Case Study: Granite Partners

(Note: This information is for educational purposes only and does not constitute an offer or solicitation.) 

Granite Companies sector graphic
The solutions-oriented, business-to-business Granite Companies currently span four durable sectors, each with macro-environmental drivers for continued growth.

Industry cluster studies have generally focused on economic development and the public policies that can foster it. This case study, in contrast, explores industry clusters from the perspective of one company—Granite Partners. “What is distinctive about this case study is that it focuses on how industry clusters can drive a business strategy and do so in a manner that has positive implications for communities,” says Horan, the lead investigator. 

Specifically, the case study (PDF) focuses on these aspects:

  • Granite Partners’ enterprise strategy, to understand how the industry cluster approach drives competitive advantage.

  • Both the hard and soft infrastructure implications of cluster-based economic development.

  • How Granite Partners uses a “shared value” approach to promote community engagement by the business.

The case study concludes with a discussion of implications for enterprise strategy, supportive infrastructure, and community development.

Industry Cluster Investment Strategy

Granite Partners is a private investment and holding company founded in 2002 in St. Cloud, Minnesota. A catalyst to its founding was a series of acquisitions by outside investors. Rick Bauerly, founder and CEO, states that Granite Partners was founded on the premise that if it had locally based capital, “the company would be more sensitive to the needs of the community.” He recruited local business owners as investors; when they had 12 founding family investments secured, Granite Partners established its first fund and began making investments in platform companies referred to as “Granite Companies.” 

Granite Partners made industry clusters a foundational part of its enterprise strategy. Operating partner Pat Edeburn recounts: “I was thinking about what to invest in. What is there in Minnesota?” He came upon some of the industry cluster research from the University of Minnesota and found it “remarkable.” One paper identified some of the industries related to medical devices, such as production technology in west-central Minnesota.2 “We began calling them investment themes,” he adds. “We felt that if we invested into these clusters, we would be more sustainable.” 

Granite Partners invests in Minnesota platform companies that are strongly tied to Minnesota clusters with economic tailwinds, then supplements the companies’ organic growth with add-on acquisitions for market and product expansions, capability extensions, and talent acquisitions.

Investment Cluster Platforms: Health Focus

Granite Partners currently focuses investments on the four durable sectors of health, infrastructure, materials, and automation. Each sector includes platform companies started by families with Minnesota ties. The 10 Granite Companies together represent 3,200 jobs, $1 billion in total revenue, and more than $2 billion in economic impact on local communities (based on the Bureau of Economic Analysis regional multiplier). 

Within the health sector particularly, Granite Partners has been able to tap into the robust medical device industry cluster to extend beyond the borders of the Twin Cities. The medical device manufacturing industry has an extensive network of connections to other industries, which creates synergistic economic impacts throughout the state. Edeburn observes, “We’re getting a positive spillover effect from the strong medical device industry cluster in Minnesota. More specifically, the human capital side of it means we likely won’t have to go 60 miles down the interstate to find someone who understands regulatory affairs or someone with good medical manufacturing practices.” 

Granite Partners’ platform company Microbiologics recently entered the biopharmaceutic cluster, which is related to its medical cluster. “Through add-on acquisitions, we supplement our ability to compete in the medical device cluster here with biology and biosciences in San Diego and pharmaceutical expertise out of Kalamazoo, bringing it all into Microbiologics’ strategy,” Edeburn says.

Supply Chain Implications

While the Granite Companies source globally, Minnesota and the Upper Midwest supply chains play a significant role. This is particularly true for platform company Altimate Medical, for which more than half (54 percent) of the total supply chain value is sourced from Minnesota alone. 

Altimate Medical Supply Chain chart
Figure 2: More than half of Altimate Medical's total supply chain value is sourced from Minnesota.

Altimate Medical makes a variety of medical equipment that offers wheelchair users a standing-frame alternative to sitting, such as EasyStand. While Altimate Medical’s supply chain movement remains strong in Minnesota and within the Midwest, it also has a national and global reach (see Figures 2 and 3). This interrelationship among greater regional suppliers is a critical and impactful aspect of the medical device cluster.

Altimate supply chain map image
Figure 3: Altimate Medical has strong regional and national supply partners.

 

Figure 4 simulates the interconnectedness of the local supply chain for medical device products leaving Renville County—where Altimate Medical is based—and moving to other parts of the state. This rendering provides transportation routes most likely used in this specific transportation network, an important reminder of the necessity of this transportation system.

Exports from Renville County map
Figure 4: This map simulates the local supply chain for medical device products leaving Renville County.
Granite Companies industry cluster destinations map
Figure 5: Composite map showing Granite Companies (as stars) and medical device industry cluster destinations from Blue Earth County

Talent Retention and Shared Value

Granite Partners’ vision is “world-class individual and organizational wellbeing.” One component of this vision is an emphasis on creating good jobs and attracting talent. The firm has taken a direct approach toward the education, training, and mentorship programs they offer to foster development and enhance wellbeing, giving them an upper hand in attracting and retaining talent. “Our aim is to partner with educational institutions and the community to attract graduating students, which benefits both parties,” notes Shelly Bauerly Kopel, partner in charge of human resource strategy. 

The firm incorporates environmental, social, and governance (ESG) factors into its business strategy as well. In considering sustainability, Granite Partners thinks about it broadly as a combined measure of business duration and business impact. To Granite Partners, “high wellbeing equals sustainability, and to reach 100 years, it’s not only the strongest that survive, it’s those that are most adaptable and innovative,” says Carrie Willis, chief operating officer. 

Granite Partners aims to create value for all stakeholders, and communities have a stake in that value as well. “When considering the community, we reflect on the significance of good-paying jobs with strong benefits for quality of life and community wellbeing,” Bauerly Kopel says. “So, when we think about shared value, we think about creating value in a way that it has a positive impact for all.” 

Regional and Community Implications

Granite Partners has implemented an enterprise strategy oriented around the value of industry clusters, and has done so in a manner that provides shared value to both the company and local communities. Bauerly recalls attending Michael Porter’s executive Shared Value course, saying, “What I took away was the idea that economic gains and social gains are not mutually exclusive, and that the ‘either-or’ thinking that permeates Western capitalism is often a false dichotomy.” The firm's vision of world-class wellbeing extends to all Stakeholders. 

Granite Partners provides an example of the stronger, proactive role a company can play in providing jobs, supporting the community, and putting sustainable practices in place utilizing private-sector resources. That said, the public sector plays an important role in providing both hard (transportation) and soft (workforce) infrastructure support. 

Transportation systems support regional suppliers and are conduits to reach national and international markets. Robust transportation links ensure that raw materials can reach manufacturers, workers can access job opportunities, and products can seamlessly reach markets. 

Bauerly observes that competition matters, but so does collaboration. “We are acutely attuned to supply and demand. But we ought to pay more attention to collaboration. There are important synergies between business and society in this approach.”

2 Santelli, P., Turner, E., Weimann, K., and Munnich, L. (Instructor), (2010), Automation of the Prairie, Final Report, University of Minnesota, May 4, 2010.