Vision Driven Investing
Vision Driven Investing is a private equity value creation framework first invented by Mekong Capital, a Vietnam-focused private equity firm established in 2001. The framework applies best practices from Private Equity, Executive Coaching, Leadership Development, Corporate Transformation and Change Management in a Private Equity context..[1]
Vision Driven Investing involves aligning around a shared vision with investee companies, subsequently aligning around a business plan with clear milestones and measurable targets for achieving that vision, actively tracking progress against those milestones, and partnering with the investee companies to execute the plan in a way that the company is empowered to achieve the vision regardless of the obstacles encountered.[2]
Mekong Capital’s application of Vision Driven Investing is featured in a case study by Harvard Business School entitled Mekong Capital: Building a Culture of Leadership in Vietnam, as well as a case study by London Business School entitled Mekong Capital: The Importance of Corporate Culture in Emerging Markets Private Equity. Both of these case studies were published in 2010.
Since launching Vision Driven Investing, the net profit performance of Mekong Capital’s investee companies has improved dramatically, especially those companies that have most thoroughly embraced the approach, with less than 10% being outliers.[3]
The framework has generated a series of successes for Mekong Capital, including Private Equity International Awards for five successive years[4], which were the Frontier Market Firm of the Year Awards in 2014 and 2016, and Operational Excellence Awards in 2013, 2015 and 2017. The Mekong Enterprise Fund II, which fully exited Vietnamese retailer MobileWorld in January 2018 for a 57x cumulative return multiple[5], was rated as the top performing fund in Vietnam as of 30 September 2018 by industry intelligence platform Preqin.
Vision Driven Investing 3.0 elements[edit]
1.1. Vision[edit]
The company has a clear goal for 5-8 years in the future around which all key stakeholders are enrolled and aligned, and would result in at least a 5x return for our fund. The vision is actively in existence and they regularly refer to it as their long-term goal.
1.2. Drivers / Annual Milestones[edit]
The company has identified key drivers or milestones on an annual basis, which involve measurable targets for each year, that if achieved would result in the Vision being achieved.
1.3. KPIs[edit]
The most important 2-5 KPIs, are tracked on a monthly or more frequent basis, which will lead to the drivers and annual milestones being fulfilled. If more than 5 KPIs are being tracked, it's clear which are the 2-5 which are most important.
1.4. Management & Financial Reporting[edit]
The company is tracking actual vs target for both operational KPIs and financial KPIs, which allows for the timely identification of breakdowns as well as acknowledging or reinforcing what is working.
1.5. Generating Breakthroughs[edit]
The company is consistently declaring breakdowns, handling breakdowns, and using breakdowns as opportunities for breakthroughs. The company masters this technology to continuously generate breakthrough performances.
1.6. Management Team / HR Capability[edit]
The company has proactively recruited a strong team that can reliably deliver the expected results, and has the internal capacity to continue to recruit and train the team necessary to achieve the annual milestones and vision. The company also invests sufficiently in training its team in the areas necessary to do their jobs to a high standard.
1.7. Core Values / Culture[edit]
A clear set of core values consistent with the vision is in existence and guiding employees' behavior/actions with each other, with customers and with business partners. Customer touching employees consistently demonstrate the core values.
1.8. Bonus System[edit]
The cash and share bonus program is effective at causing the team to take the actions and deliver the results which will lead to the Vision being fulfilled.
1.9. Corporate Governance[edit]
The company has an actively participating, well-informed, value-added Board of Directors; There are no conflicts of interest or related party transactions.
1.10. Outside Experts[edit]
The company actively engages outside experts including value-added independent Board members, outside consultants (retired CEOs and/or consulting firms), and uses 3rd party service providers when needed. The company successfully implements relevant insights or best practices provided by the experts.
1.11. Customer Driven[edit]
The company organizes around understanding what customers want, how to improve customer experience and satisfaction, and what the market opportunity is. Products or services are developed starting with an analysis of customer insights and the market opportunity based on market data.
1.12. Focus[edit]
The company is focused on a single business, or related businesses with similar success drivers, and has no non-core investments.
1.13. Digital Transformation[edit]
The company leverages the full potential of digital transformation to automate business processes, create new growth and make data-informed experimentation and decisions. As a result, KPIs are optimized to enable the company in achieving their vision.
1.14. Delegation & Accountability[edit]
No person is a significant bottleneck in the company. Accountabilities and decision rights are clearly delegated, with clear job descriptions and performance expectations. KPIs are effectively cascaded down throughout the organization for each position. People are held accountable for results and consistent under-performers are handled rather than tolerated.
History of Vision Driven Investing[edit]
Vision Driven Investing was originally launched in 2009 and has been revised two times subsequently. It is currently on its third iteration, Vision Driven Investing 3.0. The approach was seen as an innovation within a private equity firm by the Asia Development Bank.[6]
With Vision Driven Investing 3.0, Mekong Capital aims to generate at least a 5x return within the first 5 years for each of its funds’ investments.[7] Mekong Capital made a series of successful exits from companies that applied most or all aspects of Vision Driven Investing such as restaurant chain Golden Gate (generating a gross return multiple of 9.1x[8]), pharmaceutical company Traphaco (6.3x[9]), Vietnam Australia International School (4.5x[10]), and MobileWorld (57x)[11]
See also[edit]
References[edit]
- ↑ Private Equity in Emerging Markets: The New Frontiers of International Finance. 2012. pp. 268, 270. Search this book on
- ↑ Responsible Investing in Vietnam by Responsible Research. June 2011. Page 60
- ↑ "Private Equity in Vietnam" (PDF). EMPEA.
- ↑ "Mekong Capital wins private equity international award".
- ↑ "Mekong Enterprise Fund II exits MobileWorld with a 57x return".
- ↑ Asia Development Bank's extended annual report. January 2011. Page 11
- ↑ "Mekong Capital bets on vision-driven investing formula for mega returns".
- ↑ "Standard Chartered's PE Arm Strikes First Deal in Vietnam".
- ↑ "Vietnam Azalea Fund fully divests from Traphaco".
- ↑ "Vietnam: Mekong Capital nets proceeds of $79m from exits in 2017".
- ↑ "Mekong Capital: Investing with vision".
External links[edit]
Vietnam Australia International School website
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