Strategy: The Shore Capital Approach

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In this episode, we discuss the Shore Capital Partners collaborative approach to strategy setting. We'll explore the process and how it creates alignment and sets companies up to make early decisions bigger, stronger, or faster; featuring interviews with Michael Burcham, Mike Cooper, Chris Mioton, and John Nelson. In future episodes, we'll take a deeper dive into the preparation, process, and follow-ups.

Transcript

Introduction

Anderson Williams: Welcome to Bigger. Stronger. Faster., the podcast exploring how Shore Capital Partners brings billion dollar resources to the microcap space. In this episode, we're talking about strategy. Specifically, we're talking about Shore Capital Partner's approach to strategic planning. We'll explore how it works and why Shore makes this investment in every company.

In future episodes, we'll go deeper into the process, the preparation, and the follow up. For now, I'll start by asking Michael Burcham, the Chief of Strategy and Talent Development at Shore Capital to lay the foundation for us.

Michael, before we get started talking about the strategic planning process at Shore, will you just describe how you define strategy?

Michael Burcham: Thanks, Anderson. Good question. Strategy is simply how an organization plans to allocate its limited resources in its chosen market so that it can best serve its customers, outperform and add value beyond its competitors, and ultimately achieve its goals.

Anderson Williams: Seems simple enough.

Michael Burcham: Oh yeah. Simple in words, very difficult in execution because without a focused strategy, our chances of meeting our goals are really poor.

Any road will not get you where you want to go, and most young companies have a million items on their to-do list. So a strategic plan is a time to evaluate and reflect and get buy-in from all the key stakeholders to make sure the right priorities in place for success.

Shore’s Approach to Planning

Anderson Williams: With that in mind, how does Shore approach strategic planning in terms of the process we use and why that process in particular has been chosen?

Michael Burcham: So our process has been refined over the last decade, and it's a methodology really designed to communicate what we call our hold period, the time the company is with us, which is about a five to six year period, and it's to help really build the plans to achieve that five year goal, but broken down into bite size chunks year by year, so that we are also thinking about the resources needed, but also the priorities of that given time period.

Let me give you a couple of examples of that. So in year one, it's really all about team formation and alignment. The organizational culture that's going to be created, how we're defining success, which we call the vision.

What will our measures of success be three to five years out. And our north star, or our big why, or purpose, which is our mission. During that session, we really challenge the team to identify their top four to six key stakeholders they wish to serve, because you cannot be all things to all people. And the key values we're gonna offer those stakeholders so they align with us as customers or vendors or partners, or even colleagues and team members.

It is also a really important time to draft the right message to any potential partners who are the other entrepreneurs who want to join us in this journey and bring their business into this combined entity we're creating, for maximum value for themselves and for the whole.

Shore Executive’s Takes on Strategy

Anderson Williams: I asked Chris Mioton, who is a partner at Shore Capital, and given that role currently serves on seven boards of directors for Shore portfolio companies, the value he sees in the strategic planning process for his companies.

Chris Mioton: First of all, I think we're unique in that we do have a dedicated Shore Capital strategy team who's professionally trained to facilitate these strategy sessions. They also have the benefit of knowing Shore's processes, the best practices and lessons learned from other companies. And just having that broader portfolio company perspective, the specialization and knowledge the team contributes results in a very efficient process.

So I think it's an invaluable tool that we use and the process changes from inception, and we think about investing as planting, growing, harvesting, and the strategy process really mirrors that where you do your initial two day session at the outset, and then you've got multiple phases of growth that you go through, including kind of getting to the phase of optimization.

Anderson Williams: This is Mike Cooper, who is a founding partner at Shore Capital, and who also serves on eight boards of directors for Shore portfolio companies.

Mike Cooper: To me, I think that the strategic planning session is one of the pivotal parts of our investment process, right? So we're typically looking at about a five year hold period for any investment that we make.

And I would say ideally, we're doing the strategic planning process about six months into the investment. And the reason to hold off a little bit from the time we make the initial investment is it's nice to have most of the team in place. As you know, we're investing in small companies, oftentimes we're building out management teams, we're hiring a CEO, we're hiring a CFO, we're hiring a VP of development, and so on and so forth.

And for me, it's important that we've got as much of the team who is going to be asked to execute that plan, should be there when we go through the strategic planning process. Because ultimately what you want coming out of that strategic planning process, you want to have a shared vision among all the people who are going to be asked to execute on that vision.

