Shownotes
In this episode, Jim Forrest shares his journey from bagging groceries at age six to becoming Chairman of multiple high-performing companies. He reflects on formative lessons from his father, early career missteps, and the customer-first mindset that shaped his leadership style. Jim discusses building great teams, the importance of process and strategic focus, and his role in mentoring rising leaders while helping shape a lasting culture of performance and accountability.
Chapters:
- 00:00 Introduction
- 06:14 Customer Focus & Early Lessons
- 12:35 Leadership & Process Thinking
- 18:13 Culture, Boards & Mentorship
- 22:18 Strategy Starts with the Problem
- 30:37 What Makes a Great Company
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You'll also find other Microcap Moments episodes, alongside our series Everyday Heroes and Bigger. Stronger. Faster., highlighting the people and stories that make the microcap space unique.
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This podcast is the property of Shore Capital Partners LLC. None of the content herein is investment advice, an offer of investment advisory services, or a recommendation or offer relating to any security. See the “Terms of Use” page on the Shore Capital website for other important information.
Transcripts
Welcome to Microcap Moments, a podcast from Shore Capital Partners that highlights the stories of founders, investors, and leaders who have taken on the challenge of transforming ideas and small companies into high growth organizations.
Michael Burcham:The journey of building and scaling a business takes one down many unexpected paths.
Michael Burcham:It's a journey where we learn from our mistakes fall down often, but have the entrepreneurial grit to pick ourselves up and persevere.
Michael Burcham:Within this series, we will share these stories of success and failure of the challenges and the rewards faced by those who dare to dream big and through their lessons learned.
Michael Burcham:We hope to inspire others who are on a similar journey of becoming, growing and leading.
Michael Burcham:In this episode, I am talking to Jim Forrest, the Chairman of Shore Capital.
Michael Burcham:Jim has been a key part of Shore Capital's leadership since our founding.
Michael Burcham:Prior to Shore Capital, Jim spent 20 years as Managing Director of Wind Point Partners, a private equity firm in Chicago, Illinois.
Michael Burcham:There he focused on investments in industrial manufacturing, business to business services, healthcare, and the software and electronics industries.
Michael Burcham:He was also frequently involved in managing troubled portfolio companies, having served as interim CEO of a variety of Wind Point's investments.
Michael Burcham:Prior to joining Wind Point Partners in 1988, Jim was with Gould, a Chicago diversified industrials company, where he ran several international electronics businesses during his 14 years with the firm.
Michael Burcham:During his 35 years in venture capital and private equity, Jim has served on approximately 40 boards of directors, ranging from startups to companies with revenues well over $1B.
Michael Burcham:Jim's focus in his investments is to identify emerging customer needs in attractive markets, and subsequently developing defensible strategies for growth, the ultimate foundation for wealth and job creation.
Michael Burcham:Jim also previously served on the Board of Overseers of the Hoover Institution at Stanford University.
Michael Burcham:Hoover is one of the nation's preeminent public policy research institutions where it seeks to improve the human condition by advancing ideas that promote economic opportunity and prosperity through free market principles.
Michael Burcham:Jim earned his Bachelor of Science degree in electrical engineering from Michigan State University and received his MBA from Harvard Business School.
Michael Burcham:I thoroughly enjoyed this interview with Jim and I think you will as well.
Michael Burcham:Jim, welcome to our podcast.
Michael Burcham:We're really glad to have you today.
Jim Forrest:I'm happy to be here.
Jim Forrest:Thank you for inviting me.
Michael Burcham:My pleasure.
Michael Burcham:I want us to start by you just sharing a little bit of your career journey and what got you here at this moment in your career.
Jim Forrest:Certainly, well, I'm a Navy brat by background.
Jim Forrest:My father was in the Navy.
Jim Forrest:He enlisted in the Navy before World War II at the age of 17.
Jim Forrest:Having come from a broken family where he was, the man of the family went from the time he was 10.
Jim Forrest:Self achieved he ended up going to the Naval Prep School and then the Naval Academy, and ended up making Admiral after being an enlisted man for two years.
Jim Forrest:So there's nothing in my story that can beat what my father did.
Jim Forrest:That's something you really should know.
Jim Forrest:He was just an amazing man to go from a broken family to make Admiral in the Navy.
Jim Forrest:We always had to work for everything that we did.
Jim Forrest:So if I wanted something, I had to work.
Jim Forrest:I started working bagging groceries when I was six years old, the commissary, and then, you know, selling things door to door, renting out a go-kart that I had.
Jim Forrest:I did all sorts of things.
Jim Forrest:Started working full-time when I was 16 at a drugstore and I'd work 35 hours one week, 53 hours the next week.
Jim Forrest:I always had to have money and so I always worked.
Jim Forrest:Best thing that ever happened to me.
Jim Forrest:A lesson that happened to me at the time I remember, which I think would be important for many as my father had said, go find a job.
Jim Forrest:And I went downtown to find a job, and I found out there were four places and none of them had a job available.
Jim Forrest:My father then told me, well, go back and try again.
Jim Forrest:And I said, but there's no jobs.
Jim Forrest:He says, try again.
Jim Forrest:So the next weekend I went downtown to try to get a job.
Jim Forrest:No jobs available.
Jim Forrest:I came back and told him, what am I supposed to do?
Jim Forrest:There's no jobs.
Jim Forrest:He says, try again.
Jim Forrest:And so I went downtown the next weekend and sure enough, one of the guys a druggist said, oh, I know you.
Jim Forrest:You've been looking for a job, you're hired.
Jim Forrest:And I went home and I talked to my father and he said, what'd you learn?
Jim Forrest:He said, I don't know.
