsheets instead.

Another problem we’ve seen a lot recently is where firms under-estimate the effort required on their side during an implementation, particularly around data cleansing and migration. By not adequately resourcing the project, timelines slip and the team becomes disengaged, leading to problems before the system is even launched. Some firms go ahead and launch the system with poor quality data, which leads to mistrust of the technology from the outset.

Avoiding these mistakes during a system implementation is key to a smooth transition and successful go-live. Many firms suffer from not knowing the extent of what’s possible with the technology they’ve purchased and simply aren’t aware that they could be getting more from the system.

Data

With the steady increase in technology solutions for Private Capital, most firms now have multiple siloes of unconnected data, across front, middle and back office. It’s nearly impossible to get a cohesive picture.

To solve this, some firms have tried to do point-to-point integrations between systems, which are very complex and incredibly difficult to maintain. It also means there’s limited flexibility if the firm chooses to switch to a different system in the future.

The ideal solution is a combination of data brokerage, master data management and data warehouse strategy. By consolidating data is from all systems and other sources, it becomes possible to create a single source of truth from which the firm can drive all reporting and analytics.

Learning from Operational Reviews in 2021

The past 12 months have shown a continued and determined shift towards data and digitalisation in the Private Capital industry. The pandemic had a well-documented impact. It’s often quoted that the industry’s adoption of technology dramatically accelerated during the pandemic, going through 3 to 5 years of digital transformation in 6-months. There’s also been a noticeable cultural shift. Many Private Capital leaders recognise that they are under-invested in both technology, and the people with the skills to manage it. There’s a renewed commitment towards the level of transformation required. As we head into a new year, we’re very excited to see what this momentum will drive the industry to achieve.