Farmers are usually analytical, disciplined, very task oriented people that tend to want to do things as they’ve been done before unless there is a very good reason to change. The challenge is to take realistic doers and stretch you. There are a lot of changes taking place in agriculture. Strategy is a way of thinking about changes and preparing for them. It is taking control of your farm business to determine the general direction of the business and create a competitive “niche” in the marketplace. In this presentation we will illustrate the concept of strategic management and try to get a solid definition of what strategic management is. This will serve as our starting point for exploring some of the tools that help us become better “strategic” managers.
What is strategic management about? What does it do? It’s about choosing your direction . . . You using strategic management to be proactive about your own business. It’s about Tools . . We will give you tools to use – like SWOT that can organize your thoughts and provide insight into what actions you can take. When you finish with the program we want to have some comfort level with the material.
Anticipating means being aware of things going on in the World, Country, Industry, and Firm and being prepared for changes in those environments that may affect the firms future. Shaping means taking actions to respond to anticipated events so that the firm can help change those events to its favor. Capitalizing means “making the best of what the future brings” We want to anticipate and try to shape that future but ultimately we must be prepared to take advantage for what ever opportunity the future brings. Think of your business as a boat. There are lots of things to manage. You’ve got to take care of the boat. You’ve got to take care of the crew. Someone’s got to steer. Don’t spend time patching holes in the sail when you’ve got to be charting the course and keeping the boat pointed in the right direction. Choosing when to harvest is not strategy, that is patching the holes. Most farmers don’t like change – it is in their personality profile to not like it. So it is a challenge to deal with it; it is something that makes them uncomfortable. Yet change is inherent in the marketplace. So the best way to deal with it is to be prepared. That can be done by anticipating, driving and then capitalizing on what is happening. We’re not predicting the future, but we can anticipate and then we can shape – that is driving, positioning we can try. Strategic management is about thriving .
If it ain’t . . . Don’t fix it: That’s the way your dad probably did it. . . . Fix it anyway: Look forward. Anticipate or it will be too late.
Where are we now? Part of this can be answered by using financial analysis. There are also tools for assessing what strategic resources, capabilities and core competencies you’ve got. Where are we going? If no changes are made, where will the company be in five, ten years. Are the answers acceptable? You can look at part of this with a vision statement that summarizes your philosophy and general direction. You can measure any outcome you want – not just profitability – over time. You can project where you want to be. You can chart your course and gather supplies. If the answers aren’t acceptable then what specific actions should the company take? How will we get there? It is about doing things that fulfill the vision you have for your business. It is about goals and objectives and deciding what things need to be done. Strategic management is about growing toward your goals. These questions can be illustrated with the GAP Analysis graph on the next slide.
Outcome is on the vertical axis. It could be anything profits, growth, retirement, etc. Time is on the horizontal axis. Strategy starts by determining where we are today relative to where we have been. Given this current path you can ANTICIPATE where you will be in the future. Strategic management defines the goal of where you want to be and determines the path to get you there. It answers how you close the gap.
Following up on the graph this are four essential steps for strategic managers to follow in closing the gap. Notice that there is very little about day-to-day operations here. Strategic management by its nature is more longer-term thinking. But, without the last step being well defined for employees successful implementation of strategy is not likely to occur. Define our current position. Customers: do any of you have customers? Do you think about what you can do for them – what problems you can solve for them. Solving problems creates value that you can capture. Determine the goal. If you’re going to sail the boat to Spain you’ve got to point it east in a hurry. Start down the path . . . What do you do this year? What next year?
What is the difference? Operational effectiveness: doing things right. Strategy: doing the right things. The next slides back this up.
Strategy is about finding a unique way to put the company’s activities (buying, selling, producing, hiring, firing, etc.) together that is hard or impossible for competitors to replicate and is valuable to customers. Ultimately this way of designing strategy will require the company to choose things not to do in the interest of focusing resources on the activities that create competitive advantage. Wal Mart in the US is an example with the way it ties together its purchasing, inventory management, and target market (high volume, medium quality, low middle income products) with a superior information system to create a competitive that no other company has been able to successfully replicate up to this point. Competitive strategy . . . Can you grow #2 yellow corn and be different? Activities are the specific individual tasks that the farm conducts to accomplish its goal of producing and selling its products. The individual activities are the key source of competitive advantage when you focus on those activities that you do better than other people. Plant manager vs. General manager The general manager’s job is just as hard as anyone else’s job. Strategy is choosing what not to do . . . Jack of all trades and master of none. You’re spread too thin. Everyone has choices; strategy is about resolving to make choices that create your future. Strategy is a process – and it requires some flexibility.
