Integrating AI into Value Creation Strategies

Guest: David Rowley, Operating Partner at Diversis Capital
Host: Alex Rawlings
Topic: Product Strategy, Artificial Intelligence, and the Evolving Role of the Operating Partner

🔍 Episode Overview:

In this episode, Alex Rawlings is joined by David Rowley, Operating Partner at Diversis Capital, to explore how private equity can drive value creation through smarter product strategies and the integration of artificial intelligence. With a career spanning back to the 1980s in software product development, David shares practical insights into aligning executive teams with PE theses, building agile innovation pods, and how AI is transforming both product development and organizational structures.

💡 Key Discussion Points:

• The Critical Role of Alignment:
  David highlights that one of the most frequent causes of failure in portfolio companies is a lack of alignment between leadership and the PE firm's investment thesis.
• Product Strategy Framework:
  Distinguishing between goals, vision, and strategy, David explains his approach to creating adaptive product strategies optimized for optionality and driven by data.
• AI’s Evolving Impact:
  David discusses how AI is reshaping product development, comparing the current inflection point to the rise of agile methodologies in the early 2000s. He introduces the concept of small, highly-focused “cocktail party” innovation pods to build and iterate rapidly.
• Scaling Innovation Across Portfolio Companies:
  He emphasizes the need for organizational models that support rapid, creative innovation while maintaining core operations—balancing “keeping the lights on” with breakthrough work.
• Grassroots AI Adoption:
  David shares how he's cultivating a culture of experimentation across Diversis’ portfolio companies, allowing individual contributors to explore AI tools, sparking internal champions and grassroots innovation.
• Avoiding AI Hype Distractions:
  With AI now included in many value creation plans, David outlines how to distinguish between superficial use cases and those that drive meaningful operational improvements.
• Leveraging CTO Experience as an Operating Partner:
  David reflects on how his hands-on CTO background across multiple sectors enhances his intuition and effectiveness in the PE world—particularly when decisions must be made before data is complete.
• Trends in the Operating Partner Role:
  From a recent operating partner forum, David notes the growing trend of more hands-on involvement from operating partners, suggesting a broader shift in private equity away from consultants and toward in-house expertise.

⏱️ Timestamps:

00:00 – Introduction to David Rowley and today’s topics
 01:28 – Biggest mistake PE firms make: lack of leadership alignment
 02:50 – Defining product strategy vs. goals and vision
 05:10 – Key indicators for pivoting product strategy
 06:32 – How AI is changing product development structures
 08:55 – Traits and structure of high-performing innovation teams
 10:42 – Balancing innovation pods with ongoing operations
 12:31 – David’s early exposure to AI (40 years ago!)
 14:52 – Deploying AI across portfolio companies
 16:44 – Using AI agents in business operations
 17:39 – Avoiding AI distractions and integrating AI into value creation
 20:00 – Testing leadership alignment through AI transformation
 21:14 – From CTO to operating partner: Lessons and intuition
 23:08 – Takeaways from the Operating Partner Networking Forum
 24:58 – Trend toward in-house expertise and interim CTO roles
 25:51 – How to connect with David
 26:20 – Wrap-up and final thoughts