Amid a chill in exit markets, private equity (PE) firms are pivoting from reliance on financial engineering toward operational value creation. This shift sometimes called “Private Equity 3.0”, reflects strategic changes, including the appointment of Chief Growth Officers (CGOs), Chief Development Officers (CDOs), or dedicated operating partners to drive day-to-day improvements, revenue expansion, and synergies across portfolio companies. The following paragraphs explore how a slowdown in exits has heightened focus on deep operating involvement, how new leadership roles amplify value creation, and how firms are leveraging install bases, pricing strategies, sales and marketing maturity models, and customer-centric innovation.

1. The Exit Drought: A Catalyst for Change

The private equity industry has endured an extended downturn in successful exits via IPOs or corporate sales. In early 2025, continuation funds where firms effectively sell assets to other vehicles they manage accounted for 19 % of exits, a 60 % increase from the prior year. Some US$41 billion of deals were executed in this way due to limited exit windows and valuation challenges PwCFinancial Times+1Financial Times+1. Meanwhile, investors increasingly opt for liquidity rather than rolling into continuation vehicles where 85 %–92 % preferred cashing out in early 2025 compared with 75 %–80 % in 2024 Financial Times.

This inability to exit as planned has prompted many firms to rethink their playbook: instead of short holding periods, they extend timelines and intensify operational involvement to drive internal growth. As the Financial Stability Oversight Council pointed out, these structural changes require proactive risk and value management across portfolio holdings U.S. Department of the Treasury.

2. From Financial Engineering to Operational Value

Historically, PE value creation leaned heavily on leverage and multiple expansion. According to PwC, operations now contribute nearly 47 % of value creation, up from 18 % in the 1980s, while financial engineering’s share has declined to roughly 25 % PwC+1chiefoutsiders.com+1. This shift reflects record-high valuations and macroeconomic constraints (e.g. higher interest rates), where cost-cutting or financial structuring alone won’t deliver returns.

McKinsey argues that today’s market demands “deeper operational execution and better forecasting—not just traditional financial engineering” chiefoutsiders.com. Value levers now include revenue growth (organic), margin improvement, customer retention, and innovation.

3. The Rise of Operational Leadership Roles

a. Operating Partners and Teams

Many PE firms already rely on operating partners, specialists or former executives deployed across the investment cycle to guide portfolio companies strategically. PwC notes that these roles are increasingly embedded from diligence through exit, focusing on growth, cost reduction, and risk mitigation Growth Equity Interview Guide+2PwC+2Wikipedia+2.

b. Chief Growth Officers and Chief Development Officers

A growing number of firms have begun appointing CGOs or CDOs at portfolio-level management or firm-wide scale. Originally proliferating in media and tech firms, CGOs are now common in accounting firms driven, in part, by PE ownership to scale revenue through structured sales, marketing, and acquisitions The Wall Street Journal+15ACCUR Recruiting Services+15The Wall Street Journal+15.

Even outside professional services, PE-backed platforms now use these roles to break silos, surface expansion opportunities, and align GTM functions. The CGO typically collaborates across business ops, IT, and marketing to drive growth strategy execution chiefoutsiders.com+2Vista Equity Partners+2ACCUR Recruiting Services+2.

4. Operational Best Practices: How These Leaders Add Value

Across PE firms, the new operating leadership roles focus on several core themes:

4.1 Leveraging Existing Install Bases and Technology Platforms

Rather than waiting for new M&A add-ons to expand revenues, firms now exploit untapped value inside existing customer bases or software platforms. For example, PE‑owned software providers may introduce adjacent modules or services, leverage cross-selling to customers, or migrate to SaaS models turning legacy systems into recurring revenue streams.

This integration may also facilitate new target segments and products. By layering analytics, AI, or subscription-based features atop an existing platform, firms can redefine their value proposition without foundational reinvestment.

4.2 Pricing Strategy and Margin Optimization

CGOs and growth executives often lead efforts to implement data-driven pricing frameworks such as value-based pricing, tiered offerings, and elasticity testing. Profit GPS™, a framework used in over 30 PE-backed companies, aligns margin and revenue goals with tactical levers such as deal size, pricing tactics, and rep-level execution plans.

BDO’s 2024 survey of nearly 700 fund managers and portfolio CFOs found that margin improvement, sales enablement, and operational alignment were top value creation levers Business Insider+4PwC+4Reuters+4chiefoutsiders.com. Companies like Concord Servicing used Profit GPS to clarify customer segments, forecast performance, and align sales and marketing playbooks, resulting in predictable and scalable growth chiefoutsiders.com.

4.3 Sales & Marketing Maturity Models

Growth leaders implement maturity models to evaluate and elevate sales and marketing capabilities. This includes standardizing processes, improving pipeline visibility, advancing CRM usage, and embedding performance metrics at the rep level. The result is a coordinated, replicable GTM approach across the portfolio that reduces variability and strengthens forecasting.