Jim Forrest:And I didn't know at 16.
Jim Forrest:He says, you keep trying.
Jim Forrest:If somebody says, no, don't give up.
Jim Forrest:Keep trying.
Jim Forrest:Which is a great, great lesson.
Jim Forrest:I remember in the same place, this is very important to me, is that I told him after a month there I was gonna quit.
Jim Forrest:He said, why?
Jim Forrest:I said, the drug has asked me to clean the bathroom.
Jim Forrest:And he sat down and he never swore, but he swore this time.
Jim Forrest:But he said to me, listen, if they ask you to do a job and they're paying you to do the job, you do it to the best of your ability.
Jim Forrest:'cause if it wasn't worth anything, they wouldn't pay you.
Jim Forrest:And the second thing is, you're never better than anybody.
Jim Forrest:Okay?
Jim Forrest:If they ask you to do a job, you do the job, you may just be different.
Jim Forrest:And that has guided me my whole life and all of my business experience and factory floors and service organizations alike.
Jim Forrest:I'm no better than anybody else.
Jim Forrest:I may be different, but I'm no better.
Jim Forrest:And those are really important lessons.
Jim Forrest:In any case, I went to Michigan State University, barely got in.
Jim Forrest:I only got into one university.
Jim Forrest:I applied to 12 because I was a misspent youth working all the time and playing drums in a rock band, but got a degree in electrical engineering, minors in physics, math, and met my wife there in 1968.
Jim Forrest:We've been married for 52 years.
Jim Forrest:Once I got out, I started working as electrical engineer and I worked for the army.
Jim Forrest:I worked on underground nuclear tests and ordinance and bombs and things like that.
Jim Forrest:And then went back to school and got a degree in business in 1975 from Harvard.
Jim Forrest:From there, I joined the electronic industry where I started in marketing and then rapidly because of the way electronic industry is, went into engineering and market development and product market development, and then sales, sales management, and then ended up running a division of Gould when I was 32 years old in uh, 1981.
Jim Forrest:And as it sounds unusual, but it's really not because in that industry, people with technical knowledge were the ones not unlike what happens in Silicon Valley today.
Jim Forrest:They're very young when they start because technical knowledge is the big key success factor.
Jim Forrest:For your success.
Jim Forrest:And so I did that for a number of years.
Michael Burcham:In the upcoming segment, Jim shares some early lessons learned through two failures when creating products.
Michael Burcham:This simply did not resonate with its customers.
Michael Burcham:He shares with us.
Michael Burcham:People buy your solutions to their problems, not your products.
Michael Burcham:From there, he learned to be outwardly looking and to focus on customer needs to deliver really meaningful value.
Jim Forrest:There were a couple of things that I really learned at the time that I think is important for folks to think about.
Jim Forrest:In 1980 or 81, we were developing two new products and keeping them totally secret to ourselves.
Jim Forrest:One was a strip chart recorder used for doing ECGs and things, and the other was an XY recorder.
Jim Forrest:We thought we could take this system and compete against Hewlett Packard.
Jim Forrest:So we developed these two products in secret and then we took them out to the market and showed them to our potential customers.
Jim Forrest:And the customers who looked at the XY recorder said, that's an interesting product, but why would I stop buying from Hewlett Packard?
Jim Forrest:You don't have a price or competitive advantage.
Jim Forrest:There's no reason.
Jim Forrest:And so our hearts fell.
Jim Forrest:We'd spent $2 million developing this, which is a lot of money at the time.
Michael Burcham:Wow, sure is.
Jim Forrest:Fortunately my boss was in on this thing as well.
Jim Forrest:We also were developing another tech.
Jim Forrest:Technology kind of in a telegraphic recorder.
Jim Forrest:We came out, introduced it to trade show, showed it to our customers and said, look at this.
Jim Forrest:Isn't this great?
Jim Forrest:And they said, that's pretty interesting.
Jim Forrest:Who's gonna buy it?
Jim Forrest:And I said, well, you are.
Jim Forrest:No, I don't think so.
Jim Forrest:And so we had two complete failures.
Jim Forrest:So what did I learn at the time?
Jim Forrest:What I learned at the time is don't care about products.
Jim Forrest:It's really interesting about technology, and I think you said something to this effect of, in a recent comment you made on LinkedIn, Michael, but products are not what people buy solutions to.
Jim Forrest:Their problems are what people buy.
Michael Burcham:You're absolutely right, Jim.
Jim Forrest:And when I eventually joined the venture capital world, I began to realize that don't think about hot products.
Jim Forrest:Those are interesting, but they better come with a customer list of 25 people who have said that it's so compelling to them that they can't exist in their business without it.
Jim Forrest:Now you've got something there.
Jim Forrest:Doesn't mean you're successful, but if you have a list of 25 customers, and that means you're outward looking.
Jim Forrest:And so all my life in business, I have been outward looking.
Jim Forrest:I'm not focused so much on the inside of a company.
Jim Forrest:I've always focused on the outside.
Jim Forrest:What do customers think?
Jim Forrest:What do customers want, and how can I fulfill their needs?
Michael Burcham:That's an excellent perspective.
Michael Burcham:So I wanted to ask a little bit deeper question on some lessons learned, because you've scaled leadership from running a department to basically running the company.
Michael Burcham:If you were to reflect on one or two "ahas" or leadership lessons that you could share with our listeners in your journey, what comes to top of mind for you from a lesson learned, from a leadership point of view?
Jim Forrest:I had a boss who at one time had said, if you really want to go to the next level, you better have a mastery of at least three of five disciplines in this case to be a general manager in the electronic industry, you had to understand sales and marketing.
