Earned, Not Given: Jim Forrest on Leadership, Grit, and Building Great Companies

Michael Burcham: 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. The journey of building and scaling a business takes one down many unexpected paths. It’s a journey where we learn from our mistakes fall down often but have the entrepreneurial grit to pick ourselves up and persevere.

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. We hope to inspire others who are on a similar journey of becoming, growing and leading.

In this episode, I am talking to Jim Forrest, the Chairman of Shore Capital. Jim has been a key part of Shore Capital’s leadership since our founding. Prior to Shore Capital, Jim spent 20 years as Managing Director of Wind Point Partners, a private equity firm in Chicago, Illinois.

There he focused on investments in industrial manufacturing, business to business services, healthcare, and the software and electronics industries. He was also frequently involved in managing troubled portfolio companies, having served as interim CEO of a variety of Wind Point’s investments. 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.

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. 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.

Jim also previously served on the Board of Overseers of the Hoover Institution at Stanford University. 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.

Jim earned his Bachelor of Science degree in electrical engineering from

Michigan State University and received his MBA from Harvard Business School. I thoroughly enjoyed this interview with Jim, and I think you will as well.

Jim, welcome to our podcast. We’re really glad to have you today.

Jim Forrest: I’m happy to be here. Thank you for inviting me.

Michael Burcham: My pleasure. 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. My father was in the Navy. He enlisted in the Navy before World War II at the age of 17. Having come from a broken family where he was, the man of the family went from the time he was 10. 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. So, there’s nothing in my story that can beat what my father did. That’s something you really should know. He was just an amazing man to go from a broken family to make Admiral in the Navy.

We always had to work for everything that we did. So, if I wanted something, I had to work. 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 gokart that I had. I did all sorts of things. Started working full-time when I was 16 at a drugstore and I’d work 35 hours one week, 53 hours the next week. I always had to have money and so I always worked. Best thing that ever happened to me.

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. And I went downtown to find a job, and I found out there were four places and none of them had a job available. My father then told me, well, go back and try again. And I said, but there’s no jobs. He says, try again. So, the next weekend I went downtown to try to get a job. No jobs available. I came back and told him, what am I supposed to do? There’s no jobs.

He says, try again. And so, I went downtown the next weekend and sure enough, one of the guys a druggist said, oh, I know you. You’ve been looking for a job, you’re hired. And I went home, and I talked to my father, and he said, what’d you learn? He said, I don’t know. And I didn’t know at 16. He says, you keep trying. If somebody says, no, don’t give up. Keep trying. Which is a great, great lesson.

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. He said, why? I said, the drug has asked me to clean the bathroom. And he sat down, and he never swore, but he swore this time. 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. Cause if it wasn’t worth anything, they wouldn’t pay you. And the second thing is, you’re never better than anybody. Okay? If they ask you to do a job, you do the job, you may just be different.

And that has guided me my whole life and all of my business experience and factory floors and service organizations alike. I’m no better than anybody else. I may be different, but I’m no better. And those are really important lessons.

In any case, I went to Michigan State University, barely got in. I only got into one university. 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. We’ve been married for 52 years.

Once I got out, I started working as electrical engineer and I worked for the army. I worked on underground nuclear tests and ordinance and bombs and things like that. And then went back to school and got a degree in business in 1975 from Harvard.

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.

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. They’re very young when they start because technical knowledge is the big key success factor. For your success. 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. This simply did not resonate with its customers. He shares with us. People buy your solutions to their problems, not your products. 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. In 1980 or 81, we were developing two new products and keeping them totally secret to ourselves. One was a strip chart recorder used for doing ECGs and things, and the other was an XY recorder.

We thought we could take this system and compete against Hewlett Packard. So, we developed these two products in secret and then we took them out to the market and showed them to our potential customers. And the customers who looked at the XY recorder said, that’s an interesting product, but why would I stop buying from Hewlett Packard? You don’t have a price or competitive advantage. There’s no reason. And so, our hearts fell. 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. We also were developing another tech. Technology kind of in a telegraphic recorder.

