It is the skilled strategist that pinpoints an opportunity, takes the risks, selects the talent and gives them the right jobs.
It is the dues of success. In my book, “Talent: The Market Cap Multiplier,” I talk about how the highly successful private equity firm General Atlantic has perfected a new model that delivers four times the market value of a company over five years.
What is the recipe? It consists of three components:
1- You look at the company and learn what will create value. Are there new products? Is it pricing? Is technology a competitive advantage? Is it an alliance? All of this is valuable in some combination and works systematically. This requires very specific detail and examination.
2- This organization’s employees’ compensation is a base salary with no annual bonus, and after forty years when the market value has gone up four times, his or her share in the market value increases, and they receive money.
3- They have commitment — they don’t focus unnecessarily on the short term. They make a mistake, they try again. They know they will have a ton of money. But more importantly, they will have pride in building a company.
Follow it. It’s real. Read the real stories. That is how these private equity firms create enormous value.