The Steps

Anderson Williams: In these early strategic planning sessions, there's a lot of focus on nailing down a solid mission, vision, and set of core values that the team can buy into. For many of us, these constructs can be mostly empty words on a wall or in a slide deck somewhere. And given the time constraints and the growth trajectory and all of the important and pressing other things that might unfold in a strategic planning session, I asked Michael why he and the team dedicate the time they do to mission, vision, and values.

Michael Burcham: I think what we have learned, particularly as a microcap leader investor, is that we are bringing together smaller organizations that individual entrepreneurs have created with enormous amount of perspiration and their own sacrifices with their families to put a business together. It's all to say they're actually driven by purpose and passion more than anything else.

If we lose sight of that and our only measures of success are purely revenue and cash flow, I think we destroy some of the intrinsic motivation of the very thing we wanted to capture in partnering with entrepreneurs, and that's that passionate spirit for why were you doing this in the first place? Because it's really hard work.

So I think that's reason number one. And as an entrepreneur myself, that completely resonates with me. I think the second bigger reason is that while a strategy is an important plan, the guiding principles around which we determine how we're gonna execute that strategy are our mission, our why, our values, the behaviors we want to hire to, and we care about. How we're gonna treat one another in this process of building this organization.

And that pathway helps us out of the ditch, if you will, so that when we get to our destination, we're happy not only financially, but in human relationships, in our integrity and the way we run our business, we're really happy where we arrived and how we got there.

Anderson Williams: With alignment on mission, vision and values, as well as key stakeholders and how a company serves them, the process unfolds with the goal of identifying a list of three to five big rocks the company has to focus on.

And this isn't just a process for a year one plan for a company. It's a process that evolves through annual strategy updates that grow and change as the company grows and changes.

So I asked Michael how this evolution works, and why it matters that the process results in such a seemingly narrow focus.

Laying the Foundation

Michael Burcham: Anderson, that issue will be the defining issue of success or failure for every company. We talked about the myriad of things companies need to do, acquire, hire the right team, train, organically grow, focus on operations, focus on the customer, know your community, study the market. Oh my God, all those things can absorb a 24/7 week and you can be super busy not moving anything ahead. So through this prioritization process, we really lay out priorities for year one, year two, year three, year four, and it helps the entire team catch their breath.

Because we're saying organic growth matters, but probably not so much in year one. It matters a lot by the time we get in, well into year two and three, and we're gonna spend a lot of extra time and resources there. Whereas in year one, because our model is largely growth through acquisition, getting the story right and the team right, the messaging so that other partners want to join us and how they become part of us is a much bigger priority, in year one. That becomes less so by year four, because we've already grown.

In year four, we're really looking to optimize the business to create maximum value. So each year almost as a theme, if you will, and from that theme, if we are thoughtful in our planning, it becomes pretty straightforward to identify the three to five core strategies that really do lay up the proper foundation for that point at where the company is.

Think about it this way, a really good strategic plan, particularly a multi-year plan. It's kind of like the blueprint you would have for building your home. The first page is usually the foundation. The electrical wiring may be four to seven pages in, the interior paint plan is probably way at the back.

We shouldn't start painting walls we don't have. Or wiring before we have a foundation. And the process we have created at Shore lays out how we will grow and scale in a very clear, orderly manner so that the time we are into our journey, we're actually building something that has the strength and the foundation and the structure to scale to 10 to 20 times its starting size without having to constantly redo our work.

Setting Strategic Priorities

Anderson Williams: Here again is Mike Cooper.

Mike Cooper: Early on obviously it sets the foundation, right? It's literally establishing the foundation of the company and kind of what you're all focused on over the next five years. I think also there's some level, by the way of just, it helps build comradery, right?

And so you get 20 people in the room, many of these people have been brought into the organization are brand new. It helps establish some comradery and allows people get to know each other, which by the way, I think as an aside, I think that's an important element.

The first time we do it, it's foundational, it's setting kind of what's the playbook. I think in the ensuing years, and particularly let's say that you're in year three or year four, you're humming along, you're accomplishing your goals. I think the value then is, first of all, all of our companies are constantly adding new faces. They're adding new people to C-Suite.

Our board members are getting more familiar with the company, the sector, the management team, and so I think it's a great way to bring some new faces together who maybe weren't there when you established the plan at the beginning or that, you know, six months in. And so they're part of the organization, but they weren't there at the beginning, and so I think it's a great way to introduce new stakeholders into the process who, again, bring a fresh set of eyes to what you're trying to accomplish. And then I think again, it's part of that reevaluation process of, hey, we're three years in, we're doing really well on these things, we haven't maybe prioritized this.