We came out, introduced it to trade show, showed it to our customers and said, look at this. Isn’t this great? And they said, that’s pretty interesting. Who’s gonna buy it? And I said, well, you are. No, I don’t think so. And so, we had two complete failures.

So, what did I learn at the time? What I learned at the time is don’t care about products. 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. 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. 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. Now you’ve got something there. Doesn’t mean you’re successful, but if you have a list of 25 customers, and that means you’re outward looking.

And so, all my life in business, I have been outward looking. I’m not focused so much on the inside of a company. I’ve always focused on the outside. What do customers think? What do customers want, and how can I fulfill their needs?

Michael Burcham: That’s an excellent perspective. 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.

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. You had to understand engineering, and you have to understand finance. Okay. Sales and marketing kind of go hand in hand, right? But you can’t really manage a business without being expert at finance. If someone says that person’s a great CEO, but you gotta get ’em a good finance guy. Wrong.

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. 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.

In the beginning, you may have doubts about people when you’re young. And you just don’t know, kind of know what to do, whether you’re right or wrong. The older you get, the more your gut is. Right. 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.

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. 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.

I think of your financials as the sort of health index of your company. 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. And it seems like financials are basically a health checkup of the company.

And if the company’s in good health, the financials should be in good shape. 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. Would you say that’s a good analogy?

Jim Forrest: Absolutely right, because if you can’t measure it, you can’t manage it. 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. 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. How do you know so much? And I said, well, my favorite quote was from Walter Riston and from George Bernard Shaw. I believe it was. 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. Yeah. Instead of focused on product, all come from good judgment comes from experience.

Experience comes from bad judgment. 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. 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.

Your instincts and your intuitive knowledge almost becomes your driver, don’t you think?

Jim Forrest: I would agree. It becomes second nature, I suppose. It’s almost like on an athletic team, running back, running a route or a basketball player, shooting a three-point shot, it becomes a practice, practice, practice makes perfect.

Understand what you did right, understand what you did wrong. One of the things that attracted me most to Shore, for example, I’m a process engineer by background. I mean, everything you do in engineering or for that matter, physics or for that matter, anything is mathematical, and it’s process oriented.

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. Even though compared to today, it was rudimentary. I identified with that very much.

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.

Now, McDonald’s may make a slightly inferior burger. But it is always the same. And it’s always gonna be made exactly the same way. They take the same inputs; they add value and is yielded as a burger that people like to eat. And so, process is everything. The same thing isn’t true, whether it’s in urgent care. The same thing is true, whether it’s making technical equipment, whether or not it’s running our autism clinics, its process is everything. 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.

So, you started to touch on some of the things that attracted you to Shore. Let’s talk about those early days at Shore, some of your input and involvement. 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. I’ve been with Wind Point Partners another firm for about 20 years and left them in September of 2008. It’s a mutual parting. I had a different way of thinking than my other partners and they can go their way. I went my way.

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.

So, I came into town, and they had offices, I think at 60 East Lake Street. Maybe it was 50 East Lake. I forget what it was, but I go into the offices and they’re awful. They’re terrible. I mean, it was down and dirty. Nobody had an office. People had tables for their desks. It was informal. The men’s room key and, well, ladies’ room key had a 10-pound weight attached. Cause they didn’t want anybody stealing the key to the restrooms. This was Class D or classy office space.

Their one window looked out at the brick side of another wall, of another building, and I walked in, coming from the venture world. 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. So, to get them to the finish line.

And these folks, these young guys were working their butts off not taking any salary at the time. They had a strategy. I love the vertical market strategy that they had. They were living hand in mouth, and they weren’t spending money where it didn’t need to be spent. I remember getting, seeing pictures of them three wide. In a, uh, not a Spirit airline, Southwest Airlines. Mm-hmm. Going on a due diligence trip. Everybody did everything. 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. They said nothing. I said Perfect ’cause I don’t want a job.

But I started coming to Monday morning meetings just to see how they were. ’cause I hadn’t invested any money yet. Just look at the way that they ran their business. And I was quite impressed. And so, I invested in the first business that we did. Which was great and have been around since then.

Michael Burcham: So, Jim, you’ve left an important mark on Shore.