Jim Forrest:You had to understand engineering, and you have to understand finance.
Jim Forrest:Okay.
Jim Forrest:Sales and marketing kind of go hand in hand, right?
Jim Forrest:But you can't really manage a business without being expert at finance.
Jim Forrest:If someone says, that person's a great CEO, but you gotta get 'em a good finance guy.
Jim Forrest:Wrong.
Jim Forrest:Because the devil and the details are all in the numbers, and the best CEOs have an instinctive ability to take a look at a spreadsheet or a look at a report and know what is right and what is wrong.
Jim Forrest:I'd say another thing that would be most important to me is the older you get, the more you need to trust your gut.
Jim Forrest:In the beginning, you may have doubts about people when you're young.
Jim Forrest:And you just don't know, kind of know what to do, whether you're right or wrong.
Jim Forrest:The older you get, the more your gut is.
Jim Forrest:Right.
Jim Forrest:And instead of like in the beginning where it was ready, aim, fire, you'll get to a point when you get old enough, it's ready, fire, aim, you know there's something wrong.
Jim Forrest:And invariably, what your people will tell you is why did you wait so long to change that person out because your gut was telling you and your logic.
Jim Forrest:And if you'd really gone through and measured what it was, that's where you would've been ended up.
Michael Burcham:Yeah, so let's take each of those for a minute.
Michael Burcham:I think of your financials as the sort of health index of your company.
Michael Burcham:Just like if you went to a doctor and they took your height and your weight and your blood pressure and heart rates that says, okay, this person's generally healthy.
Michael Burcham:And it seems like financials are basically a health checkup of the company.
Michael Burcham:And if the company's in good health, the financials should be in good shape.
Michael Burcham:And I think your comment about A CEO being able to look at a set of financials and pick out something that's probably systemically wrong is probably right on the money.
Michael Burcham:Would you say that's a good analogy?
Jim Forrest:Absolutely right, because if you can't measure it, you can't manage it.
Jim Forrest:Justin says this all the time, he stole a line from me of course.
Michael Burcham:Of course he did.
Jim Forrest:But I stole a line from someone else.
Jim Forrest:My other favorite line, which I use in business is I've had young people come up to me and say, geez, Jim, you know so much.
Jim Forrest:How do you know so much?
Jim Forrest:And I said, well, my favorite quote was from Walter Riston and from George Bernard Shaw.
Jim Forrest:I believe it was.
Jim Forrest:That quote was good judgment comes from experience, but experience comes from bad judgment.
Michael Burcham:Yeah.
Jim Forrest:And so those two examples I gave you about how wise I am now regarding being focused on customer needs.
Jim Forrest:Yeah.
Jim Forrest:Instead of focused on product, all come from good judgment comes from experience.
Jim Forrest:Experience comes from bad judgment.
Jim Forrest:I know this 'cause I screwed up.
Michael Burcham:Sure.
Jim Forrest:But fortunately I didn't get fired because the whole organization screwed up.
Jim Forrest:We did it together.
Michael Burcham:Your example of as you get older, you go with your gut is really a testament to years and years of insight, and years and years of making good and bad choices.
Michael Burcham:Your instincts and your intuitive knowledge almost becomes your driver, don't you think?
Jim Forrest:I would agree.
Jim Forrest:It becomes second nature, I suppose.
Jim Forrest:It's almost like on a athletic team, running back, running a route or a basketball player, shooting a three point shot, it becomes a practice, practice, practice makes perfect.
Jim Forrest:Understand what you did right, understand what you did wrong.
Jim Forrest:One of the things that attracted me most to Shore, for example, I'm a process engineer by background.
Jim Forrest:I mean, everything you do in engineering or for that matter, physics or for that matter, anything is mathematical and it's process oriented.
Jim Forrest:And when I met the guys and they had the barbell theory of how to invest and I process by which they wanted to follow.
Jim Forrest:Even though compared to today, it was rudimentary.
Jim Forrest:I identified with that very much.
Jim Forrest:Because you know, you can get a good burger at Burger King, but you can't always get a good burger at Burger King because they don't run their processes with the discipline that McDonald's does.
Jim Forrest:Now, McDonald's may make a slightly inferior burger.
Jim Forrest:But it is always the same.
Jim Forrest:And it's always gonna be made exactly the same way.
Jim Forrest:They take the same inputs, they add value, and is yielded as a burger that people like to eat.
Jim Forrest:And so process is everything.
Jim Forrest:The same thing isn't true, whether it's in urgent care.
Jim Forrest:The same thing is true, whether it's making technical equipment, whether or not it's running our autism clinics, its process is everything.
Jim Forrest:And so I fit here perfectly.
Michael Burcham:In this next segment, I asked Jim to talk about the early days of his time with Shore Capital and how he helped shape the firm that we have become today.
Michael Burcham:So you started to touch on some of the things that attracted you to Shore.
Michael Burcham:Let's talk about those early days at Shore, some of your input and involvement.
Michael Burcham:You mentioned you liked the barbell theory, but let's just go a little deeper in those early days and some of your experiences with our four founders and how you helped shape what Shore has become today.
Jim Forrest:Oh yeah, that'd be a lot of fun.
Jim Forrest:I've been with Wind Point Partners another firm for about 20 years and left them in September of 2008.
Jim Forrest:It's a mutual parting.
Jim Forrest:I had a different way of thinking than my other partners and they can go their way.
Jim Forrest:I went my way.
Jim Forrest:I started making investments in angel investments and other startup investments and then Mike Cooper, who at been Wind Point Partners, called me up and asked if I would wait with them in June, right after they were formed to see whether I would be an advisor.
