Curiosity, structure and change: How PE firms can begin their AI journey to gain value

AI is here to stay, and it is time to take a stand and develop strategies for handling it. For Private Equity (PE) firms, AI has the potential to revolutionize how they navigate through vast amounts of data, helping them save precious time in their daily work and giving them valuable insights. 

In the dynamic landscape of private equity, firms are under pressure to make smarter investment decisions, enhance portfolio performance and being efficient. As the industry increasingly turns to advanced technologies, AI is emerging as a key differentiator. However, despite clear benefits, many PE firms remain hesitant about adopting AI due to concerns about complexity and potential risks. Currently, only 24% of the surveyed PE firms report using AI effectively in their organization.* (*KPMG global tech report)

Casper recommends three ways in which organizations could get started:

1. Begin by using off-the-shelf solutions and standard models in your work. Be curious how you can get better at what you do, by constantly improve and adapt, to enhance your proficiency. 
2. Figure out which AI you should build yourselves to get that competitive edge. For example, an AI that is trained on all your investments, or the decisions you decided not to do, to receive input on the future decisions you want. 
3. Understand where the gaps for use of AI in their portfolio companies are, and how to support them in adopting and building the right tool. This would be part of the valuation work. 

In other words, adopting AI doesn’t have to mean a total overhaul of existing systems or a significant upfront investment. Organizations can take on a step-by-step process. When doing so, firms can gain a better understanding of the specific AI solutions they need to invest in to gain advantages, as well as finding the right balance between innovation and existing workflows. 

Change isn’t always easy, and the introduction of new technology often brings a mix of excitement and worry, especially when that technology seems complex or disruptive.  

Casper Guldager explains:  

“Concerns about risks and complexity are of course valid. However, often organizations tend to over-regulate or don’t do anything, which leads the staff to feel that there is “danger” in trying, or they do something that they haven’t been asked for. To avoid this, there is a need for a structured process and clear communication to enable staff to begin using AI. Then they need training to succeed.” 

These key actions can enable organizations to keep up the pace and identify opportunities: 

• Make AI tools available to enable people to find their own ways to cut hours from their work. This could prove very effective in freeing up to 40 percent of people’s time — even without proprietary data and training. 
• Create AI influencers within the organization by encouraging employees who are enthusiastic about AI and quickly master its use. These early adopters and tech enthusiasts can be an invaluable resource by sharing their knowledge and excitement with colleagues. 
• Launch pilots to demonstrate the power of combining AI models with your proprietary data. For example, analyze the tasks most workers spend time on, then pick a subset of these where AI can have an impact. Then build these applications instead of selecting use cases that aren’t well suited for AI development or offer lower value to fewer people. 
• Accelerate data modernization: Data is crucial for high-value AI applications - data access and governance are essential. As data cloud capabilities are vital for all PE firms, cloud efforts must be accelerated and funded to meet shorter timelines and higher expectations. 
• Implement a ‘Trusted AI’ governance framework, ensuring compliance with regulations and upgrading cyber-protection. 

For PE firms that want to stay ahead of the curve, AI adoption is not a question of if but when. By taking a gradual approach and focusing on value, organizations can begin their AI journey with confidence. At KPMG, we are here to guide you. Together we will map the necessary steps that need to be taken so that you can gain from adopting the latest technology.