The way to stay ahead of your competition is through Lean Six Sigma‘s process improvement.  However, to continuously improve and scale your private equity processes, you’ll need visibility into what’s holding your investment’s internal rate of return back.

In the previous posts, we started the Define and Measure phases to use data to define our process, performance gap and start analyzing or “measuring” it to understand where to focus our efforts.  The difference between the analysis done in the Measure phase vs the Analyze phase is the Measure phase is more of a lighthouse to tell you where to dig into your gap’s data. 

Think of the Measure phase as data analysis – letting the data links between each drill down tell you where to go next.

The Analyze phase is process analysis.  You’ll start to map and then root cause the process choke points to understand how to remove them.  There shouldn’t be any broken links between what you’ve done in the Measure phase to this new phase, Analyze. 

We break the Analyze phase of DMAIC into 2 parts because it requires 2 different tools. The first phase is mapping your baseline process.

Map Baseline Process: Find IRR Choke Points


In Lean Six Sigma process mapping, we force our processes into linear flows because we don’t want to build in any path except the one that leads straight to our goal.  

If you build decision points into your process, you’re building in chances to get it wrong.

Scaling a process means being able to have it handle more volume (i.e. increase your capacity) and have it done right the first time.  To ensure these two criteria are met, you’ll need to build quality into every step – especially on the front end.  The process we’re using for our case study is:

private equity investment process

Step 1: Map Reality Not Emotions


If you don’t use data, you’re going to map a false reality.  Your results won’t be achievable and you won’t see a return on investment for your improvement efforts.  To ensure your map reflects reality, you pull real-life examples from your CRM or other systems which track the process end to end.  These examples will show you what “thing” flows through your process 51% of the time. 

Since our process is how we source, perform due diligence and grow investments, the “thing” flowing through this process is a deal or investment. 

If you have you have hundreds of examples, we group them into a “group type”. You do this by pulling a handful of examples and then marking the process steps or activities in your CRM, they went through in order to complete your process end to end.  In our case, this would be an acquired or completed investment, we’ve completed growing and are ready to exit.*

Quick Software Tip:  Most CRMs only show stages, not activity level details because this detail isn’t out of the box.  It’s specific to your company and process.  Make sure you’re looking at the detailed activities or you won’t map reality.


lean six sigma product family DMAIC

Smarter Private Equity Analysis


There are several critical mistakes teams make while mapping their baseline.  The tips above and below will help you build a high-quality process map to aid you in gaining insight into what’s preventing you from hitting higher targets.  

Tip 1:  Process Scope – Verb Noun


The first step for any process map is to establish the process scope.  This is best stated as “from X to Y” (e.g. From deal to investment).  The best process maps have process steps which describe “what’s being done” and “to what”.

The actions are critical because you need to know how to successfully move items from one.  Better the best is to say From (Verb Noun) to (Verb Noun) (e.g. From source investment opportunity to grow investment).  We updated the scope steps only in our Lucidchart example below.

lean six sigma process private equity IRR


TIP 2: Time Limit

Set a time limit up front for creating your map.  This can take anywhere from 2 hours to 2 days. It really depends on how clean and readily available your data is.  The chance of investing too much time is greater than spending too little, so the time limit helps create a bias for action.


TIP 3: Step Limit

Force your process into 3 macro steps or milestones. Put data to each step.  Once the data tells you which steps is the bottleneck or chokepoint, expand this step into 3 more detailed steps.  Repeat until you stop getting insight.

lean six sigma process private equity IRR

Better Tomorrow Than Today


Continuous improvement means progress over perfection; being better tomorrow than you were today.  So what can you do today to ensure you’re better tomorrow?  You’re naturally inclined to map what’s most painful instead of what happens 51% of the time.  Use your data to keep you on track.

You’ll find many of the groups to be different from what you originally thought and you can never go wrong with new insight.  You’ll be ready in time for the next post: Analyzing IRR choke points.

*Since our process ends as “Grow Investment”, we’re not going to touch on how, when or why to exit the investment in this post.

Ashley Asue Guerrilla Analytics Private Equity Consultants
At 26, she was asked to create a new department to grow their Fortune 300 company using Lean Six Sigma continuous improvement.
While working with consultants and experts, she saw a common thread among their challenges and failures.
With this insight, she created a custom process to create a high-performance company.
As the only CPA and business architect in the US, she helps others use creativity instead of cash to efficiently build their businesses.