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Richard Madgwick examines how value creation has become central to private equity performance and why firms are rethinking how their operating models are built. He challenges the false choice between generalists and specialists, arguing that the most effective teams are deliberately designed around portfolio needs, combining strategic breadth with targeted functional depth to deliver sustainable value.
Firms are no longer debating whether these capabilities matter; instead, they are working out how best to evolve their operating models to meet the demands of increasingly competitive markets and increasingly complex portfolio needs.
This evolution reflects a broader change in private equity itself. Longer holding periods, higher entry multiples, and greater operational scrutiny have raised the bar for post-deal execution. Value creation is no longer an adjunct to the investment process; it is central to it. As a result, operating models that once felt sufficient are now being questioned, reshaped and in some cases rebuilt entirely.
Conversations with value creation leaders over recent months reveal a clear trend. Most are either expanding or reshaping their teams, but while there is broad agreement on the need for investment in these functions, consensus quickly dissolves when the conversation turns to the how.
The debate is most often framed around a deceptively simple question: Should value creation be anchored by generalist operating partners capable of navigating a broad range of challenges? Or, should firms prioritise deep functional specialists who can apply highly refined playbooks across multiple assets?
In practice, framing the decision as a binary choice between generalists and specialists is misleading. There is no universal model that works for every firm, every strategy or every portfolio. Instead, the optimal configuration depends heavily on the level of homogeneity within the portfolio and the nature of the value creation agenda.
In more homogeneous portfolios – those concentrated in a single sector, built around repeatable business models or driven by common value‑creation levers – functional depth can be a powerful accelerator.
When assets share consistent commercial, operational or market characteristics, specialists are able to apply pattern recognition efficiently and deploy proven methodologies at scale. Functions such as pricing, go‑to‑market, procurement, talent, product, data and M&A can all benefit from focused expertise. In these environments, operating platforms can be effectively industrialised.
For sponsors pursuing focused strategies or roll-up models, this approach often delivers speed, consistency and measurable impact. The value creation team becomes a force multiplier, embedding best practices quickly and reducing execution risk across the portfolio.
However, when portfolios are more diverse, this logic loses traction. Heterogeneous portfolios introduce a wider variation in business models, leadership teams, market maturity, operational capabilities and strategic priorities.
Here, success is less about deploying pre-packaged toolkits and more about sound judgment. The questions become more nuanced: Where should the team focus? What should be deprioritised? How can transformation be sequenced without overwhelming management?
In these settings, strong generalists often outperform. Their strength is not in executing every task themselves, but in diagnosing issues, synthesising complexity, prioritising initiatives, and orchestrating the right resources at the right moments. They act as the connective tissue between investment intent and operational reality, helping management teams navigate ambiguity while maintaining momentum.
The nuance often overlooked is that many of the most effective funds operate with a hybrid approach, whether or not they formally describe it that way.
In these models, generalists provide the strategic spine – they anchor the investment thesis, partner closely with management teams, and provide coherent direction. Specialists are then deployed selectively to address clearly defined, high-impact challenges.
This balance allows firms to retain flexibility without sacrificing rigour. It also enables value creation capability to scale in line with portfolio needs, rather than being locked into a rigid structure.
Where firms frequently struggle is not in choosing one model over the other, but in misalignment between structure and portfolio reality.
One common failure mode occurs when functional teams attempt to find problems to solve in portfolios that lack repeatable patterns. Another arises when generalists are stretched too thin across assets that would benefit from consistent application of specialised expertise.
In both cases, impact is diluted, and credibility erodes. More importantly, these outcomes often reflect a lack of intentionality in how value creation capability has been designed and deployed.
This leads to a more fundamental question – one that is often neglected amid industry trends and peer benchmarking: What does the portfolio actually demand? And are firms willing to be honest about that assessment?
The most effective operating models are those designed deliberately. They follow strategy rather than fashion, they recognise that value creation is not monolithic, and that different stages of the investment lifecycle, different asset types, and different transformation ambitions call for different capabilities at different times.
As private equity continues to evolve, the most successful funds will be those that resist the urge to emulate prevailing narratives and instead build operating structures grounded in the specific needs and dynamics of their own portfolios. The debate is not about choosing generalists or specialists; it is about understanding where each brings the most value, and designing teams that can flex accordingly.