This is a summary slide of what we have now defined strategy to be.
Build this slide slowly, talk about the components and how we will be dealing with each of these components throughout the strategy section of the institute. 3 rd level (assessing): Customers – the eating public is not your customer. They are Kroger’s customers. Part of the structural change in agriculture is a move away from open markets and more to contracted or limited access production. 2 nd level: low cost or differentiate? What strategy are you trying to follow? It depends on the skills/resources. Some choices don’t make sense. Inner level: At this level you’ve got someone steering the boat. Now you can patch the holes in the sails. These day to day operations should be the least of your worries. The circular pattern, in the sense that it is difficult if not impossible to deal with any of these components without considering the other components. A good strategy will find a way to fit all of the components together in a nice complete package. Although this will be done step by step here in the Strategic Business Planning for Commercial Producers program you’ll need to come back later. You’ll always be assessing the situation. The business plan isn’t supposed to get done and then sit on the shelf for 30 years.
How Can the Business Be Positioned through Strategic Thinking?
How Can the Business Be Positioned Through Strategic Thinking?
Overview <ul><li>Strategic management </li></ul><ul><li>Your own strategic direction </li></ul><ul><li>Tools for analyzing strategic direction </li></ul><ul><li>Determining strategic alternatives </li></ul>
What is strategic management? <ul><li>Strategic management is all about anticipating, driving, and capitalizing on change: </li></ul><ul><ul><li>Anticipating: seeing the future </li></ul></ul><ul><ul><li>Driving: shaping the future </li></ul></ul><ul><ul><li>Capitalizing: making the most of the future </li></ul></ul>
What is strategic management? <ul><li>“ If it ain’t broke... </li></ul><ul><li>Don’t fix it.” </li></ul><ul><li>“ If it ain’t broke... </li></ul><ul><li>You haven’t looked hard enough. </li></ul><ul><li>Fix it anyway!” </li></ul><ul><ul><ul><ul><ul><li>Tom Peters </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Thriving on Chaos </li></ul></ul></ul></ul></ul>
What is strategic management? <ul><li>In any strategic planning process, we must answer three key questions: </li></ul><ul><ul><li>Where are we now? </li></ul></ul><ul><ul><li>Where are we going? </li></ul></ul><ul><ul><li>How will we get there? </li></ul></ul>
The Performance Gap Time Outcome Gap Goal Current Path TODAY
How do we close the gap? <ul><li>Define our current position .... </li></ul><ul><ul><li>with respect to customer needs, competitors, the general market situation </li></ul></ul><ul><li>Determine our goal .... </li></ul><ul><ul><li>where should our firm be in 5, 10, …, years? </li></ul></ul><ul><li>Evaluate our firm and our market …. </li></ul><ul><ul><li>Strengths, Weaknesses, Opportunities, Threats </li></ul></ul><ul><li>Start down the path that will lead to our goal </li></ul><ul><ul><li>short - long-term action steps to move toward our target </li></ul></ul>
What is strategy? <ul><ul><li>Operational effectiveness </li></ul></ul><ul><ul><li>versus </li></ul></ul><ul><ul><li>strategy </li></ul></ul><ul><ul><li>What is operational effectiveness? </li></ul></ul>
What is strategy? <ul><li>“ Competitive strategy is about being different.” </li></ul><ul><li>“ Strategy is the creation of a unique and valuable position in your industry.” </li></ul><ul><li>“ Activities are the basic units of competitive advantage.” </li></ul><ul><ul><li>“ Strategy is about combining activities.” </li></ul></ul><ul><ul><li>“ Strategy is about creating fit among a company’s activities.” </li></ul></ul><ul><li>“ Strategy is choosing what not to do.” </li></ul>
What is strategy? <ul><li>Strategy is …. </li></ul><ul><ul><li>Looking longer term </li></ul></ul><ul><ul><li>Capitalizing on change </li></ul></ul><ul><ul><li>A stream of decisions </li></ul></ul><ul><ul><li>Focused on a purpose </li></ul></ul><ul><ul><li>Managing strategic risks </li></ul></ul><ul><ul><li>Creating a unique and valuable position </li></ul></ul><ul><ul><li>Choosing what not to do </li></ul></ul>