Jim Forrest:So I came into town and they had offices, I think at 60 East Lake Street.
Jim Forrest:Maybe it was 50 East Lake.
Jim Forrest:I forget what it was, but I go into the offices and they're awful.
Jim Forrest:They're terrible.
Jim Forrest:I mean, it was down and dirty.
Jim Forrest:Nobody had an office.
Jim Forrest:People had tables for their desks.
Jim Forrest:It was informal.
Jim Forrest:The men's room key and, well, ladies' room key had a 10 pound weight attached.
Jim Forrest:'cause they didn't want anybody stealing the key to the restrooms.
Jim Forrest:This was Class D or classy office space.
Jim Forrest:Their one window looked out at the brick side of another wall, of another building, and I walked in, coming from the venture world.
Jim Forrest:And said, this is the greatest because what you find in venture is some people raise a whole bunch of money and then spend it on offices instead of spending it on the key success factors.
Jim Forrest:So to get them to the finish line.
Jim Forrest:And these folks, these young guys were working their butts off not taking any salary at the time.
Jim Forrest:They had a strategy.
Jim Forrest:I love the vertical market strategy that they had.
Jim Forrest:They were living hand in mouth and they weren't spending money where it didn't need to be spent.
Jim Forrest:I remember getting, seeing pictures of them three wide.
Jim Forrest:In a, uh, not a Spirit airline, Southwest Airlines.
Jim Forrest:Mm-hmm.
Jim Forrest:Going on a due diligence trip.
Jim Forrest:Everybody did everything.
Jim Forrest:They also, at the time, and I agreed to be an advisor and then shortly thereafter they asked me whether I'd be chairman and I asked 'em what that paid.
Jim Forrest:They said nothing.
Jim Forrest:I said Perfect 'cause I don't want a job.
Jim Forrest:But I started coming to Monday morning meetings just to see how they were.
Jim Forrest:'cause I hadn't invested any money yet.
Jim Forrest:Just look at the way that they ran their business.
Jim Forrest:And I was quite impressed.
Jim Forrest:And so I invested in the first business that we did.
Jim Forrest:Which was great and have been around since then.
Michael Burcham:So Jim, you've left an important mark on Shore.
Michael Burcham:You mentioned meeting with these four fairly scrappy young men and what was Class D office space as you started working with them.
Michael Burcham:Tell us some of the ways that you helped really shape the overall direction for the firm.
Michael Burcham:'cause I know you've had your fingerprints all over it, so tell us a little bit about that.
Jim Forrest:Well, I think much of the experience I had was actually attributed to them.
Jim Forrest:And lemme tell you why.
Michael Burcham:Okay.
Jim Forrest:A lot of times you go into organizations like this, especially in the financial institution world where it seems like everybody comes out with an MBA and, and I went to Harvard, so I know this very well and, and they think they know everything.
Jim Forrest:These four guys respected me for what I knew.
Jim Forrest:They asked me for help, they asked me for guidance and when they would come up to naughty questions.
Jim Forrest:Now, I would never tell them an answer, especially if it was 70 30 or 80 20.
Jim Forrest:I would ask them, what questions would you ask in order to make it a hundred zero?
Michael Burcham:Yeah.
Jim Forrest:To answer the question.
Michael Burcham:Right.
Jim Forrest:At 51 49, we'd work together, but they always were asking me questions and I was always asking them questions back.
Jim Forrest:Don't give people the answer.
Jim Forrest:I liked that way of working and they were respectful and they listened.
Jim Forrest:The other thing they did, they understood the value of great board members.
Jim Forrest:I remember going to Sirona Infusion, they had a great board with two guys who were industry icons.
Jim Forrest:And I went to the board meeting, I said, I don't understand why I'm here.
Jim Forrest:I don't know anything about Home Infusion.
Jim Forrest:And they said, no, no, no, we need you.
Jim Forrest:Because general business advice, I may not know about home Infusion, but I do know how to make money.
Jim Forrest:And most information in most is 95% transferable.
Jim Forrest:So I think I also fit in with them in terms of the fun factor because, and Michael, you know me.
Jim Forrest:We've been around each other for almost at the same time.
Jim Forrest:You knew Justin before.
Jim Forrest:You knew.
Jim Forrest:I knew Justin.
Michael Burcham:Sure.
Jim Forrest:And I like lending levity in board meetings.
Jim Forrest:Making people relax, making people feel enjoyed.
Jim Forrest:I think it's my role.
Jim Forrest:I can help take a tense situation and diffuse it.
Michael Burcham:Sure.
Michael Burcham:Have people, I've watched you do that.
Jim Forrest:Yes.
Jim Forrest:And I enjoy doing that.
Jim Forrest:I think that's an important skill of a manager.
Jim Forrest:You don't want people on pins and needles all the time.
Jim Forrest:And worrying that if they make a mistake, they're gonna be held to a standard that they shouldn't be.
Michael Burcham:Well, if you keep 'em on pins and needles, you never hear quite all the truth.
Jim Forrest:That's right.
Michael Burcham:Every phrase is guarded for fear of retribution, so bringing that to a meeting gets people to openly talk about what's going on, and that's what you have to do to help a business.
Michael Burcham:You can't be hedging all the time.
Jim Forrest:Well, that's right.
Jim Forrest:One of these bosses, the best boss I ever had, as a matter of fact, used to tell me, tell me the bad.
Jim Forrest:And I said to him, what do you mean tell me the bad?
Jim Forrest:He said, listen, something bad might happen.
Jim Forrest:And eventually it'll get around to me if you don't tell me, but you'll go first.
Jim Forrest:He says, if you tell me the bad, we can work it together and maybe we can make sure it doesn't come real bad and we'll both survive.
