The word “Digital” can feel like a vast and nebulous concept, and for good reason. The searing pace of technological development expands the boundaries of the digital world every day. This was true even before artificial intelligence blew all our minds.

At EQT, we embrace digital transformation wholeheartedly because we know that companies perform better – much better – if they run on a modern tech stack and are equipped with market-leading digital capabilities. Indeed, the performance gap between digitally mature and digitally immature companies is vast.

In the three years to 2021, traditional companies in the S&P Global 1200 index that had undergone a successful digital transformation created nearly twice as much value for shareholders on average as those that hadn’t, a study by Boston Consulting Group found. Our own analysis of BCG’s data shows that in 2022, on average, revenue growth at digitally mature companies was 1.6 times higher, and earnings before interest and tax were 1.5 times higher than digitally immature companies.

EQT Digital, a team which comprises about 40 professionals, aims to help future-proof the firm’s portfolio companies, give them a competitive edge by enhancing their digital maturity, and ultimately, make them digital leaders in their respective industries. We encourage EQT portfolio companies to embrace technology and data wherever it can help them. Often, this involves emulating legacy-light and highly ambitious start-ups that are doing clever things with new tech.

Digital transformation of a portfolio company might involve hiring some bright, tech-savvy people to work there, perhaps through a bolt-on acquisition. It might involve using a company’s data more imaginatively. It could be about implementing new technology or automating repetitive tasks. It could be about customer-facing innovation — or go-to-market. Applying our founder’s credo everything can be improved, everywhere, at all times, we look at every area where tech, data and digital ways-of-working can make a real dent.

An analog business, digitally transformed

Nordic Ferry Infrastructure, one of our portfolio companies, is a leading provider of passenger, car, and freight ferry services across the Nordic region, operating over 100 vessels across more than 60 routes. It is, by its very nature, a highly analog business. You can’t digitize ferries (at least, not yet) so we needed to dig deeper to discover where digital could make a difference.

Nordic Ferry Infrastructure transports more than 25 million passengers every year, and has a wealth of journey data. Molslinjen, a big NFI subsidiary, decided to leverage its data, as well as passenger journey data from the wider ferry industry, to help predict when and where customers would cancel bookings, or fail to show for their crossings because of bad weather conditions, poor traffic, or other issues. This allowed us to create dynamic waiting lists, thereby helping us to fill more ferries to capacity.

We also supported designing a smarter way to load each ferry so we could squeeze more vehicles on board. We now cross-reference the number plate of each customer’s vehicle with public vehicle registries so that we can identify the dimensions of their vehicle. By using this data to inform loading, we pack up to 15% more vehicles onto a ferry. Also, by loading ferries faster, we can slow the crossing speed a little and thereby save fuel — and reduce CO² emissions.

Another initiative was moving the company’s booking system from static to dynamic pricing. Dynamic pricing automatically adjusts the price of each ticket based on real-time movements in the market, with the aim of ensuring more ferries are fully utilized. The Nordic Ferry Infrastructure booking system is now powered by a prescriptive AI engine that assesses a wide range of variables, such as when and where customers booked, to automatically set prices for tickets.

Our digital initiatives at Nordic Ferry Infrastructure have boosted revenue by tens of millions of DKK annually. This is the benefit of constant digital innovation and the momentum it brings to a business. And we continue to explore new initiatives, such as personalized packages that allow customers to reserve tables with sea views.

The EQT Digital playbook

Strictly speaking, we at EQT don’t have a catch-all playbook for digital transformation. Portfolio companies have very varying starting points and we carefully consider the specific requirements of each. However, there are some common themes.

Before deploying our resources, we determine which companies in our portfolio are exposed to digital disruption, and which have the greatest opportunity to jump ahead of the competition by upgrading their digital capabilities. Once selected, we seek to build a trusting relationship with the company’s management and board. We never force our services on them; we seek a partnership, because that’s fundamental to success.

The next step is to carry out a highly structured assessment that defines the digital and data maturity of the company, the state of their tech stack, in-house capabilities and the maturity of cloud infrastructure. This helps us to formulate a strategy and create a shared view of what “digital” means for that particular company. Not everything is equally important.

This shared view is essential. It’s the starting point for a digital transformation because it makes it far easier to talk about critical enabling investments for things like automation, digital marketing, IoT, sales tech and data platform.

Artificial intelligence

We are advising our portfolio companies to embrace AI, which I believe is the most disruptive wave of technology right now.

We like to think of AI in three dimensions. There’s obviously the potential it brings for increasing productivity, which varies between industries but can be huge in some, like software development. There’s also the innovation dimension, like for example video conferencing software that automatically transcribes conversations. Add these two dimensions together and you enter the third dimension: competitive shifts. With high AI maturity, smaller companies can effectively begin competing with companies several times their size. A very small team of developers who leverage AI supremely well can do the same work as tens of developers who don’t use AI well — or at all. The impact can be felt across the food chain: a small software company that effectively uses AI can challenge a medium-sized company that doesn’t, and so on.

We’re urging all our portfolio companies to have conversations at the management and board level to identify where their opportunities lie with AI. Often, EQT Digital and Motherbrain Labs will moderate these discussions. We encourage all of our companies to experiment with AI to discover where it can enhance their operations.

AI represents a huge leap forward that has, once again, shaken our perception of the capability of digital technology. But it won’t be the last big leap because digital disruption is in constant motion. Furthermore, it’s when discrete technologies are combined that it becomes really interesting. Think of AI + Robotics, AI + CRISPR gene-editing technology or AI + Quantum Computing to process massive data sets. We will see some very exciting breakthroughs and there will be new advances in the not-too-distant future. We must be ready to embrace and adopt them. Which is to say that if you work in a job like mine, there’s really no time to sit still.