Is it the right priority? Do we need to look at something different?

Anderson Williams: Chris shared a specific example of a conversation he's had with one of his companies that illustrates Mike's point exactly. It's not about whether something is a good idea or a bad idea necessarily, but is it strategic? Is this the time to make this investment? Will this deliver the most impact?

Chris Mioton: Without getting into specific companies in multi-site healthcare, we've got two primary avenues for inorganic growth, de novo greenfield location openings, or acquisitions. And I've seen in one company in particular, we probably could build teams to do both. We probably could be successful in the long run doing both, but in our investment horizon of, call it five years, it's very hard to execute at a high level against both of those initiatives.

So we know that the add-on strategic initiative is our best path to achieving the outcome that we all desire, management team included. And we have had that debate. Every annual refresh we, we contemplate should de novos have a bigger piece of this strategic plan.

But once we have that conversation in that annual refresh, it's put to bed for the year, we know we're driving against the add-on acquisitions. We can always evaluate additional levers, including de novos at future meetings. But in between those meetings, it really should be a singular focus on the plan that we've agreed upon.

Anderson Williams: This kind of clarity is central to the value of the Shore strategic planning process and as a foundational tool for keeping the CEO, the board and Shore aligned.

For this to work however, the three to five big rocks have to be documented and developed into what Shore calls strategic charters.

Michael, will you describe briefly what a strategic charter is?

Michael Burcham: Absolutely. A charter in my view is a snapshot way to capture any strategic priority. Usually each priority has its own charter.

It's defined so everyone knows what is this particular initiative, really? It has a set of objectives and goals and measures under it, so we know what are we trying to accomplish with this particular initiative? What is the goal and measure of success? How will we know we achieved it? And usually there are milestones there quarterly for this year and maybe annually for the next few.

There's usually a section to talk about the resources needed. Sometimes that's people, sometimes that's money. There's an area to talk about the interdependencies, meaning who else around the team are you dependent on for this success that others have to play in? Usually names a single owner of each initiative because rarely can a committee achieve anything, but it also has team members who are gonna work with that leader to achieve that.

And usually there's some acknowledgement of what are the risks in doing this and how might we mitigate those risks. That seems like a lot, but we've organized what we call a charter into a single page at a glance. So if a company has, let's say, five key strategic priorities for this year, there are five pages that any member of the team or any new member of the leadership team, could look at those five pages and get a really good sense of what's the plan for this year, which in turn helps them understand how do I fit into this plan and how am I going to contribute to this plan? It's also a really valid instrument for the CEO, for the board members, and often for other stakeholders outside your organization to understand what you're trying to achieve so they can help.

Measuring Success

Anderson Williams: As Michael suggests, a good strategic plan and planning process should be an incredible tool and opportunity for a CEO. So I asked John Nelson, the CEO of a Shore portfolio company, that's done four strategic planning sessions and has also blown through their five year goals in just three years, about his thoughts on the process as well as why he keeps investing in it when the company is already performing well beyond expectations.

John Nelson: Well, look, it's been an outstanding experience. I think it was about year 17 at my prior business where I was there for 20 years and saw it go through various stages of evolution and where we finally got to the point of defining our strategy, but just a fascinating and outstanding experience and product. So we went through a deep dive across all stakeholders, board members, doctors, our leadership team. We did it around month six into starting the business. So compiled enormous amounts of data, added that to the assumptions that were already built in the work that Shore did before closing the business. There was a lot of background information. Six months in Michael had a process of assessment and then took the key leadership team, offsite, initial doctor partners, the key business leaders that were in place, as well as our partner and team, at Shore. And Michael, led us through a robust process of looking at defining mission, vision, values, stakeholders.

What were the industry environment? What was current state of change within the industry? What were the trends? Where were opportunities that the team saw to create a value proposition in acquiring new partners, which was part of the initial thesis. And the output of that was, you know, really a 200 page book of data, which included the mission statement, the vision of the company, six key values, and then five key growth drivers, as well as a rank list of who the stakeholders were within the company, as well as a series of operational initiatives that needed to be considered as the company grew.

So month seven, you've got a 200 page playbook that defines and helps you start organizing, what are some of those no, not nows that I referenced earlier. And for me, being a first time CEO, that was just an amazing experience. But for the team, and for a new company, the output was, an amazing experience to walk through. I had an interest of us continuing to work that process from day one, and so we aligned to rework the strategy at the start of year two, the start of year three.

