The Power of Wanted Positions
At Credo Partners we create value through achieving quantum leaps in strategic positions that enable significantly improved financial results. Executing this inspires management and employees, and ensures high investor returns. SYSCO represents a typical case example of such strategy-lead value creation:
In 2016 SYSCO was a successful IT consultancy, built and managed by its founder. The company was widely renowned for its Oracle tech expertise, as well as for its long list of customers in energy utilities. At the same time, the market was signaling a big increase in IT spend in the energy utility sector. automatic metering being implemented and flooding utilities with data, centralization of customer data into the national Elhub which challenged software incumbents, regulatory changes forcing separation of energy production, distribution and sales, as well as rapid technological shifts in general. We knew this would generate large and long-term IT investments in the industry, and recognized that the position as the leading IT service company for energy utilities in Norway was open. Building Sysco into this position became our guiding aspiration for SYSCO.
In SYSCO we saw raw talent representing the best tech team in the country for handling the utility sector’s data infrastructure, databases and software integration, combined with recognized domain expertise. These factors are really hard to copy. Thus, our “big bet” was that right know-how would be a better starting point for success than incumbent market positions. As ambitious owners, Credo had to add three key elements to support SYSCO in achieving its wanted position:
Sharp strategic focus. SYSCO had grown in any number of directions. We needed to get the entire crew behind the core idea of relentless pursuit for winning the wanted position. This is a lot harder than it sounds as results take time, and there are so many focus-deviating opportunities that present themselves every day in a performance-oriented company;
Scalability in the business model. Invoicing time and material were insufficient to take the company to its wanted position. We therefore structured the business into three units: Consulting, Managed Services and Software, thereby significantly increasing the ability to scale and get recurring revenues.
Leadership for tripling in size. To grow very fast, both organically and through acquisitions, SYSCO needed management that had built similar organizations before and knew how to to substantially upgrade the company’s employer branding.
It took five years to execute and succeed with the plan, and in 2021 the company was acquired by Cegal at a very attractive pricing. SYSCO had tripled in size, and the value of the strategic position was proven. We chose to partly reinvest in the combined Cegal-SYSCO, because we have already set our eyes on the next wanted position: Creating the next generation IT services company for the global shift to renewables. Again, we will have to add key properties to the combined company to succeed, of which Cegal brings some of the most critical ones to the table: A larger and more sophisticated managed services business, an international business platform, as well as sheer size. We hope to demonstrate within some years that once again a quantum leap in strategic ambition/wanted position, will create significant investor returns.
As the SYSCO-case demonstrates, in Credo Partners we maintain a firm focus on the essential recipe for using a high strategic ambition expressed as a defined wanted position as a lever for quantum leaps in strategic performance by:
Recognizing the strategic opportunity early in the investment process, and craft all value creation plans to support achieving this (strategy, organization, M&A, execution);
Identifying the key success factors that are hard to copy (for SYSCO: domain knowledge, Oracle expertise) – uniqueness can be hard to recognize and assess; thus, significant analyses and “pressure tests” are required in the Commercial due diligence and early ownership phase of a new portfolio company;
Adding the missing pieces and ensure relentless execution focus. Here lies the core ownership value contribution of a qualified owner: Ensure the right leadership and capacity for achieving the ambition, ensure execution focus and confidence in the chosen strategic path, and ensure relentless learning, reinforcement and follow-up.
Executing rapidly on strategic platform: It takes time to realize full impact of new leadership and add-on M&A’s. Thus, such critical building blocks should be executed on sooner rather than later. Also, such shift-up’s in strategic capabilities require significant attention and support from owners and Board to be successful.
With this approach, we at Credo always consider opportunities for achieving quantum leaps in strategic positions when investing into our portfolio companies. Here are some other examples of wanted positions that have inspired us at Credo Partners:
Starting position: Local wine filler
Wanted position: The #1 wine partner for Danish retail and Nordic importers (branded and filler)
What did we add to get there?: Management, new filling plant, own brands, new skills (FMCG; Operations)
Starting position: Local distributors of mobile homes
Wanted position: The #1 mobile home distributor in the Nordics
What did we add to get there?: Size through acquisitions, group functions (After sales, purchasing, control, finance), purchasing power
Starting position: Individual Microsoft partners
Wanted position: The #1 independent Microsoft Partner in Norway
What did we add to get there?: Size through acquisitions, complete tech stack offering, next gen IT services operations, group functions
Starting position: Food trading for Danish retail
Wanted position: The #1 independent category partner for Scandinavian grocery retail
What did we add to get there?: Position in Norway and Sweden, Scandinavian organization, category leadership
In total, we have seen significant value being created through such radical quantum leaps in aspirations, and therefore believe it is always relevant to ask the question: What should be your company’s wanted position for the next era of value creation?