Podcast #104: Industrial Value Creation

Good day and welcome to episode 104 of our Digital Leadership podcast, produced by, for, and about digital industry leaders. Today I’m please to introduce Geoff Baird, Senior Managing Director of Value Creation at LLR Partners, a $3.5 billion private equity company based in Philadelphia. Prior to joining LLR, Geoff was an operating executive at Tailwind Capital where he assisted in sourcing, evaluating, and performing due diligence on investment opportunities. He previously served as President of the Product & Technology Group at AGT International, where I first met him. CEO of 3i-MIND, and Vice President and General Manager at Avaya.

Earlier in his career Geoff was the CEO of mobile technology firms Commtag and Xtempus, and COO of Psion Computing. He received his MBA with distinction from The London Business School, and a BSc in cybernetics and mathematics from University of Reading in the UK.

Welcome Geoff.

Thanks Ken, always good to connect with you. I’m looking forward to our conversation.

As well, as well. So as always, let’s start with your professional journey, tell us a bit about your background and how it has informed your views of digital industry.

I started really as an engineer, and I always say that within two years of designing computers, I realized that if you didn’t sell something it was pointless designing it, I’m not into the theoretical concept of experimentation. And so my career then developed into how to build companies, and how to help those companies evolve, and that was I would say a 10-year journey of learning how to, and the  20-years of actually working, running businesses, and now another number of years investing and assisting companies in running.

It’s always been in technology, originally with computers when IBM was the competitor and we were building what were called copycats or clones of IBM, and then rapidly moved into the mobile space. I think moving into the mobile space was for me the next generation of growth that was happening, as it became clear that you could put computing in the hands of people. That was the start for me of understanding what digital transformation could be. Because if you could put computing into the hands and take it away from a heavy computer on a desk, then it became really valuable in all sorts of ways, whether it be in medical, whether it be accountancy, whether it be a professional user. Of course, what we saw 15 to 20 years later was how it changed the world of the consumer.

And so that for me was the foundation of understanding that, and then experience of networking in telecoms built the ‘How do you connect it all?’ And so, taking the computing piece and the networking piece, created that ecosystem that enabled then not only the ability to have computing in the hand, but the ability for that to adapt change and evolve on the street, on the road, in the office. That has been the foundation then of where I’ve gone, and of course digital industrial IoT and the digital world is then almost the natural outcome of those types of technologies, as you miniaturize technology, as you reduce the power consumption you have batteries, and the ability to then bring data into some form of center. All of that was built over the last 30-years.

It’s interesting, I have probably a similar pedigree to yourself in the sense that we both started as engineers, and Momenta loves engineers. And in some sense the systems, developing the technology systems, and then developing a system within the company, and then developing a system of companies has been a natural path as well. So, no surprise to see you ending up in private equity, where you’re looking at the kind of metasystems if you will, that make-up technology companies that are made of technologies. I love the fact that you have this kind of convergence if you will, of both mobile devices and the connectivity, because in some sense that is exactly what brings us to machine-to-machine, and industrial IoT, or digital industry as we like to call it.

You had a string of early successes across emerging leaders, mobile computing, and voice-over IP, Psion, Xtempus, Commtag, Avaya; what originally attracted you to this space?

So, the evolution of computing into a smaller form factor was fascinating to me, and to be honest with Psion which was my starting point that really drew me into that, was also the fact that it was a British world leader, so it was a company in London creating what was the personal digital device at that point, and then of course leading to what became Symbian and the smartphone, and then I guess we would argue iPhone, then drove and changed the smartphone category again. But the fascination of what was possible in the hand… I was working with Microsoft Technologies for not quite 10-years before I joined Psion, and every year the application you built, Microsoft Word, or Excel or whatever, got bigger and bigger and bigger. In Psion we would build an Excel-type model, a spreadsheet that would be in a few 100k of code, it was fascinating what was actually possible when you really put your mind to it.