Jim Forrest:He says, I don't care about the good.
Jim Forrest:The good takes care of itself.
Jim Forrest:What we need to work on is the bad.
Jim Forrest:And that lesson has stuck with me the whole life.
Jim Forrest:When in our boards, in our companies, having folks be comfortable enough to tell you the bad, then we can work together as boards and as managers to solve the problems of the business.
Jim Forrest:And I think that's something that we emphasize at Shore through the openness of these.
Jim Forrest:Board meetings.
Jim Forrest:The board meetings we have here are unlike almost any board meetings I had in my previous partnership.
Michael Burcham:Yeah.
Michael Burcham:I tell folks that being an entrepreneur leader, when you focus on the bad is kinda like chewing glass.
Michael Burcham:You get to do it every day.
Michael Burcham:After a while, you get an acquired taste for it.
Michael Burcham:In the upcoming segment, Jim shares some of his insights from the boardroom, both in his advice to first time CEOs in working with a board of directors, as well as some advice for first time board members.
Michael Burcham:I love the phrase learn to ask questions.
Michael Burcham:Don't be telling the CEO what to do.
Michael Burcham:You've served on numerous boards for sure.
Michael Burcham:I want to ask sort of a two part question.
Michael Burcham:What are some of the insights you've gained from the boardroom that could help a first time CEO interact with their board?
Michael Burcham:And then I'm gonna follow up with a second part for board members, but let's start with anything that you've observed in board meetings and some insights that could help a first time CEO.
Michael Burcham:So what advice would you have for someone in that role?
Jim Forrest:Everybody who's on your board is there to help.
Jim Forrest:Nobody joins the board at zero compensation, zero other than perhaps upside some options without wanting to make the company successful.
Jim Forrest:They're not there to criticize.
Jim Forrest:They're not there to get your fired.
Jim Forrest:They're there to help.
Jim Forrest:And so take that at face value and use the skills that each one of them bring, and everybody brings something different.
Jim Forrest:Use the skills that they bring and ask them questions.
Jim Forrest:Follow up, interact with them.
Jim Forrest:They're not the enemy.
Jim Forrest:They're there to help.
Jim Forrest:And I've yet to see a situation in Shore where I've seen a board member try to undermine a management team.
Jim Forrest:I've yet to see one.
Jim Forrest:Nobody does it.
Michael Burcham:I haven't either.
Michael Burcham:That's a good one.
Michael Burcham:And sometimes that's a hard lesson learned, because I'm sure first time CEOs, you've got all this high powered knowledge in the room and you're a little nervous anyway.
Michael Burcham:And so a good reminder is.
Michael Burcham:Be open and honest and transparent and let them do what they can do best, which is help you and see perhaps how they could share some of their own lessons learned so you can avoid making the same mistakes they've made perhaps.
Jim Forrest:That's right, and that's where I think the lead director and the partner for each deal come to bear.
Jim Forrest:They need to coach the new CEO that this is the case, to reach out to the rest of the board as appropriate, especially during crisis periods, but also every day when you have a question, you can't answer it.
Jim Forrest:When I worked for a large corporation, we had a department for quality.
Jim Forrest:We had a legal department, we had a human resources department.
Jim Forrest:We had all sorts of big departments.
Jim Forrest:In these big companies, everybody has an internal resource.
Jim Forrest:When you're running a small company, you don't have that.
Jim Forrest:That board is there to provide that.
Jim Forrest:Essentially for free.
Jim Forrest:So if you need a person, they may have somebody in their network.
Jim Forrest:If you need knowledge on how you might do your audit, they've gone through it before.
Jim Forrest:They can help guide you through an audit.
Jim Forrest:They might be able to help guide you through implementation of better customer service metrics, but they've been there and they're free resource.
Jim Forrest:You don't have to have them hired and on your staff to get the value from them.
Michael Burcham:It's a good point and good to remember.
Michael Burcham:So I told you I was gonna ask the reverse or inverse of that question.
Michael Burcham:So while board members have such great intent, many come from much larger experiences and we're in microcap.
Michael Burcham:So what advice would you give a first time board member coming on a Shore board?
Michael Burcham:They could help them be their best self in that boardroom at a Shore company.
Jim Forrest:Yes, take the time to meet with the CEO so that they understand where you come from, what your background is.
Jim Forrest:We take it for granted often that they know who you are and often they do not, especially in some of these larger boards where you may have six or seven outside people and that becomes more difficult.
Jim Forrest:The other advice I would give to every board member and some more than others who will go and mention.
Jim Forrest:But ask questions.
Jim Forrest:Don't be telling people your opinion, your thoughts on what they should do.
Michael Burcham:So true.
Michael Burcham:Oh, it's just so true.
Jim Forrest:You know when you tell people what to do and they do it, then you own it and you, we don't want that.
Jim Forrest:I did that same boss once told me, he said, if I tell you to do something and you do it and it's wrong, it's still your fault.
Jim Forrest:And that's another thing that the CEO should remember.
Jim Forrest:If I tell you to do something and it's wrong and you do it, it's still your fault.
Jim Forrest:I remember that so well.
Michael Burcham:Wow.
Michael Burcham:Good lesson.
Jim Forrest:What that, what does that mean?
Jim Forrest:That means push back.
Jim Forrest:If you're the CEO, don't do something that you know is not right.
Jim Forrest:If somebody's pushing you to do it from the board.
Jim Forrest:Yeah.
Jim Forrest:Just say I can't do it, and here are the reasons why stand up.
Jim Forrest:So if board members should ask questions, should provide direction at a minimum.