You mentioned meeting with these four fairly scrappy young men and what was Class D office space as you started working with them. Tell us some of the ways that you helped really shape the overall direction for the firm. ’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. 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.

These four guys respected me for what I knew. They asked me for help, they asked me for guidance and when they would come up to naughty questions. Now, I would never tell them an answer, especially if it was 70 30 or 80 20. 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. Don’t give people the answer. I liked that way of working and they were respectful, and they listened.

The other thing they did, they understood the value of great board members.

I remember going to Sirona Infusion, they had a great board with two guys who were industry icons. And I went to the board meeting, I said, I don’t understand why I’m here. I don’t know anything about Home Infusion. And they said, no, no, no, we need you. Because general business advice, I may not know about home Infusion, but I do know how to make money. And most information in most is 95% transferable.

So, I think I also fit in with them in terms of the fun factor because, and Michael, you know me. We’ve been around each other for almost at the same time. You knew Justin before. You knew. I knew Justin.

Michael Burcham: Sure.

Jim Forrest: And I like lending levity in board meetings. Making people relax, making people feel enjoyed. I think it’s my role. I can help take a tense situation and diffuse it.

Michael Burcham: Sure. Have people, I’ve watched you do that.

Jim Forrest: Yes. And I enjoy doing that. I think that’s an important skill of a manager. You don’t want people on pins and needles all the time. 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. You can’t be hedging all the time.

Jim Forrest: Well, that’s right. One of these bosses, the best boss I ever had, as a matter of fact, used to tell me, tell me the bad. And I said to him, what do you mean tell me the bad? He said, listen, something bad might happen. And eventually it’ll get around to me if you don’t tell me, but you’ll go first.

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. He says, I don’t care about the good. The good takes care of itself. What we need to work on is the bad. And that lesson has stuck with me the whole life. 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.

And I think that’s something that we emphasize at Shore through the openness of these. Board meetings. The board meetings we have here are unlike almost any board meetings I had in my previous partnership.

Michael Burcham: Yeah. I tell folks that being an entrepreneur leader, when you focus on the bad is kinda like chewing glass. You get to do it every day. 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. I love the phrase learn to ask questions. Don’t be telling the CEO what to do.

You’ve served on numerous boards for sure. I want to ask sort of a two-part question. What are some of the insights you’ve gained from the boardroom that could help a first time CEO interact with their board? 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.

So, what advice would you have for someone in that role?

Jim Forrest: Everybody who’s on your board is there to help. Nobody joins the board at zero compensation, zero other than perhaps upside some options without wanting to make the company successful. They’re not there to criticize. They’re not there to get your fired.

They’re there to help. And so, take that at face value and use the skills that each one of them bring, and everybody brings something different. Use the skills that they bring and ask them questions. Follow up, interact with them. They’re not the enemy. They’re there to help. And I’ve yet to see a situation in Shore where I’ve seen a board member try to undermine a management team. I’ve yet to see one. Nobody does it.

Michael Burcham: I haven’t either. That’s a good one. And sometimes that’s a hard lesson learned, because I’m sure first time CEOs, you’ve got all this highpowered knowledge in the room and you’re a little nervous anyway. And so, a good reminder is. 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. 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.

When I worked for a large corporation, we had a department for quality. We had a legal department; we had a human resources department. We had all sorts of big departments. In these big companies, everybody has an internal resource. When you’re running a small company, you don’t have that. That board is there to provide that.

Essentially for free. So, if you need a person, they may have somebody in their network. If you need knowledge on how you might do your audit, they’ve gone through it before. They can help guide you through an audit. 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. 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. So, I told you I was gonna ask the reverse or inverse of that question. So, while board members have such great intent, many come from much larger experiences and we’re in microcap. So, what advice would you give a first-time board member coming on a Shore board? 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. 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.

The other advice I would give to every board member and some more than others who will go and mention. But ask questions. Don’t be telling people your opinion, your thoughts on what they should do.

Michael Burcham: So true. 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.

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. And that’s another thing that the CEO should remember. If I tell you to do something and it’s wrong and you, do it, it’s still your fault. I remember that so well.  Michael Burcham: Wow. Good lesson.