So, I think I was drawn into the application of technology, and the use cases, and the potential of what could happen. What of course was interesting is moving to Xtempus and Commtag, it became obvious it was all about the applications, it was all about how do you build what in those days we called hosted, and nowadays is a true SaaS environment, which is building an application that could work in the cloud could work remotely and make the mobile computing device that much more powerful. And so Xtempus was in the gaming space, interestingly doing SMS gaming and those types of things, and then I migrated to Commtag where we were doing essentially a direct competitor to Good technology. If you remember, Good in those days which was enabling the mobile worker and doing push email over your mobile network into your hand-held computer, working with Psion, working with Compaq and other types of devices. That journey was a natural one, as you first of all understood what was possible through the core technology, and then how software in the application was essential to that.

Avaya was interesting because I had looked at and had been exploring the US market many times; the UK is a fantastic hotbed of technology, ideas, creation and applications, and of course the US is the market that just gives you a homogenous market that can grow so fast. So, the opportunity to work in that space was always interesting in geography, and so Avaya was a space that I’ve been looking at, voice over IP. I actually ran a VoIP business in the late 90’s when it really was just a startup, and that was a lot of my history was working on new ventures, new ideas, so VoIP was seen as almost impossible in the mid-90’s in terms of replacing classic digital telephony, and Avaya had in 5+ years later really made that come to life, along with of course its competitor Cisco.

And so I joined because I saw the opportunity of bringing those two worlds together, and mobile was seen as a key piece of Avaya, of connecting communications now from the desk to the mobile worker, and essentially creating a seamless experience where you could just move back and forth between the different systems, and the idea of that being productivity, the idea of it being – I can now work and look as if I’m at my desk wherever I am, I’m on the golf course but now I can communicate with people, I’m working late at night I want to go home, I’m now going to move from the desk to the mobile, and I’m going to keep that communication going. Of course, that’s now become ubiquitous for all of us, but in those days it was an exciting vision that we’ve developed.

Speaking of application of technology, and especially the dual vectors of mobile and wireless, in 2011 you jumped into the smart city space, taking over CEO of 3i-MIND, a big data, deep web, extraction analytics company focused on providing reliable predictive intelligence, offered to law enforcement agencies, corporations, governments, and urban authorities. What inspired you to make this I would say, almost horizontal move in the sense, moving into the solution space?

Yes, it was interesting because as I worked at Avaya, I ended up running a billion-dollar business, and so as a result I was responsible for a large amount of the core infrastructure and core technologies, in various sectors of the business. Those gave me a real appreciation for the need for data, and the opportunity for data, and I think in 2011 it was very clear to all of us and to the industry, that data analytics and the application of machine learning, anomaly detection, and other things, was going to become a real opportunity in the market, and changed the way we work, and it still is in that sense going to do that.

And so, 3i-MIND was a particularly interesting business because it was, as you said, a big data, deep web analytics engine, and it had been built out of the security space, but at that moment had just made an acquisition of a corporate B2B business, with the intention of bringing that technology into the corporate world. So, I joined specifically with the idea that these technologies were going to be the next growth driver, vector, of the world, and building those skills, and building that capability would be valuable. Of course, by then my skills were not what I would consider in technology, they were skills in how to run companies, how to manage teams, how to bring the right resources and assets to a solution, and hence that move.

And you no doubt did well since the company was merged into AGT International, actually where you and I met, and where you were president and GM of their Product Division. AGT was quite prominent I remember at the time in the Cisco IoE ecosystems and conferences, or Internet of Everything as they called it, which was I guess right around, oh man, I have to say around 2014 timeframe.

That’s right.

What were some of your key lessons at the frontlines of smart cities?

It’s interesting. As we merged into AGT, AGT had a successful infrastructure business that was serving on the edge of cities, but serving a lot of oil wells, oil fields etc., and of course when you get to a refinery of 30,000+ employees it’s like a mini city. We found that there was a real opportunity, a need to develop and build services there, and so we developed into smart cities, and that became a key focus of ours. What I found from that was that it was a truly deep understanding of how the connecting of sensors could build a digital footprint of the world, and how this could then be used to react in needs

So, as you know already of course, very well from industrial IoT, the natural idea of being able to connect and monitor a fleet of trucks, an oil pipeline, etc., those are obvious opportunities. In a city you have so many different moving parts, and the management of those cities is trying to figure out how to optimize it. They’re dealing with so many different factors, they’re dealing with either population growth, they may be dealing with population decline, they’re dealing with floods, they’re dealing with traffic, they’re dealing with security, they’ve got climate change to think about, they’ve got pollution to think about, and the kind of application that we know about of how it works in B2B is highly relevant to the city. And I think that was one of the key lessons, was that if you could monitor your traffic in a more efficient way – sorry, in a sharper way, you could be more efficient at how you then managed your traffic and actually routed it.

