Strategically Positioning the Farm Business

Operational Efficiency Versus Strategic Positioning Productivity Frontier (state of best practice) low high Relative cost position Nonprice buyer value delivered

Strategic and Operational Performance HOW WHAT Clear Strategy Unclear Strategy Effective Operations Ineffective I Equaled success in the past and will in the future II Equaled success in the past, but success is doubtful in the future III Sometimes worked in the past in the short run, but competition makes success doubtful in the long run IV Equaled failure in the past, and will in the future

Doing the Right Thing versus Doing Things Right

Components of Strategic Planning 1. Determine Mission and Goals 2. Internally Analyze Farm’s Strengths and Weaknesses 3. Evaluate the External Opportunities and Threats to the Business 4. Evaluate Potential Strategies for the Farm Business 5. Develop an Implementation Plan for Selected Strategies

Strengths and Weaknesses Strengths Weaknesses Products or Services Operations/Production Processes Marketing/Purchasing Human Resources Organization/Business Structure Goodwill/Public Relations

Strengths and Weaknesses (cont.) Strengths Weaknesses Financial and Physical Resources Production Technology Information Management Channel Linkages/Key Relationships Management Team Other

External Opportunities and Threats The New Agriculture International Competition Industrialization Differentiated Products Food Supply Chains Information/Precision Source: Michael Boehlje

What This Means for Producers 1. Strategic Positioning 2. Determining alliances and partnerships 3. Marketing channels 4. Adopting appropriate technology 5. Preparing for accountability 6. Managing information 7. Frequent monitoring 8. Transferring management

Business Products & Size 1. What products are you going to produce? 2. What technologies & methods will you use to produce them? 3. How big will your operation be? 4. Will you specialize or diversify? 5. Where will your business be located?

Size/Growth/Downsizing Focus/Specialize Intensify/Modernize Expand Diversify Replicate Integrate Network Delay/Wait and See Exit

Alliances 1. Will you participate in production alliances with other producers? 2. Who will you partner with for capital? 3. What alliances will you build for inputs, services and information? 4. What production systems will you use? 5. How will you participate in food supply chains? 6. What consulting services will you partner with? 7. Who will be part of your legal and financial team?

Marketing 1. Which production and marketing contracts will you sign? 2. Will you form marketing or purchasing alliances? 3. Will you participate in value-added endeavors? 4. Will you employ marketing services or consultants? 5. Will you develop direct marketing linkages to end-users? 6. Will you enter a niche market, such as organic products? 7. Will you have access to markets you want in the future?

Adapting Appropriate Technology - Automating a Process 1. What technology moves you towards goals in other areas? 2. Should you adapt technologically-assisted processes internally or externally? (Consultants) 3. What level of technology are you comfortable with? 4. What are you not doing now that you would like to do? 5. What job/process do you hate and would like to automate?

Preparing for Accountability 1. How will you track government regulations concerning the environment, chemical use, drug use, permitting and other areas? 2. How will you stay informed/ahead of new regulations? 3. Do you have review processes and plans to deal with regulatory issues? 4. Are you preparing for food safety traceability from end use to point of origin? 5. How will you review & manage legal liabilities? 6. How will you inform the end user of your stewardship

Managing Information 1. What information do you need to know, or want to know? 2. How will you avoid tracking excess information? 3. How will you filter and summarize information into manageable quantities? 4. When will you use outside consulting services? 5. What software systems will you use? 6. How will you employ precision technology? 7. What is the price of getting what you want to know?

Frequent Monitoring 1. How will you monitor your financial situation quarterly, monthly, or weekly? 2. How will you monitor critical factors to continually evaluate production efficiency and to identify potential problems before they begin to cost money? 3. How will you move toward a system of real time intervention that will help you make adjustments to save or make more money? 4. What monitoring provides useful information?

Transferring Management 1. How will you transfer management capabilities to other family members, managers, and employees? 2. What contingency plan do you have if the farm manager suddenly can no longer manage the business? 3. Who is management, who will be management?

Strategic Risk International Government Policy Government Regulations Macro-Economics Social Natural Industrialization Technological Uncertainty Competitive Conditions Source: Positioning the Farm Business

Peak Performing Ag Executive Perspective on the Peak Performing Ag Executive Measure financial performance Strategic thinkers Objectively assess strengths & weaknesses in themselves/people Think in systems rather than components when looking for improvement Risk takers but excellent risk managers

Perspective on the Peak Performing Ag Executive (cont.) Evaluate but-what-if scenarios & contingency plans Seek input and expertise from outside See changes as opportunities, don’t see themselves as victims See themselves as head coach rather than boss

Perspective on the Peak Performing Ag Executive (cont.) Balanced approach to management of key performance areas Spend time monitoring and analyzing performance Use judgement rather than emotion Creative and innovative Communicators

Managing Strategically Conclusions Managing Strategically Take time to think creatively, honestly & strategically Develop a plan to strategically position your unique business Find and develop a team to help Run what-if scenarios and develop contingency plans

How Will Agricultural Professionals Work With Producers? Agricultural professionals who can help producers develop strategic management approaches that take advantage of opportunities in the rapidly changing agricultural business environment will be invaluable. Your customers are facing a radically different agriculture from that which existed several years ago. How are you adapting to provide radically different services?