The Most Expensive Mistake in Private Equity: Treating Digitalization Like IT
Private Equity doesn’t lose value because technology is missing — it loses value because digitalization is still handled like an IT upgrade instead of a leadership discipline. And while this misconception rarely triggers alarms in the early phases of an investment, it quietly erodes returns across the entire holding period. The gap between “talking about digitalization” and “leading digitalization” is becoming one of the most expensive blind spots in the industry.
The Biggest Blind Spot in Private Equity: Technology Is Treated as a Cost, Not a Strategy
Everyone in private equity talks about digitalization.
Everyone calls it essential.
Everyone adds it to the value-creation plan.
But when you look closely, technology is still often reduced to a checklist of projects: an ERP overhaul, a dashboard rollout, a handful of automation initiatives — perhaps even an AI experiment to satisfy the zeitgeist.
The uncomfortable truth is this: companies rarely fall behind because they lack technology. They fall behind because leadership still treats digitalization as an IT project rather than a fundamental transformation of how the organization operates, decides and competes. As long as digitalization is placed inside the IT silo, the rest of the business will always move slower than the market demands.
At HAGER, digitalization is not an accessory topic. It is embedded in how we build leadership, how we evaluate organizations and how we design transformation capacity. Decades of work with investors, founders and technology-driven companies have shown us that digital transformation succeeds or fails based on leadership — not tools.n.
Technology Doesn’t Create Value — Leadership Does
After more than 30 years advising investors and portfolio leadership teams, we’ve witnessed the full spectrum of digitalization failures: transformation programs that stall before implementation, AI pilots that never make it into daily operations because the underlying data is unreliable, automation roadmaps blocked not by technology but by culture.
From our work across technology, software, IT and digital transformation environments, one pattern is unmistakably clear: technology is almost never the bottleneck. The organization behind the technology is.
Digitalization fails when decision-making is slow, data discipline inconsistent, accountability fragmented, or when leaders underestimate how much organizational clarity and cultural readiness true transformation requires. AI accelerates insight. Automation accelerates execution. But leadership determines whether the organization can handle acceleration at all.
The Harsh Reality: Digital Immaturity Is a Valuation Risk
Digital weakness is often framed as an operational problem. In reality, it is a valuation problem. A company without integrated systems, a unified data architecture, automation capability, scalable infrastructure or AI-readiness is not simply inefficient — it is structurally slow and strategically constrained.
In today’s market, operational excellence has become alpha. Ignoring digital maturity is no longer conservative — it is negligent. Investors who treat digitalization as a side note inherit businesses that cannot scale at the speed their strategy requires.
Digital Due Diligence Is Broken — and Must Evolve
Traditional digital due diligence tends to focus on the wrong questions: What systems are installed? How modern is the tech stack? Which tools are outdated? These questions describe the present but say nothing about the organization’s ability to transform.
The real questions are different:
Can the leadership team make technology-driven decisions?
Does the culture support transparency and automation?
Are data treated as strategic assets rather than operational by-products?
Can the company integrate AI responsibly and effectively?
And most crucially — does the organization have the capacity to build digital momentum?
A tech stack is not a strategy. A CIO is not a transformation. A dashboard is not alignment. Unless digital due diligence evolves from IT inventory to organizational capability assessment, investors will continue buying software without buying scalability.
Transformation Begins Where Power Shifts
Organizations do not resist digitalization because it is complex. They resist because technology changes how power flows. Digital transparency exposes weak processes. Automation challenges legacy roles. Data-driven decisions replace political ones. AI reduces decision-making based on hierarchy rather than competence.
This is why the hardest part of digital transformation is not technical — it is political. Leaders must be willing to reshape responsibilities, redesign collaboration and realign incentives. Without this shift, even the most advanced technologies remain unrealized potential.
The Cultural Cost of Not Transforming
Every company pays a silent tax for delaying digitalization.
It manifests in manual workarounds, outdated processes, opaque reporting, slower decisions, rising costs and cultural fatigue. This tax never appears in the P&L — but it steadily erodes enterprise value.
Digitalization is not about installing tools. It is about building an organization that learns faster than it breaks — and that requires leadership far more than technology.
What the Best Investors Do Differently
The most successful investors understand that digital performance begins long before technology. It begins with leadership, structure and culture. They ask who has the capability to drive transformation. They ensure alignment across entities before they introduce new systems. They establish governance that accelerates execution.
And they build data culture — not just data platforms. They integrate AI into decision-making — not just into isolated workflows.
At HAGER, Digital & Technology is not just a sector. It is our home turf, where market understanding meets leadership expertise. We see across our client base that digital leadership consistently outperforms digital tools — in every cycle. And the strongest platforms are never defined by their software, but by the clarity of their leadership architecture.
Speed Comes From Systems. Direction Comes From Leadership
Digitalization creates speed. Leadership gives it meaning. And together, they create competitive advantage. Speed may come from systems — but direction always comes from leadership. And in this tension lies the decisive moment of value creation. As Martin Krill puts it:
“You can replace software in months. But you can’t replace the cost of weak leadership. Most ‘digital failures’ aren’t technical — they’re failures of courage, clarity and accountability.”
— Martin Krill, CEO, HAGER Executive Consulting
It’s precisely at this intersection — where systems accelerate and leadership aligns — that digitalization stops being a cost center and becomes a true value engine.
Final Insight: Technology Is Not the Differentiator – Leadership Is
In a market flooded with capital and accessible technologies, the true competitive advantage is no longer the toolset — it is the organization that knows how to use it.
Because in private equity, as in leadership:
Buying technology is easy.
Implementing it is hard.
Scaling with it is transformational.
And the firms that understand this won’t just outperform the market —
they will define the next one.