Jim Forrest:You can guide people through the questions that you ask to the point where you think they should be, but it's easier to get a horse to follow you than it is to push the horse.
Michael Burcham:Sure.
Michael Burcham:Absolutely.
Michael Burcham:In the following segment, Jim and I talk about the importance of good strategy and what makes a really great strategy.
Michael Burcham:He frames the essential starting point as what is the problem to be solved, and then who specifically has that problem?
Michael Burcham:Jim then shares several examples of the work involved in analyzing the competitor as well as the marketplace.
Michael Burcham:So Jim, you know, we've known each other well over a decade now.
Michael Burcham:You have a very keen eye for strategy and uh, it's such an important part of what we do at Shore, because we're as much company builders as we are company investors, and so strategy and execution here go hand in hand to create real enterprise value.
Michael Burcham:So would you share some of your insights with our listeners of what makes good strategy and your point of view?
Jim Forrest:Certainly every opportunity that we end up addressing to build a business starts with a problem that needs to be solved.
Jim Forrest:Everything is a problem that needs to be solved.
Jim Forrest:People don't go to urgent care because they don't have a problem.
Jim Forrest:They go to urgent care 'cause they have a problem.
Jim Forrest:They don't, for that matter, go to a restaurant because they don't have a need.
Jim Forrest:They go to a restaurant 'cause they have a need.
Jim Forrest:So once you perceive a market opportunity, again, not a product, or maybe it is a product, somebody brings it up.
Jim Forrest:Once you perceive a market opportunity, the first thing you have to do is validate.
Jim Forrest:Do customers really exist that have this issue, have this problem that needs to be solved?
Jim Forrest:Right?
Jim Forrest:So you have to do your homework in terms of understanding market.
Jim Forrest:And to me, a market is a group of customers who, when faced with similar buying circumstances will behave similarly.
Jim Forrest:You've heard me say this a hundred times.
Michael Burcham:Sure.
Jim Forrest:There's no wheelchair market.
Jim Forrest:There are submarkets within wheelchair sports wheel.
Jim Forrest:Wheelchairs, heavy wheelchairs, airplane wheelchairs.
Jim Forrest:So define your market very precisely and then define the problem that it is a customers ask you to solve.
Jim Forrest:Once you've decided that this actually may be a real opportunity, then you need to aggregate the number of customers.
Jim Forrest:How big?
Jim Forrest:Is this, how many are there?
Jim Forrest:What is the price sensitivity?
Jim Forrest:What are the other issues in the marketing mix that you need to understand for customers?
Jim Forrest:Having gone through that process now you're in a really good position to understand what role might vendors play and help new fashion, a solution to the customer's problems.
Jim Forrest:Because we can't do everything by ourselves.
Michael Burcham:Right?
Michael Burcham:And if we try, we absolutely fail.
Jim Forrest:We fail.
Jim Forrest:There's a few things, key success factors that we have to do well, but we can rely on other people to bring resources to the game.
Michael Burcham:Absolutely.
Jim Forrest:What role does technology play in helping us to deliver these solutions?
Jim Forrest:Technology should have a role in virtually every function in our businesses, in every function across the company.
Jim Forrest:If there's an area which I would say sure could improve in the most, is that a nice way to say it?
Michael Burcham:Yeah, sure.
Michael Burcham:Absolutely.
Michael Burcham:None of us are perfect yet.
Jim Forrest:Is in competition.
Jim Forrest:I'm gonna relate a story that occurred to me when I was first manager, and this has stuck with me.
Jim Forrest:Electronic industries used to have 18 month product cycles.
Jim Forrest:If you miss a product cycle, you're out of business.
Jim Forrest:And also costs would come down by half.
Jim Forrest:It's Moore's Law every 18 months.
Jim Forrest:So the company that I was running at the time, we beat Hewlett Packard, a different story.
Jim Forrest:They dropped out of our market.
Jim Forrest:We were very happy.
Jim Forrest:And all of a sudden there's a new Japanese entrant called Watanabe.
Jim Forrest:And they were taking share from us.
Jim Forrest:They were selling basically a very similar product, maybe 90% of our performance for about 70% of the price.
Jim Forrest:And so we were losing share and we were losing share to the big auto companies and aircraft companies and all sorts of other folks.
Jim Forrest:And we kept thinking they were dumping.
Jim Forrest:But I always believed in understanding is the art at war, right?
Jim Forrest:Understanding the competition.
Jim Forrest:And so I started at that point in time, I had been at that point in time visiting every competitor I had in the world.
Jim Forrest:It was a worldwide business.
Jim Forrest:And you may think that's funny, Jim, how you to visit?
Jim Forrest:You know everybody in the world.
Jim Forrest:I had competitors in Austria and Germany and England.
Jim Forrest:I had competitors in Japan and in the United States.
Jim Forrest:And so I called up the CEO of Watanabe.
Jim Forrest:It was in Yokohama, Japan, and I said, Hey, I'm coming over to Japan.
Jim Forrest:I wonder if I could stop by and just meet you and tell you a little bit about what we're doing, and maybe there's ways that we could work together.
Jim Forrest:He said, come on over.
Jim Forrest:And this little company, as it turns out, was run by a $10 billion man.
Jim Forrest:He had been the CEO of Panasonic's calculator business when it failed in the 1970s.
Jim Forrest:And so he was ushered out of Panasonic Matsushita, and here's this very sophisticated guy who had parachuted down into this little tiny company that was now our largest competitor.
Jim Forrest:So he invited me to go through the plant and I looked at it.
Jim Forrest:First off, he was doing a single flow Deming productivity pull versus continuous flow manufacturing.
Jim Forrest:There's another word I just forgot about it.