In both years, we saw tweaking and defining and the end result at the end of year three, we've really got a strategic plan now that is well set for where the company's at. There's not more tweaking to the the key five strategic drivers. We've got those, they're the right ones. Now it's executing to them.

There's not a lot of strategic plan change and the rigor of then executing, setting those initiatives and goals quarterly, continuing to use a scorecard approach and making sure that we are driving value, both for the stakeholders and the partners.

Anderson Williams: I'm curious, it seems like it would be easy as a CEO of a company that's sort of blowing through its five year goals in three years to sort of say, no, our strategy's working, we don't need to do this again, we've got this, clearly it's working. Why in that context, you as a CEO say, nope, we still need to come together another time and get focused.

John Nelson: Yeah, I mean, I just think your understanding of the business evolves, and I think it's important to continue to be at the table and assessing is, you know, the market conditions change.

Your understanding of the business evolves, that understanding's driven by where you win, but also understanding your losses as much as anything. What did we get wrong? Was it a, was it an execution issue? Was it a resource issue or was the thesis wrong?

Executing Your Strategic Plan

Anderson Williams: Given John's success, I wanted Michael to help clarify what actually makes a good strategic plan, including thoughts on how to execute a good plan.

What makes a good strategic plan based on your experience, for Shore companies in particular.

Michael Burcham: Here's a couple of universal truths I've come to realize after doing hundreds of these sessions in my career. First is most humans are wired for what I call an internal focus. What is my job? What am I going to do today or this week?

But if that's the prevailing mindset of leadership, the business is almost set up for failure from the beginning. But when a well-developed strategy is done across the team with an external focus, who is my target customer? How do I serve them well? How are we creating value beyond our competitors? How's the market shifting?

And when the team is able to spend time together thinking in that external way, they're more likely set up for success. There's usually someone identified by the CEO who will organize internally, the work to be done, and the team agrees to hold one another accountable, whether it's biweekly or monthly check-ins, to ensure they're moving the strategy ahead and they're serving one another around their interdependencies, so the strategies can be realized through execution. Because without execution, it's a beautiful blueprint, but the house never gets built.

Anderson Williams: When you think about that idea of execution, and perhaps even both in your experience as a CEO, but also your experience as a lead independent director, what does execution of a strategic plan look like in a way that optimizes the investment in the planning process?

Michael Burcham: The plan is going to answer really five questions. Who are we going to serve? What are we going to do for them that creates maximum value? Where are we serving them in that value chain? Why we are the players to do this, and why they should care about what we have to offer and exactly how we're going to do that.

And that 'how' is the key to the execution. The how we choose to go about our business beyond the developing is really having the internal team organized and prepared around the resources, getting the proper resources aligned, making sure accountability aligns with responsibility and incentives. Then the process both gets managed, but more importantly gets communicated throughout the organization. If you know anything about intrinsic motivation and a human's choosing to put discretionary effort into their job, which is the effort beyond the job description, to do your best, all of us need to know where we fit, why our work matters, and what part of the bigger plan are we contributing to.

That's the strategic plan. If we do not democratize it across the entire organization, and I literally mean all the way to the frontline worker, whatever they happen to do, whether that's intake on a phone, assembly, working a loading dock, it doesn't matter. Until they recognize why their work matters and where it fits in the bigger vision, the company's strategy is always gonna be less than it could have been. The execution will always be less than it could have been, and however much it grows, it will not be all it could have been because until you have everyone working in that same direction, you don't achieve all the greatness you could.

Anderson Williams: Strategic planning is one of the critical investments Shore Capital Partners makes to help portfolio companies grow Bigger. Stronger. Faster. A good strategic planning process creates the opportunity for all key stakeholders to align around the top priorities for the company, which means it also helps them align around what they shouldn't do, at least for now.

The strategic plan is a blueprint and a communication tool. It's a way the company makes sure it knows how it wants to invest, why, where, and at what point in their journey.

This podcast was produced by Shore Capital Partners with story and narration by Anderson Williams. Recording and editing by Andrew Malone. Editing by Reel Audiobooks. Sound design, mixing and mastering by Mark Galup of Reel Audiobooks.

Special thanks to Michael Burcham, Chris Mioton, Mike Cooper, and John Nelson.

This podcast is the property of Shore Capital Partners, LLC. None of the content herein is investment advice, an offer of investment advisory services, nor a recommendation or offer relating to any security. See the terms of use page on the Shore Capital website for other important information.