Many businesses, in farming and elsewhere, have no formal plan. Some are happy with the result, many are not. But many discover that developing a strategic plan and carefully implementing it has two effects. First is that it helps identify the desired outcome (where you’re going, your vision for the future). Second, it identifies the path required to achieve your vision.
Developing strategy is fundamental to success. We start with strategy in our CTEAM and CFAME courses, and it is the foundation for this new series of columns we are introducing.
Strategy is a badly misused word. We hear: Strategy is the goal — “be No. 1”; strategy is intention — “be low cost”; strategy is action — “we are most efficient.”
Strategy is none and all of the above. It is comprehensive. Harvard strategy guru Michael Porter defines strategy as “the set of integrated choices that define how you will achieve superior performance in the face of competition.”
Strategy is how you position your organization to achieve its goals, and it is the actions taken to achieve the positioning.
Some will say this is high-falutin’ hooey, maybe relevant to non-farm businesses, but not for farms — what’s to decide about a farm’s strategy? Our experience is there is a lot. We see farms that prosper by being extremely low-cost commodity producers and financial managers. Others combine cost control with producing products that earn premium prices because of traits or services. Still others focus on adding value.
After they adopt a written plan with clear goals, actions and accountabilities, many farmers find it transformational.
Strategy and planning
Joan Magretta, author of Understanding Michael Porter, provides a process to define strategy and undertake planning:
Step 1: Examine Your External Environment. Businesses succeed by providing value to customers. Understanding your external environment, especially who might be your customers and what product traits or services they need and will pay for is the starting point. It also includes understanding your competitors and what they do or don’t do well.
Step 2: Define Your Value Proposition. Your value proposition defines the end-users to whom you will sell. It also defines which products, product characteristics and/or services you will bundle in your sales, and the relative price you will charge. This may be as straightforward: “We will sell to any elevator at the highest possible price.” Or it may be more complex, such as producing specific feed ingredients for specific livestock operations at a premium over the average cash price, or contracting with a maltster to deliver at a premium.
Step 3: Examine Your Internal Environment. This step links your internal operations to your customers. You examine your “internal supply chain” to understand your strengths and weaknesses against your value proposition. Delivering consistently on your value proposition at the best cost requires knowing what you do well, and what needs to improve.
Step 4: Identify Your Mission and Strategic Intents. Mission defines what you need to accomplish over the next two to five years to fulfil your value proposition profitably. It describes the changes that you will make to build on current strengths and overcome weaknesses. It is concrete and measurable: how else will you know if your mission is accomplished? Strategic intents then divide mission into three or four manageable pieces. For most farms, they often address improved human resource management, better financial management, new ventures, and expanded or improved operations. They are unique to each farm.
Step 5: Articulate Your Vision. This step can be taken at any point, but is best clarified after examining the external and internal environments. Most owners have clarity about what contribution they want their business to make in the long term, but it should be clear enough to judge whether the shorter-term elements of strategy identified here are consistent with the long-term goal.
Step 6: Develop Operational Plan. In this step, the conceptual meets the operational, identifying exactly how each of the strategic intents from Step 4 will be implemented. It defines actions that need to be taken, who is responsible and accountable, timelines, resources required, and measures of success in achieving the desired outcome. This component also is used to judge progress as the plan is implemented.
Strategic planning goes from the general to the specific. Our experience tells us this approach is equally good for large organizations and for individual farm operations.
Larry Martin is a principal of Agri-Food Management Excellence (AME), which runs national farm and agri-food training programs, including CTEAM for farmers and CFAME for the agri-food business sector.