1. 1 Sixth Annual Farmer Cooperatives Conference October 30, 2003 The Speed of Execution John E. Gherty President and CEO Land O’Lakes, Inc.

2. 2 Speed of Execution Be fast or be gone! Dr. Chris Peterson Dr. Chris Peterson Department of Agricultural Economics Department of Agricultural Economics Michigan State University Michigan State University

3. 3 Speed of Execution Change … You don’t have to do it. Survival is not mandatory. Peter Drucker Business analyst and author In today’s business environment, cooperatives must do things different, better and faster, if we are going to survive and succeed.

4. 4 Speed of Execution Success in today’s economic environment depends greatly on the ability to envision the future … and get there first!

5. 5 Topics  How cooperatives can accelerate their “speed of execution” their “speed of execution”  Laying the foundation  Implementation  What can go wrong

6. 6 Today’s Business Environment  Accelerating change  Economic globalization  Industrialization of agriculture  Intensifying levels of competition  CONTINUED DRIVE FOR SIZE AND SCALE!

7. 7 Change – The Continued Drive for Size and Scale Must have the necessary size and scale to:  Meet the increasing demands of large and growing customers large and growing customers  Meet the challenge of large, well- financed, aggressive competitors financed, aggressive competitors

8. 8 Change – The Continued Drive for Size and Scale Every market will be dominated by three major players, with small specialty players filling niche markets, and any company caught in the middle will be swallowed up or destroyed. Every market will be dominated by three major players, with small specialty players filling niche markets, and any company caught in the middle will be swallowed up or destroyed. J. Sheth/R. Sisodia “The Rule of Three … Surviving “The Rule of Three … Surviving and Thriving in Competitive Markets” Markets”

9. 9 Change – The Continued Drive for Size and Scale Land O’Lakes Corporate Goal “To operate businesses with “To operate businesses with number-one or number-two number-one or number-two market shares or strong, market shares or strong, defendable market niches.” defendable market niches.”

10. 10 Change – The Continued Drive for Size and Scale Focusing on growth is in itself a change for many cooperatives … focusing on achieving growth in collapsed time frames is a major change.

11. 11 Speed of Execution Laying the Foundation  Culture/operating state  Strategic planning process  Communication  Balance sheet

12. 12 Speed of Execution – Laying the Foundation Culture/Operating State  Commitment to the cooperative as a business organization business organization Land O’Lakes is first and foremost a business organization. The essence of Land O’Lakes mission is to create long-term value for its member-owners through superior financial performance. At the same time, the cooperative has responsibilities to its membership that differ from those of a proprietary corporation. However, only through achievement of our business and financial objectives will the organization accumulate the resources required to successfully fulfill the economic, social and political expectations of its owners.

13. 13 Speed of Execution – Laying the Foundation Strategic Planning Process  Good data  Clear vision  Board and management alignment Other players skate to where the puck is, I skate to where it will be. Wayne Gretsky

14. 14 Board/Management Alignment 1.We must continue to grow, if we are going to have the size and scale necessary to compete have the size and scale necessary to compete effectively, long-term, on behalf of our owners effectively, long-term, on behalf of our owners 2. Resources are finite and Land O’Lakes growth must be consistent with proactive management must be consistent with proactive management of our portfolio of our portfolio 3. Generating industry-competitive financial results is critical to success is critical to success 4. Exceptional people will be essential to our success success 5. The breadth of the Land O’Lakes system must be leveraged where it creates competitive advantage leveraged where it creates competitive advantage

15. 15 Speed of Execution- Laying the Foundation Effective Communication with Members and Leaders  Essential, non-negotiable, cooperative leadership responsibility cooperative leadership responsibility  Critical to member understanding and trust and trust  No surprises!

16. 16 Speed of Execution – Laying the Foundation Balance Sheet Strength/Access to Capital  Intensified focus on performance and balance sheet strength  Commitment to proactive portfolio management  Development of alternative sources of capital  Willingness to explore new business relationships

17. 17 Speed of Execution- Implementation  Leadership Team  Board Role  Communication

18. 18 Speed of Execution – Implementation “The old adage ‘People are your most important resource’ turns out to be wrong, people are not “The old adage ‘People are your most important resource’ turns out to be wrong, people are not your most important resource, the right people are.” your most important resource, the right people are.” Jim Collins “Good to Great” Leadership Team  Select leaders wisely  Clarify expectations  Hold accountable  The “intangibles”

19. 19 Speed of Execution – Implementation Board Role  Understanding of, and alignment with, business objectives  Willingness to act in collapsed time frames  Discipline in communicating and advocating the organization’s message

20. 20 Speed of Execution – Implementation Communication  Go to the members  Timely  Honest  Two-way  Complete

21. 21 Speed of Execution – What Can Still Happen  Failure to recognize the time it takes to fully implement change/integrate growth  Reactions of customers and competitors  Management capability to lead a larger organization  Difficulty in evolving a new culture in a larger, more complex organization