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The Execution Imperative: Why Operational Value Creation is Private Equity’s New Competitive Advantage

Author: 

Mimi Glenn

The 2025 State of Contract Hire & Payroll in UK Finance: Why Outsourcing Is the Strategic Choice

The old private equity playbook is dead. In a world of high-interest rates, fierce competition, and lengthening hold periods, the days of relying on financial engineering and multiple arbitrage to drive returns are over. The new frontier of value creation lies in a single, powerful word: execution.

But here’s the uncomfortable truth: a staggering 67% of value creation failures are controllable, with 53% stemming directly from poor implementation and a lack of execution capability [1]. These are not macro shocks; they are self-inflicted wounds and they are execution gaps.

This article explores why operational value creation has become the ultimate differentiator in private equity and reveals how the most forward thinking firms are building their competitive advantage not just on numbers, but on people.

The Shift from Financial Engineering to Operational Excellence

For decades, the PE model was straightforward: buy low, leverage up, sell high. Today, that model is broken. According to a recent Simon-Kucher & Partners report, 33% of deal teams now prioritise operational improvements; almost double the next most important value lever [2].

“The market is rewarding preparation, not patience. The quality of execution and the durability of the numbers behind it are what command a premium in today’s market.”

— Scott Engler, PE CxO Report [3]

This is not just about cutting costs. It is about building better, more resilient, and more profitable businesses. It is about transforming portfolio companies from the inside out. And that requires a fundamentally different skillset—one that is less about financial modelling and more about human leadership.

The Three Pillars of Modern Value Creation

Our research and experience with leading PE firms reveal a clear framework for success in this new era. It’s built on three pillars:

Pillar 1: The Right People: The Human Capital Premium

Technology and process are important, but they are ultimately commodities. The true differentiator is talent. A recent Kingsley Gate study found that 53% of PE professionals cite human capital as the primary driver of success [4].

This means:

  • Talent-first due diligence: Assessing the leadership team’s execution capability with the same rigour as the financials.
  • Hiring “complete leaders”: Executives who possess not just the technical skills, but the emotional intelligence, resilience, and change leadership capabilities to drive transformation.
  • Building “superstar teams”: Recognising that a high performing, cohesive leadership team is worth more than the sum of its parts.

 

Pillar 2: The Right Process: The Science of Change Management

Having the right people is necessary, but not sufficient. They need a proven process for driving change. This is where the neuroscience of change management comes in. It’s about understanding the human brain’s natural resistance to change and using that knowledge to create a process that fosters buy-in, reduces friction, and accelerates adoption.

This includes:

  • Creating psychological safety: An environment where people feel safe to speak up, take risks, and learn from failure.
  • Communicating the “why”: Clearly and consistently articulating the vision and the case for change.
  • Celebrating small wins: Building momentum and reinforcing positive behaviours.

 

Pillar 3: The Right Technology: AI as a Strategic Enabler

Technology, particularly AI, is a powerful enabler of operational excellence. But it is not a silver bullet. The most successful firms are not just implementing AI; they are using it to augment their people and processes. According to EY, 53% of PE firms are hiring more digital transformation specialists to bridge the gap between technology and execution [5].

This means:

  • Focusing on use cases, not technology: Identifying specific business problems that AI can solve.
  • Investing in data literacy: Ensuring the team has the skills to interpret and act on AI-driven insights.
  • Managing the human impact: Proactively addressing the cultural and organisational changes that AI will bring.

 

The Carnegie Perspective: Your Partner in Execution

At Carnegie Consulting, we understand that operational value creation is a human endeavour. For over 20 years, we have been the trusted partner to private equity firms that recognise the critical link between talent and returns. We don’t just find candidates; we build the leadership teams that drive execution and deliver alpha.

In a market where execution is everything, the war for talent has never been more critical. The firms that win will be those that understand that their greatest asset isn’t on the balance sheet; it is in the boardroom.

References

[1] Boston Consulting Group. (2024). Creating Value by Improving Operational Performance. https://www.bcg.com/publications/2024/creating-value-by-improving-operational-performance

[2] Simon-Kucher & Partners. (2025). Private Equity: The Operational Era of Value Creation Accelerates. https://www.simon-kucher.com/en/insights/private-equity-operational-era-value-creation-accelerates

[3] Engler, S. (2025). PE CxO Report – December ’25: Focus on Leadership. LinkedIn. https://www.linkedin.com/pulse/pe-cxo-report-december-25-focus-leadership-scott-engler–zni5e

[4] Kingsley Gate. (2025). The Human Factor: Why Top PE Firms Are Winning Through People, Not Just Numbers. https://www.kingsleygate.com/the-human-factor-why-top-pe-firms-are-winning-through-people-not-just-numbers/

[5] EY. (2025). 2026 Private Equity Trends: Leading Through Change. https://www.ey.com/en_us/insights/private-equity/leading-through-change-2026-private-equity-trends

 

Frequently Asked Questions

How do private equity firms create operational value?
Private equity firms create operational value by improving the performance of their portfolio companies through a combination of strategic initiatives, process improvements, and technology adoption. This includes optimising pricing and sales strategies, enhancing operational efficiency, and investing in talent and leadership development.
The execution gap refers to the difference between a private equity firm’s strategic goals for a portfolio company and its ability to successfully implement those plans. Research shows that a significant percentage of value creation initiatives fail due to poor implementation and other controllable factors.
Human capital is crucial because the success of any operational improvement plan depends on the quality of the leadership team responsible for executing it. The right talent can drive growth, navigate challenges, and build a culture of high performance, which ultimately leads to higher returns for investors.

private equity salary survey 2025

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Why Operational Value Creation is Private Equity’s New Competitive Advantage
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