Lee McCabe Argues ‘Basics Gap’ Hinders PE Portfolio Companies, Not Strategy Deficits

In a recent LinkedIn post, Lee McCabe challenges conventional wisdom within private equity (PE) circles, arguing that many portfolio companies suffer from a fundamental “basics gap” rather than a lack of strategic vision. McCabe, writing from his perspective as an operator and observer of PE value creation, contends that an overemphasis on abstract “strategy” often distracts from addressing core operational deficiencies.

McCabe opens by highlighting a common PE tendency to prioritize “strategy” because it sounds sophisticated and fits neatly onto presentation slides. However, he asserts this focus is often misplaced.

“PE loves ‘strategy’ because it sounds expensive and it fits nicely on slide 7. The problem is most portfolio companies don’t have a strategy gap, they have a basics gap.”

According to McCabe, the true path to value creation lies in shoring up foundational elements before attempting to implement grand visions. He refers to this as putting “digital foundations first,” emphasizing that even the most ambitious plans are doomed if the underlying operational mechanics are flawed.

Prioritizing Un glamorous Fundamentals

McCabe advocates for focusing on the less glamorous, yet highly measurable, aspects of a business. He points to website performance and conversion rates as critical areas often overlooked. Citing data from Google, he illustrates the tangible impact of technical deficiencies:

“Digital foundations first. Every time. Because you can’t ‘vision’ your way out of a broken funnel. Start with the stuff nobody wants to own because it’s unglamorous and measurable. Website speed and conversion rate. Google’s data shows bounce probability jumps 32% when load time goes from 1s to 3s. That’s not branding, that’s physics.”

This focus on performance metrics, McCabe argues, is essential for driving real business outcomes, contrasting it with vanity dashboards that merely create an illusion of productivity.

Reconciling Tracking with Revenue

Another key area McCabe identifies is the need for accurate revenue tracking and attribution. He notes the increasing complexity and unreliability of current tracking systems, exacerbated by changes like those introduced by iOS updates.

“Tracking that reconciles to revenue, not a dashboard that makes everyone feel productive. Attribution is already compromised, then iOS made it worse, and a lot of teams are still running budgets off fairy tales.”

In McCabe’s view, businesses need robust systems that clearly link marketing and sales efforts to actual revenue, rather than relying on potentially misleading metrics.

The Cost of Slow Response Times

Furthermore, McCabe stresses the importance of customer interaction speed, particularly concerning call handling and lead response times. He argues that neglecting these basic service elements directly harms the customer experience and wastes valuable resources.

“Call handling and speed to lead. If you miss calls, reply slowly, or let leads rot in an inbox, you’re paying to manufacture disappointment.”

He suggests that once these fundamental operational issues are addressed, then and only then should companies focus on more abstract concepts like branding and positioning.

A Call for Operational Competence

In conclusion, Lee McCabe posits that the most effective value creation strategy for many PE-backed companies involves a disciplined focus on operational basics. He suggests that PE firms would be better served by ensuring their portfolio companies have clear ownership, weekly metrics, and accountability for fundamental business processes, rather than solely pursuing complex strategic initiatives.

McCabe’s analysis provides a practical framework for leaders looking to drive tangible improvements by focusing on the unglamorous but essential foundations of business operations.