In terms of pedestrians; pedestrian traffic management can be done through mobile signals, through Wi-Fi signals, all anonymous, for example. So, really interesting piece there of using sensors, physical sensors, and using soft sensors, and bringing all that together into a dynamic system, and you already talked about a system of systems, the idea that traffic has a system, license plate readers for example give out data and information, originally considered to be used for monitoring, or for toll collection or for other things, but in fact you could then use it for flow, and for traffic flow, and like I said, mobile phone signals can give out information, and give you an idea of how people are moving, bringing all that together gives you the ability to then start planning, it looks for hot spots, for blockage points or other things.

That extends into, we worked in a number of cities where flood was a major issue, and so you could actually deploy various different sensors to monitor floods, but you could also look at traffic flows to see how they were reacting in bad weather, because that would usually be an indicator, and so what happens is, you found you could use machine learning, you could use that anomaly detection, and you could create predictive analytics. Now of course what we did find from that is, it’s hard! This is not a simple application of technology, you do need sensors, you can use the soft ones we talked about, but obviously complementing that. That does mean that cities need budgets and they need to be able to deploy those, and so what I think I particularly found was that this is a long-term program.

I do believe that over the next 10+ years it will become a greater use case, and a repeatable model that can be deployed. It’s almost essential given that more population is going to move into cities, COVID notwithstanding, because that’s a new curve ball that we’d not planned in. But I see this is a long-term plan which needs governments to provide budgets, to be able to support it. Then I also think the business comes along and continues to provide innovative ways of doing it, and startups are continuing to create, and will create more faster, simpler ways of solving the problem using all this third-party data that is just building constantly. Data is a true sensor, which I think is probably the strongest learning I took away from smart cities.

After AGT you made the move from operator to operating partner, joining Tailwind Capital, a $3.7billion PE firm focused on healthcare, technology, business services, and industrial services. I should mention, you also joined Momenta as an adviser around the same time and have been an inspiration to us ever since. What led you to make the move into private equity, and what were some of the surprises in it?

I have enjoyed immensely the partnership with Momenta, I think the work you’ve been doing, and just to watch how you’ve grown over the last 5+ years has been a real joy to see.

I originally had been in private equity in Avaya with Silver Lake and TPG as investors, but as an operator, and experienced the process, and in particular the benefits of value creation, and longer-term planning. We came out of the public markets, and we moved away from the quarterly model, and we moved to a model that said, ‘This is a business that needs to transform from a hardware business, to a software business’, and that takes a longer journey. And so, I had valued what we had done there, and the discipline that had provided. So, it was an interesting and natural course to start working closer with private equity, as I moved in fact from AGT International, which was in Switzerland, back to a US-based role.

Tailwind of course is different, its investing in much smaller businesses, but the learnings I brought in were very valuable. I really fell into Tailwind’s private equity thought, I worked with them on a deal where I would become the CEO, and continue to actually be an operator, but that deal as sometimes happens in private equity, fell apart, but by then I was advising them on other technology opportunities. So, I enjoyed bringing my skills, my knowledge, and also my network to a portfolio of companies so much that I made the move full-time.

I think the surprises for me was probably more the biggest learning, was that I’d spent the whole of my career working in companies that were trying to be globally number one in their category, sometimes successful, sometimes not, but always with that focus. I saw that as fundamental to success. Working in private equity really led me to realize that there are hundreds of thousands of exciting businesses out there, that create real value by being fantastic in their niche. They’re either regional, they’re very sector-focused, or they even have a slice of the value chain that they provide, a service business that enables the wheels to run. I sometimes say it’s about providing the handles to the shovels, to the miners. It seems so obvious now, but after you’ve looked at 400 deals which I’ve done, you get a real appreciation for the wider economy, and the opportunities that that provides.