Jim Forrest:But in any case, the other thing is as I walked through the plant, turns out they were doing what were called quality circles at the time, which is if you ask the team on the floor to work together to take care of a problem, what would it be worth?
Jim Forrest:So I couldn't understand Katakana or whatever the language was at the time, but I could understand the math they had on their board, which was enumerated denominator and the denominator at that time.
Jim Forrest:I think it was a denominator was average hourly wage, and so I got that.
Jim Forrest:In the end, I couldn't understand anything else, but I did figure out what the average hourly wage was.
Jim Forrest:He didn't know I was gonna pick that up.
Jim Forrest:It turns out we were paying $10.50 an hour in Cleveland where my plant was.
Jim Forrest:He was paying $3.50 cents an hour.
Jim Forrest:We bought one of their machines in the US.
Jim Forrest:We cost reduced, it turns out, landed with duties and everything else they were making between 25 and 30% profit.
Jim Forrest:Turns out later on I was validated.
Jim Forrest:We found out from the company I was validated, so I had two choices.
Jim Forrest:Continue to try to lose money and go outta business.
Jim Forrest:Or at this point, because I knew the competitor, we moved 400 jobs down to Mexico and saved the company.
Jim Forrest:. This is why you need to understand your competition.
Jim Forrest:Because it's really easy to jump to conclusions.
Jim Forrest:Like, oh, they're losing money on everything they ship and you find out No, they're not.
Jim Forrest:You're not competitive.
Michael Burcham:Yeah.
Michael Burcham:They're actually making a pretty handsome margin.
Jim Forrest:They were making a very handsome margin and so.
Jim Forrest:I stress on all the boards that I'm on, and again, you and I have spoken together is what do you know about your competition?
Jim Forrest:And I don't want just a leaflet on their factory.
Jim Forrest:I don't want a leaflet on the services.
Jim Forrest:I wanna understand who their people are, how many cars are in the parking lot, what are they working on right now, what kind of machinery they think they have, what their cost structure might be, the whole works.
Jim Forrest:When you work in a competitive environment, you really have to understand that.
Michael Burcham:Sure.
Michael Burcham:It's almost like you're having to compare their business model.
Michael Burcham:To your business model.
Jim Forrest:Absolutely.
Michael Burcham:Which includes people, machines, technology, everything.
Jim Forrest:Everything.
Michael Burcham:Because if they can run that model at a lower cost structure, they're always gonna be.
Jim Forrest:You lose.
Michael Burcham:You just, you can't win against that.
Michael Burcham:You just can't.
Jim Forrest:Right.
Jim Forrest:And I grew up in the seventies and eighties when Japan was taking over everything and I was, would tell people, why do we move overseas?
Jim Forrest:The reason is if somebody's willing to do the work you are doing and you're charging a $1, and they'll do it for $0.30 you lose?
Jim Forrest:If they could do the same work.
Jim Forrest:So you have to react to that.
Michael Burcham:Cause your customer isn't gonna pay $0.70 more.
Jim Forrest:Correct.
Jim Forrest:And so through my whole life, the competitive knowledge has been important to me.
Jim Forrest:Another thing to understand as you think about a business opportunity is the environment you're in.
Jim Forrest:What do I mean by environment?
Jim Forrest:Well, are there rules or laws that might change that?
Jim Forrest:Could obviate the reason for you existing in a business or could potentially mightily affect your p and l. We had one business in Shore, for example, where the government came in and cut our reimbursement for code by 90% overnight, and there was nothing we could do.
Jim Forrest:Now if we'd thought about that prior to making the investment and we made money on the investment, but near as much as we should have or could have.
Jim Forrest:Maybe we would not have made that investment knowing that we're so much a function of regulatory change so every business has these outside forces that don't fit into customer's.
Jim Forrest:Competition, technology or vendors.
Jim Forrest:Right, outside forces that might affect standards, might change all sorts of stuff.
Jim Forrest:But Dan, if somebody in charge of that, by the way, somebody in the business should be in charge of customers, somebody in competition, some in technology, some vendors in some in environment.
Jim Forrest:You may ask, why didn't I say management?
Jim Forrest:I mentioned management last because it's only after you've understood these factors that you really know what kind of management you need.
Jim Forrest:Once you've understood customers, competition, technology, vendors, and environment, now you understand the management you have to have.
Jim Forrest:What distinctive competencies must you have inside your firm to pull off the strategy.
Jim Forrest:. Right.
Jim Forrest:And what are the key success factors to pulling off the strategy.
Jim Forrest:. So those are super important.
Jim Forrest:And as you may then recall, once we do these things, outfalls.
Jim Forrest:The marketing mix.
Jim Forrest:The marketing mix is a function of what you learn of all these things.
Jim Forrest:So the customers need this kind of a product, embodying this technology delivered in this kind of a fashion at such and such a price, et cetera.
Jim Forrest:It will have validated your strategy and the marketing mix reflects that.
Jim Forrest:If you wanna analyze a competitor.
Jim Forrest:I'd say at the same time, look at their marketing mix.
Jim Forrest:That will tell you their strategy.
Jim Forrest:It tells you about the products they wanna offer, the pricing, where they wanna sell them, who's gonna sell them for them, all the things that you need to know on the outside.
Jim Forrest:But then you gotta get inside the competitor.
Michael Burcham:In our final segment, I asked Jim to define what makes a great company.
Michael Burcham:He talks about a continuous focus on the outside to define what the customer really wants.
Michael Burcham:So Jim, talk to me about from your experience, how good companies behave versus bad companies behave.
Michael Burcham:So let's hear some of your thoughts on that.
Jim Forrest:This one is relatively simple to me, and I do this on due diligence checks a lot.
