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Agile in Private Equity

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Agile in Private Equity

If you think that Agile can't belong in a private equity firm, this developer has found a way to make it work.

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It's been almost a year since I joined Mekong Capital. Six months as a advisor and now six months more as a CTO-in-Residence, which in Mekong Capital we call it Value Optimization Board (VOB) member. I am  the technology guy: I love Java, startups, coding, building product, and building great teams. This decision of me joining a private equity (PE) dazzled many of my pals; some think that I am going to retire, others tghink I am downgrading myself from high-end technologies to basic old-fashioned systems. Allow me to explain the context as to why a PE firm and an Agile software engineer like myself might seem an oxymoron.

PE firms are typically known for robust oversight of their portfolio companies, emphasizing metrics-driven decision-making, high margins, and EBITDA. PE firms rely on robust planning processes, sometimes even at the expense of growth, because of the significant leverage and needed predictability. Management teams enter every year with firm plans, the results of which will determine not only their compensation but also whether a bank will be breathing down the company’s neck or not.

Traditionally, waterfall development processes have served the PE community well, as a lot of time is spent in annual planning processes. It isn’t uncommon for Agile software engineers to spend months planning, designing, and estimating future product releases that are quarters away, even though many of those features will never be delivered and requirements will certainly change during the intervening months. This common, fallible practice creates waste in the ecosystem. Agile development strives to delay major investments until they are necessary and eliminates waste in doing so.

So, my existence in a PE firm is definitely not similar to any of my personifications. The challenge is not only the PE firm itself but the investees, too.

  1. Typically the PE investees are laggards in term of technology, Lean, design thinking, and Agile in general.
  2. Sometimes, they feel proud as they just have ERP and some reports (which they like to call BI).
  3. They call themselves data-driven when what they are actually report-driven. Meaning they get a report and make some decisions; there is no experimentation, pivot and preservation.

The way we engineers used to work in product or startup companies very much follows design thinking, Lean startup and Agile. The following figure shows it very well, how these things work together well. I implemented these methodologies with amazing colleagues of mine in two companies in Vietnam called VietnamWorks and iCare Benefits.

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It just does not work like this in PE and its typical investees. But I still joined a PE firm. You might be thinking why the hell did you do it? I did not join a typical PE firm (despite it has some common grounds with typical firms), I joined Mekong Capital which is re-inventing private equity. I am very keen on their Vision Driven Investing framework. Mekong Capital is kind of doing almost similar to what Bain Capital is doing (for instance read this article from Bain which talks about Agile Innovation shows how much this firm is trying to transform from typical PE to a new style of PE firm) which is value creation. Mekong Capital creates value through its Vision Driven Investing framework. Of course not perfect and we've got room to improve, as not all of us at Mekong Capital are adding value.

Mekong Capital is a pioneer in applying Vision Driven Investing to produce consistently high investment returns. Our post-investment philosophy is based on the proposition that we partner with our investee companies to align around and achieve a bigger future than what is predictable without an investment by Mekong Capital. We add value insofar as we provide the leadership to commit to, empower, and achieve a bigger future for our investee companies than what a passive investor would provide. This is the framework version 3.0:

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Thanks to my colleagues being open.

  1. The first change we did was to rename "ERP and IT Processes" into "Digital Transformation."
  2. Also, we used to measure our progress in investees in binary way but now we use a very basic maturity model measurements from 0 (meaning non-existent) to 5 (meaning world-class)
  3. Soon we are going to have some discussions on how to bring in our learnings from OKR on Google Ventures and Google Launchpad into the core framework of Vision Driven Investing

I've also started doing a couple of the following practices:

  1. Having a Slack among all investees (managers, engineers, and digital marketing folks) to enable direct communication and serendipity
  2. I also send my daily updates to all team members (it is only me now)
  3. I also have like sprint planning every quarter (unlike my other startups which are every 5 days)
  4. I also have a Scrum-like retrospective which follows the below template that we call in Mekong Capital 4W (what worked, what did not work, what's missing and what's next)

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I still think that there is some hope in bringing Agile into a PE firm, not a typical one but Mekong Capital, that has great leadership and Vision Driven Investing framework. Also as an engineer I love learning, in Mekong Capital I've been exposed and work closely with these industries and companies on daily basis (so it is not that shallow well except for few, I get to learn very deep in these companies from their co-founders and management team):

  1. Vuanem. The company provides a wide range of bedding products from many brands, in order to have the perfect sleep solution for each customer. I am helping on ERP, eCommerce and Digital Marketing.
  2. Yola provides junior English training (9-15 years), foundation English training (16 years+) and academic test preparation. I am helping on Learning Management System, Finance, School Information System, CRM and Digital Marketing.
  3. Nhat Tin is a postal service provider. I am helping on website and basic features.
  4. Precita (BTJ) is one of the oldest companies in gold & gem stone retail in Vietnam. I am helping with ERP, POS, eCommerce and Digital Marketing.
  5. BiaCraft and Quan Ut Ut are great restaurants which I helped on POS and ERP. Also I am working with their parents company called RedWok which owns brands like Wrap & Roll.
  6. F88. The company pioneered in professionalizing pawn services in Vietnam, bringing fast, reliable and professional financial solution to consumers, and disrupting the traditional pawn market. I am helping them on Digital Marketing and implementing Agile.
  7. ABA. The company is now rapidly evolving towards providing an integrated cold chain logistics service to the Vietnam market. I am working with them on Transportation Management Systems and ERP.

I do miss working with engineers, focusing on a product, designing objectives, defining KPIs, working on strategies and execution, product roadmaps and weekly releases. However, I am bringing these concepts into our investees now (some worked and others not yet) and it seems as an engineer we can help to transform many companies, Mekong Capital is giving me the chance to learn retail, distribution and education which is an extraordinary chance. I still believe we can implement Agile in a PE firm like Mekong Capital and in its some of investees which are open to embrace it.

I would love to hear and talk to other engineers that joined a PE and implemented or implementing agile; please drop a comment or message so we can share our learnings.


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Topics:
adopting agile ,agile business ,agile implementation ,private equity ,private equity investment ,operational value stream ,agile

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