This article and the accompanying slide deck are part of a series exploring how companies in specific industries can adopt the mindset, expertise, and ambition required to win in an AI-first world.
AI in private equity has been a source of contradictions and consternation. Many PE leaders believe strongly in the value creation potential in AI and are investing meaningfully in talent and technology. Investors expect higher returns from their PE investments due to AI.
The actual impact of AI on the sector in 2025, however, has been modest. Few firms can show meaningful returns from AI in many of their portfolio companies. The outliers that have created significant value—and are showcased at PE conferences—remain the exception.
The reason is simple: Although many PE-backed companies have deployed AI tools across the portfolio, few have done the hard work of transforming their operating model or value proposition to capture real value. Even fewer have done the harder work of becoming AI-first, putting AI and agents at the center of how they make decisions and operate.
More Reshape, Less Deploy
Our central framework for understanding this opportunity is one that we have used in hundreds of AI transformations: deploy, reshape, invent.
Deploy involves handing out AI tool licenses to employees without changing anything about how the organization operates. This is what most PE portfolio companies are doing today: Give everyone a license to the company’s large language model of choice and assume that the efficiency will follow. Deploying AI is worth doing. It will make some employees more productive. But it rarely creates measurable and meaningful value.
Reshape requires fundamentally rethinking the roles, organizational structure, and operating model to ensure that productivity improvements are real and scalable and flow through to the P&L.
Invent is about building new offerings for your customers in which AI is integrated into the core product. It is the hardest part of AI transformation to get right, but for companies in specific industries it is the most important.
PE leaders need to evolve their AI strategy away from simply deploying tools and toward reshaping organizations and selectively re-inventing their business.
Reshape: The Path to Greater Profitability and Efficiency
In most areas AI does not operate as a direct substitute for employees but a force multiplier that can automate a subset of tasks, generate novel insights, and inform better decision making. When AI is simply a substitute all you need to do is replace high-cost employees with lower-cost AI agents.
When AI is a force multiplier employees must optimize their use of AI tools and rethink their workflows—while leaders must align role definitions and organizational structures. For an AI-first company this optimization comes organically, but for most established players it requires hard work to overcome organizational inertia and gravity. Simply handing over the tools will not translate into P&L impact.
For PE firms, realizing value in the reshape phase requires writing new playbooks that all or nearly all of their portfolio companies can adopt. Leaders will need to reimagine how work gets done job function by job function. They can then pilot the approach at one portfolio company and translate that playbook to other companies even in different industries. R&D, sales, marketing, and customer service are currently the most promising early areas to apply AI, given their size and the sophistication of the relevant tools.
PE leaders should run initiatives across several portfolio companies in parallel to test whether they are actually changing their operating models and acheiving P&L results. This structured approach ensure that the AI tools are creating measurable impact.
Invent: Transformation of the value proposition
Invent is high investment, high risk, and high reward. It requires fundamental rethinking of your customer value proposition to build new business models or revenue streams. Firms need to be selective in choosing this option. Invent should be reserved for industries in which AI carries an outsized risk or opportunity. Software, digital services, media, and business process optimization are prime candidates. There is not an invent playbook. It will require meaningful focus from both the CEO and the board to succeed.
AI has the potential to drive meaningful impact across PE portfolio companies. The deploy, reshape, invent framework is a powerful way to ensure you are prioritizing initiatives and creating sustainable and replicable change.