Jim Forrest:I'll walk on a factory floor or walk through somebody's office and you can ask someone, what do you do here?
Jim Forrest:Someone will come back, they say, I process accounts receivable, and that's okay.
Jim Forrest:That probably defines what their job is.
Jim Forrest:But the right answer would be, it's my job to make sure receivables get processed in the most efficient, effective fashion so we can collect cash and keep this company growing.
Jim Forrest:Without having bad debt.
Jim Forrest:You might ask somebody, what's your job?
Jim Forrest:And they say, it's my job to run the lathe.
Jim Forrest:Whereas the job actually is to deliver good parts to the customer.
Jim Forrest:Great companies focus entirely on the outside world.
Jim Forrest:They don't allow their staffs and their companies inside to devolve into interesting quarrels.
Jim Forrest:Where the quality guy is the manufacturing guy, and the manufacturing guy is mad at the engineering guy, and the engineering guy is mad at the salespeople, and all of a sudden they're all focused internally trying to win battles internally.
Jim Forrest:Great companies are a hundred percent focused all the time on what happened with a customer.
Jim Forrest:When I ran a company, if I had, for example, a manufacturing company, if I had an engineering guy disagreeing with a salesperson about what a customer needed, say, well, this is really simple.
Jim Forrest:We didn't need to argue about it.
Jim Forrest:The two of you are getting in an airplane.
Jim Forrest:You're gonna go visit three customers together and you're gonna come back and talk to me and tell me what you found.
Jim Forrest:Every time we would do that, we would come back with the people in agreement and having realized they were just misinterpreting each other, but now they understood what the customer really wanted.
Jim Forrest:And we can deliver it.
Jim Forrest:So the outside focus in a company should be 99% of the people, maybe 1% whose job is to empty the trash can.
Jim Forrest:You can't describe the job in terms that's meaningful to the customer, but even that, you could probably.
Michael Burcham:Sure you could.
Michael Burcham:Well, I like your example of the person who's processing the accounts receivable because in your answer of the correct job, you really focus on not what am I doing, but why it matters to the company in a bigger picture.
Michael Burcham:And I think when people understand not just what they should do, but why it matters in the bigger scheme to the customer and the market, that's when you win.
Jim Forrest:That's an excellent point.
Jim Forrest:I had never thought about it in quite that context, but you're right.
Michael Burcham:Because it's like I don't just move part A from left to right, but by my doing that, this is how we impact the business and our customers.
Michael Burcham:Then you've really got someone who's really bought into success of the business.
Jim Forrest:That's right.
Jim Forrest:And goes right into what you teach so well, which is mission, vision, and values.
Michael Burcham:Yeah.
Jim Forrest:And if you stress in those values.
Jim Forrest:What we need to do for our customer, what we need to do in our competitive environment and what our mission is and all of that.
Jim Forrest:It's super important to the success of the company.
Jim Forrest:You had on one hand, and I've always said, those things are complimentary.
Jim Forrest:They're two sides of the same coin.
Jim Forrest:And so I have a process which I follow through.
Jim Forrest:The other part of the process that I follow through, of course, is once haven't had a strategy, then you have to do a plan to implement a strategy.
Jim Forrest:Then you have to organize to implement the plan.
Jim Forrest:Then you have to staff the organization, then you have to control the organization.
Michael Burcham:Yeah.
Michael Burcham:What am I gonna measure?
Jim Forrest:And then when, then you have to measure.
Michael Burcham:Yeah.
Jim Forrest:And at some level, when you're not making plan, one of those things has gone wrong.
Jim Forrest:Is it the strategy?
Jim Forrest:Is it the plan?
Jim Forrest:Was it too aggressive?
Jim Forrest:Was it the organization not structured right?
Jim Forrest:I had to change my organization once, 'cause three times in row I had to fire the market manager.
Jim Forrest:And then I realized.
Jim Forrest:I was the problem.
Jim Forrest:I was asking the marketing manager to do something that they couldn't control nor measure.
Jim Forrest:Once I changed the organization, the next guy was successful, but it was my fault.
Jim Forrest:It was not their fault.
Jim Forrest:It was because I was, had a organization not organized for success.
Michael Burcham:Wow.
Michael Burcham:Good point.
Michael Burcham:Good point.
Jim Forrest:And that's another good point too, as a manager is you, you have to own your failures.
Jim Forrest:The beauty of running a company is, you know, if it works, you get the credit.
Jim Forrest:If it fails, you're responsible, but.
Jim Forrest:You know, pick yourself up, dust your hands off and go forward doing the right thing.
Michael Burcham:Own it and go forward.
Michael Burcham:Jim, it's been such a delight to have you today and I've so enjoyed the conversation.
Michael Burcham:I know our listeners well as well.
Michael Burcham:Thank you for giving us some of your time and for sharing some of your stories about Shore.
Jim Forrest:Thank you, Michael.
Jim Forrest:I appreciate being invited and I've got lots more stories for another time.
Michael Burcham:This podcast was produced by Shore Capital Partners with Story and narration by Michael Burcham.
Michael Burcham:Recording and editing by Austin Johnson.
Michael Burcham:Editing by Reel Audiobooks, sound design, mixing and mastering by Mark Galup of Reel Audiobooks.
Michael Burcham:Special thanks to Jim Forrest for joining me for today's discussion.
Michael Burcham:This podcast is the Property Shore Capital Partners, LLC.
Michael Burcham:None of the content here in is investment advice, an offer of investment advisory services, nor a recommendation or offer relating to any security.
Michael Burcham:See the terms of use page on the Shore Capital website.
Michael Burcham:For other important information.