For portfolio companies lacking a CMO, PE firms sometimes deploy fractional CMOs who drive GTM strategy, channel optimization, and digital execution to close execution gaps Moving Minds.

4.4 Customer-Centric Culture & Product Innovation

Many firms invest in shifting culture toward customer centricity emphasizing customer feedback loops, net‑promoter surveys, and product enhancements rooted in client needs. Growth leaders may launch adjacent services or products often software-based that fill market gaps and open new segments without significant M&A.

They also drive cross-functional initiatives by linking product, marketing, and operations to evolve offering roadmaps. By doing so, they build differentiated propositions that support premium pricing and defensible revenue streams.

5. Why This Shift Matters

5.1 Navigating Exit Uncertainty

With traditional IPOs and strategic buyers scarce, enhancing internal growth reduces reliance on external exits. Continuation vehicles provide short‑term liquidity but may erode long‑term value if portfolio firms lag operationally. Deepening operational involvement increases flexibility and the likelihood of improved future exit outcomes Financial Times.

5.2 Meeting LP Expectations for Time-to-Value

General Partners are under pressure from limited partners to deliver results faster and more predictably. The Churchill Asset Management 2025 PE Sentiment Survey indicates rising expectation for disciplined execution and pipeline management. Profit GPS and similar frameworks enable aligned, measurable progress across functions and time horizons chiefoutsiders.com.

5.3 Talent Management & Retention

ON Partners’ 2024 PE Talent Trends Report highlights that the median holding period is now 5.7 years, and that firms are prioritizing executive search to build operating bench strength across their portfolio leadership from CGOs to operating partners to support longer-term value creation onpartners.com+1PwC+1.

6. Challenges and Tensions Ahead

• Deal Team vs. Operating Team Friction: As Business Insider notes, internal conflict can arise when dealmakers’ expectations don’t align with what's operationally feasible Business Insider.
• Balance Between Guidance and Autonomy: PE firms must calibrate operating model styles from directive to consultative to avoid overreach while ensuring discipline and value capture Private Equity International.
• Risk of Diluting Incentives: Extending holding periods or relying on continuation funds could misalign incentives if managers lack clear paths to exit or portfolio turnover.

7. Practical Recommendations for PE Firms

1. Define Clear Leadership Roles: Appoint CGOs, CDOs, or equivalent to centralize growth accountability and reduce fragmentation.
2. Adopt Frameworks Like Profit GPS: Break financial goals into operational levers pricing, pipeline, win rates and align across sales, marketing, product, and finance.
3. Invest in Talent Infrastructure: Build operating teams with deep experience in scaling technology-enabled businesses. Use a mix of full-time and fractional expertise where needed.
4. Prioritize Customer-Centric Metrics: Institutions should measure leading indicators (e.g., churn, NRR, NPS, upsell rates) as early signals of traction.
5. Leverage Install Base and Platform Capabilities: Rather than waiting for acquisitions, seek organic innovation within portfolio assets via tech-led services or modules.

Conclusion

The current exit drought is rewriting the private equity playbook. Portfolio value creation is now firmly rooted in operating execution, not just dealmaking or financial tweaking. As firms embrace longer hold periods, they are investing in leadership roles like CGOs, CDOs, and expanded operating teams to drive growth through pricing sophistication, marketing maturity, and platform-driven innovation. The organizations that embed operational discipline and cross-functional alignment are best positioned to unlock long-term value even in uncertain markets.

References:

BDO (2025), Private Equity Survey (referenced via Chief Outsiders Profit GPS framework) Financial Times+1Financial Times+1chiefoutsiders.com Business Insider (2024), “Move over, dealmakers … rising stars of private equity” Business Insider ON Partners (2024), “Private Equity Talent Trends Report” onpartners.com PwC (2024), “How private equity operating partner roles are changing” Growth Equity Interview Guide+2PwC+2Wikipedia+2 McKinsey & Company (2024), “Bridging private equity’s value creation gap” McKinsey & Company EY (2024), “Three ways CFOs are adapting to emerging private equity …” ey.com Profit GPS framework, Chief Outsiders blog (2025) chiefoutsiders.com+1Reuters+1 Fractional CMO strategies, MovingMinds article (date) Moving Minds Role of CGO, AccurServices / Vista Equity Partners (2023 data) Reuters+2ACCUR Recruiting Services+2Business Insider+2 Rise of CGOs in accounting firms, Woodard report (2025) Woodard Report Financial Stability Oversight Council Annual Report (2024) U.S. Department of the Treasury Continuations / exit trends, Financial Times & newsletter (July 2025) Financial TimesFinancial TimesFinancial Times