We like to call that base hits, and we say at least on our Venture side, we do that as much if not more than unicorn hunting, to use a Ventures term there. All of this has culminated in your current role with LLR Partners, serving as Senior Managing Director for the Value Creation Team. Can you tell us a bit about the company and your role within it?

Absolutely. LLR is a $3.5 billion under management, private equity growth capital company. So, we are focused on the lower end of the market, on companies that have high-growth now, and the potential for continued high-growth in their sectors. We focus on the technology and healthcare sectors, and we bring both those two together in terms of capabilities, and my organization is focused on how to help those businesses grow. They are going through typically a scaleup change, moving through from the original founder-led, maybe single-threaded focus, and have lots of opportunities in front of them. So, what I am doing is building a set of repeatable services that our portfolio can benefit from and building a team that can support those services.

The focus for all of that is, how do we add value? How do we help a company understand the opportunities around tripling the size of its company around growing its revenue streams, and putting in the next stage of process needed for the next level of scale? And all of that is done as a founder-friendly program, so our intention is to bring a set of services and capabilities that the CEOs and the founders can choose from, and can work with us in a partnership model, so that we can be seen to provide true support through the life of the investment.

The last statement may have already spoken to this, but many of our listeners will think of early PE models primarily being focused on what I’ll call, ‘Sweating the assets of an acquired company’, usually having to do with a lot of balance sheet exercises. I think what you’ve just described gives a contrasting view of what value creation is, and its balance on top and bottom line. Would you say that the PE industry in general has completely moved to this value creation model now, that you’re discussing?

I would say that the industry is moving further that way. There is a fundamental understanding that financial engineering has got limitations in how much value it can create, and a lot of companies have become very good at managing and understanding their bottom line, and how to organize it. So, the industry is moving more towards value creation, and there is a growth in the operating partner network, and a growth in the type of services that that leads to. However, I don’t think it’s by any means a completely established process with every firm and think there are still many firms that consider that there’s opportunity in the balance sheet, and there’s also a question of the investment they choose to make in the services that they provide. But I’ve definitely seen a growth in this area.

Overall, it then has an interesting dynamic which is the classic model is called from a laissez-faire model to a prescriptive model, of services and value creation that you can provide, laissez-faire being, we let the management team just do it, and we’ll sort of every now and then dip in and out. Prescriptive being a hard and fast rule-based system that says, ‘You must do this, you must do that, you must put this system in to help you’. The majority of the industry is sitting somewhere in the middle, which is trying to find a way of adding the most value without making it a highly prescriptive model, but without letting poor behaviour or opportunities slip by.

It sounds a bit how larger corporations might describe digital transformation in that sense, at least where the catalyst of it is digital, and I imagine with a lot of your companies it is as well. Do you find that the industry focus on digital transformation provides an arrow in your quiver of value creation tools?

I think I find that most businesses now are trying to understand how they can lever technology to make them more effective, whether it be for customers or internally, through remote automation etc. So, most of our businesses are software-based, and all our businesses are going through some form of digital transformation. Our services-based businesses are building out mobile solutions to help their customers. Interestingly COVID accelerated this, so in the medical space it’s obvious you and I would argue given our technology backgrounds, that mobile registration, remote form filling etc. is something that should just have been natural.

That is now happening with COVID in a very rapid way, and some of our technology companies who provide those and support that are building that out, but so are our service companies and deploying it, and the ability to have a virtual app to a microsite is all about how do you use those mobile devices, and that communications network, and the services around it, to make a better experience, which is digital transformation. I think the focus on the industrial scale of this, and the knowledge that we’ve all got from the industrial scale potential, is making that very real.

And then the other space I would say for us, is in the medical space, TeleHelp is also growing rapidly, and this leads heavily on those types of technologies, and that ability to connect to users in an off the network way, or rather in a remote manner.

So, you’ve spoken about COVID and its impact on some of the industries you’re focusing on now, I love the fact the World Economic Forum has decided to use the term, ‘The Great Reset’, as they refer to the long-term impact of COVID-19 pandemic. Let me ask, what do you see is the impact of this reset on private equity particularly?