Jim Forrest: What that, what does that mean? That means push back. If you’re the CEO, don’t do something that you know is not right. If somebody’s pushing you to do it from the board. Yeah. Just say I can’t do it, and here are the reasons why stand up. So, if board members should ask questions, should provide direction at a minimum.

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. Absolutely.

Michael Burcham: In the following segment, Jim and I talk about the importance of good strategy and what makes a really great strategy.

He frames the essential starting point as what is the problem to be solved, and then who specifically has that problem? Jim then shares several examples of the work involved in analyzing the competitor as well as the marketplace.

So, Jim, you know, we’ve known each other well over a decade now. 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. 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.

Everything is a problem that needs to be solved. People don’t go to urgent care because they don’t have a problem. They go to urgent care ’cause they have a problem. They don’t, for that matter, go to a restaurant because they don’t have a need. They go to a restaurant ’cause they have a need. So, once you perceive a market opportunity, again, not a product, or maybe it is a product, somebody brings it up.

Once you perceive a market opportunity, the first thing you have to do is validate. Do customers really exist that have this issue, have this problem that needs to be solved? Right? So, you have to do your homework in terms of understanding market. And to me, a market is a group of customers who, when faced with similar buying circumstances will behave similarly.

You’ve heard me say this a hundred times.

Michael Burcham: Sure.

Jim Forrest: There’s no wheelchair market. There are submarkets within wheelchair sports wheel. Wheelchairs, heavy wheelchairs, airplane wheelchairs. So, define your market very precisely and then define the problem that it is a customers ask you to solve. Once you’ve decided that this actually may be a real opportunity, then you need to aggregate the number of customers. How big? Is this, how many are there? What is the price sensitivity? What are the other issues in the marketing mix that you need to understand for customers?

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.

Because we can’t do everything by ourselves.

Michael Burcham: Right? And if we try, we absolutely fail.

Jim Forrest: We fail. 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?

Technology should have a role in virtually every function in our businesses, in every function across the company. 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. Absolutely. None of us are perfect yet.

Jim Forrest: Is in competition. I’m gonna relate a story that occurred to me when I was first manager, and this has stuck with me.

Electronic industries used to have 18-month product cycles. If you miss a product cycle, you’re out of business. And also costs would come down by half. It’s Moore’s Law every 18 months. So the company that I was running at the time, we beat Hewlett Packard, a different story. They dropped out of our market.

We were very happy. And all of a sudden there’s a new Japanese entrant called Watanabe. And they were taking share from us. They were selling basically a very similar product, maybe 90% of our performance for about 70% of the price. 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.

And we kept thinking they were dumping. But I always believed in understanding is the art at war, right? Understanding the competition. 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. It was a worldwide business. And you may think that’s funny, Jim, how you to visit?

You know everybody in the world. I had competitors in Austria and Germany and England. I had competitors in Japan and in the United States. And so I called up the CEO of Watanabe. It was in Yokohama, Japan, and I said, Hey, I’m coming over to Japan. 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.

He said, come on over. And this little company, as it turns out, was run by a $10 billion man. He had been the CEO of Panasonic’s calculator business when it failed in the 1970s. 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.

So he invited me to go through the plant and I looked at it. First off, he was doing a single flow Deming productivity pull versus continuous flow manufacturing. There’s another word I just forgot about it. 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?

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. I think it was a denominator was average hourly wage, and so I got that. In the end, I couldn’t understand anything else, but I did figure out what the average hourly wage was.

He didn’t know I was gonna pick that up. It turns out we were paying $10.50 an hour in Cleveland where my plant was. He was paying $3.50 cents an hour. We bought one of their machines in the US. We cost reduced, it turns out, landed with duties and everything else they were making between 25 and 30% profit.

Turns out later on I was validated. We found out from the company I was validated, so I had two choices. Continue to try to lose money and go outta business. Or at this point, because I knew the competitor, we moved 400 jobs down to Mexico and saved the company. . This is why you need to understand your competition. Because it’s really easy to jump to conclusions. Like, oh, they’re losing money on everything they ship and you find out No, they’re not. You’re not competitive.

Michael Burcham: Yeah. They’re actually making a pretty handsome margin.

Jim Forrest: They were making a very handsome margin and so. 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?