Actually, I think private equity is a very adaptive business, so I think on the whole it just creates opportunities. I think that clearly there are sectors of the world that private equity is invested in, that have challenges from the retail sector for example or maybe real estate, that are going through a substantial reset, and we don’t know what those images are going to look like when they come out of it, and so private equity that’s invested there will have a path to navigate. But, if you think of private equity in two ways, money that’s invested, and money that is waiting to be invested, there is a large amount of money that is waiting to be invested, and that is highly adaptive. So, I think the opportunities that come from this, whether they be growth opportunities because there is a new need, such as we talked about, the digital transformation world, and the opportunities that accelerates, or whether it’s a challenging sector that needs to be restructured, I think that there is a real opportunity there.

The one thing that did happen is, the whole industry triaged its portfolio in March and April, and it all worked out plans for what it needed to do for its firms. Now, obviously could any of us truly know what the situation in March and April was, and what it meant it would be in 2021 is a different question. But what we all built is a way of monitoring, a way of being able to keep a tighter level of understanding over what was happening, so that through the next 12 months we would be able to react faster to it for our current portfolio. I think that has really settled in now and most firms have got a good way of responding. What I think will happen is, we’re now looking at the new opportunities and the new deals, and we’re of course factoring that into the long term, because that’s how as private equity we think for the long term, and therefore it’s how do we invest going forward.

I do think productivity has changed, maybe productivity hasn’t changed but what’s been interesting is, that the remote workers that all our firms have seen, has demonstrated that productivity can be maintained with a remote workforce. I think that creates a different dynamic because previously for example, we would have been very sensitive to where was the workforce? Could the intellectual property walk out the door? Did it feel connected to its company hub, for example? Whereas now what I hear from the industry, from CEOs, is that the fact that the remote working works so well, means that we can actually have access to a greater pool of workers, and we can have less real estate, and make all of that work in a very effective way. I think that will also change how we invest in companies, the type of companies that we invest in and how we support them.

Well said. Since we operate in some sense at the other end of alternative investments, if you will, VC level versus PE, we’ve seen some very similar trends amongst our portfolio of companies as well, and all of them have done okay, if not actually seen a bit of a step up during this time, mainly because our thematic is remote asset management, and so by definition those services are in greater demand, and those products are better in there as well.

So, in closing we always like to ask about providing recommendations of books, and/or resources that inspire you.

In this COVID world that we’re in where we’re working crazy hours, and we’re doing it from our home offices, what I found is that the time when I used to mentally switch off… I think I was joking to you before the call, when I’m standing in the security line, or the door of the airplane closed, is not there. I actually would go back to something that still is foundational to me, and I also advise all my teams, which is Stephen Covey, ‘7 Habits of Highly Effective People’. I think the need to manage the vast number of initiatives, projects, ideas, that come at us, and come at all of us as professional individuals developing in this industry, means that managing that is almost one of the most important skills that you need. So, I think Stephen Covey for me was the recommendation here.

You also mentioned before, resources; I will say that we are trying to build or own resources to serve our portfolio of 40+ companies. What we do is, we try to create a pool of knowledge, a knowledge base that is accessible to them, and so for me building that out is inspirational, because it’s about delivering a service to other people, and to 10,000 other employees around the country. So, that’s a focus of mine, but ‘7 Habits of Highly Effective People’ is still for me, 20-30 years later something that I use regularly, daily I would say.

Yeah, in some sense this pandemic has taken us back to basics in a lot of different ways, and that’s a great recommendation as well. A special callout, because I really appreciate the LLR thought leadership, and for those of you who don’t know LLR, they do have a great set of resources that they publish pretty regularly, subscription to it, so definitely hit the website and subscribe to that.

Geoff, thank you for this insightful interview, it’s really been a pleasure reconnecting back with you, and getting to know the, I’ll call it, the perpetual digital pioneer that you are.

Ken, thank you very much. I appreciate the opportunity to share my thoughts and experiences, and always enjoy hearing your questions, and getting the thoughtful inspiration you provide me. So, thank you.

Yeah, thank you. So, this has been Geoff Baird, Senior Managing Director of Value Creation LLR Partners, and I’ll say a perpetual digital pioneer and digital industry leader. Thank you for listening, and please join us next week for episode 105 of our digital industry leadership podcast series, produced for, by, and about digital industry leaders.

Thank you and have a great day.

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