And I don’t want just a leaflet on their factory. I don’t want a leaflet on the services. 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. When you work in a competitive environment, you really have to understand that.

Michael Burcham: Sure. It’s almost like you’re having to compare their business model. 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. You just can’t.

Jim Forrest: Right. 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? 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? If they could do the same work. So you have to react to that.

Michael Burcham: Cause your customer isn’t gonna pay $0.70 more.

Jim Forrest: Correct. And so through my whole life, the competitive knowledge has been important to me.

Another thing to understand as you think about a business opportunity is the environment you’re in. What do I mean by environment? Well, are there rules or laws that might change that? 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.

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. 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 customers.

Competition, technology or vendors. Right, outside forces that might affect standards, might change all sorts of stuff. 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.

You may ask, why didn’t I say management? I mentioned management last because it’s only after you’ve understood these factors that you really know what kind of management you need. Once you’ve understood customers, competition, technology, vendors, and environment, now you understand the management you have to have.

What distinctive competencies must you have inside your firm to pull off the strategy. Right. And what are the key success factors to pulling off the strategy. So those are super important. And as you may then recall, once we do these things, outfalls. The marketing mix.

The marketing mix is a function of what you learn of all these things. 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. It will have validated your strategy, and the marketing mix reflects that.

If you wanna analyze a competitor. I’d say at the same time, look at their marketing mix. That will tell you, their strategy. 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. But then you gotta get inside the competitor.

Michael Burcham: In our final segment, I asked Jim to define what makes a great company. He talks about a continuous focus on the outside to define what the customer really wants.

So, Jim, talk to me about from your experience, how good companies behave versus bad companies behave. 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. I’ll walk on a factory floor or walk through somebody’s office, and you can ask someone, what do you do here? Someone will come back, they say, I process accounts receivable, and that’s okay. That probably defines what their job is.

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. Without having bad debt.

You might ask somebody, what’s your job? And they say, it’s my job to run the lathe. Whereas the job actually is to deliver good parts to the customer. Great companies focus entirely on the outside world. They don’t allow their staffs and their companies inside to devolve into interesting quarrels. 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.

Great companies are a hundred percent focused all the time on what happened with a customer. 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. We didn’t need to argue about it. The two of you are getting in an airplane. You’re gonna go visit three customers together and you’re gonna come back and talk to me and tell me what you found.

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. And we can deliver it. So, the outside focus in a company should be 99% of the people, maybe 1% whose job is to empty the trash can. 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. 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.

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. 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. Then you’ve really got someone who’s really bought into success of the business.

Jim Forrest: That’s right. 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. 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.

It’s super important to the success of the company. You had on one hand, and I’ve always said, those things are complimentary. They’re two sides of the same coin. And so, I have a process which I follow through. 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. Then you have to organize to implement the plan. Then you have to staff the organization, then you have to control the organization.

Michael Burcham: Yeah. 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.

Is it the strategy? Is it the plan? Was it too aggressive? Was it the organization not structured right? I had to change my organization once, ’cause three times in row I had to fire the market manager. And then I realized. I was the problem.

I was asking the marketing manager to do something that they couldn’t control nor measure. Once I changed the organization, the next guy was successful, but it was my fault. It was not their fault. It was because I was, had a organization not organized for success.

Michael Burcham: Wow. Good point. Good point.

Jim Forrest: And that’s another good point too, as a manager is you, you have to own your failures. The beauty of running a company is, you know, if it works, you get the credit.

If it fails, you’re responsible, but. You know, pick yourself up, dust your hands off and go forward doing the right thing.

Michael Burcham: Own it and go forward. Jim, it’s been such a delight to have you today and I’ve so enjoyed the conversation. I know our listeners well as well. Thank you for giving us some of your time and for sharing some of your stories about Shore.

Jim Forrest: Thank you, Michael. 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. Recording and editing by Austin Johnson. Editing by Reel Audiobooks, sound design, mixing and mastering by Mark Galup of Reel Audiobooks.

Special thanks to Jim Forrest for joining me for today’s discussion.

This podcast is the Property Shore Capital Partners, LLC. None of the content here in 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.