Ag Retailers Should Break Out Of The Comfort Zone
December 16, 2011 For most retailers, 2012 is lining up to be another fantastic year. Most growers were flush with cash and looking to lock in inputs before year’s end. And with crop prices sustaining their high levels, selling products and technologies that boost yield has been much less challenging this winter, and will likely continue through the season.
In conversations that we’ve had with retailers through roundtable meetings and interviews through the fall and early winter, virtually everyone we talked to has at least a vague sense that all this prosperity could be taken away at any minute. But most also aren’t making the commitment to dive deeply into developing new and innovative ways of approaching business that could help to ensure the long-term sustainability of the operation.
“Everybody senses it, but not very many people do much about it,” says Dr. Dave Downey, long-time professor at Purdue University who is now traveling the country and consulting with agribusinesses on this question, among many others. “The issue tends to be psychological, and it is hard to get your hands around it when things are going well.”
Downey says that in the two years of relative prosperity we’ve experienced, the tendency of people is to believe that it can never get bad again. “Our heads know it’s not true, but people can’t get their arms around thinking about the difficulties that can come when the market begins to turn,” he explains.
Don Pottinger, who spent decades working on the retail and manufacturing sectors of agriculture and who is also doing consulting work, agrees that success changes the mindset of many businesses, and not for the better.
“When times are good, cultures that do not have very strong discipline and sharp leadership are in danger of falling into a state of arrogance and complacency,” says Pottinger. “My point is, if you are doing well and you believe the reason for that is what you’re doing rather than what’s happening in the markets, then you become a different entity, a different culture and a different company.”
Pottinger gets to work with a lot of good retailers, and he says that when he asks them what they fear the most, it’s never about the markets or a potential downturn – they’re most nervous about complacency in their own ranks.
So if the first step towards making change is acknowledging the need do it, what comes next? Pottinger and Downey are virtually on the same page with their recommendations.
First, there needs to be somebody whose job revolves around bringing innovative ideas and monitoring medium- and long-term trends for signals that changing business course is necessary. “If somebody in the organization does not see this as their job, it will not get done,” says Pottinger flatly. “If the main guy isn’t putting processes in place to get people to think outside the box, they simply won’t do it.”
“What you need to do is make sure that you as a manager are intentionally planning for change,” adds Downey. “Typically people don’t consider change until the problems have started. Then the resources get very thin and then you can’t do it. Change requires investment, it requires different people, more training, and deeper analysis. Unfortunately we are so busy doing things that we oftentimes can’t get our arms around that.”
Inside And Outside
Pottinger and Downey also agree that moving toward a company vision that embraces innovation should involve both employees and customers in the formative stage.
One technique that Downey recommends for uncovering issues that may require innovation is called scenario planning. Usually done at an offsite location to minimize distraction and sometimes involving an outside facilitator, the group works to identify all the things that affect the business in a significant way and then consider scenarios of what could possibly go wrong.
“From there, you create a solution to that scenario that you may want to be ready for or to plan toward if you believe some of those things could happen,” says Downey. “That creates a mechanism for thinking outside the box.
“The issue is, everybody I talk to is talking about the huge impact of volatility, and that it’s so more severe – to the point that it’s very likely that worst-case scenarios could happen,” he adds. “How do you get yourself organized to build toward not just a better year next year, but to protect your business against worst-case scenarios? Because it can happen.”
Outside the business, a carefully identified group of customers can provide valuable input on the retail operation.
“I encourage retailers to go through a process of identifying the customers who you absolutely want to have on your customer list in 2015,” says Pottinger. “Then, get hold of these people, sit down with them and tell them that you want to align with them. People will meet with you if you tell them they are important – tell them you want to wrap your business around their needs, and they will be glad to see you.
“You have to sit down with your customers nose to nose,” he continues. “Tell them that you are putting a lot of thought into how you’re shaping your culture and organization, and figure out very clearly what their needs and expectations are of you, or if they need retailers at all.”
Downey is working with Purdue University to get at the question of service and future needs to the next level of “really large farmers,” which are defined as 12,000 acres and larger through a university study.
“Those guys tend to think very differently,” says Downey. “They are concerned with bottlenecks, timeliness, control, using scale to negotiate – lots of things that most of our ag retailers frankly are not dealing with very well.”
Downey calls the key grower interaction the process of “discovering the grower’s business model.” Getting inside the customer’s mind it takes a whole different way of selling, and does not involve telling the customer how good your services are.
“It’s trying to understand what his business model is so you can relate on a business to business level,” says Downey. “That’s a different way of doing business than we have typically done.”
Once a conversation starts down that path, it fully engages the grower. A retailer Downey knew who tried to business discovery process went to a grower’s farm to have a 15-minute conversation about the operation, and after two hours had only gotten through two of six points he intended to make. The grower asked him, “so when can you come back?”
Retail managers can foster innovation by getting people to think differently about the sales process and focusing on value creation, says Downey. “Creating value for the kind of customers we will be serving in the future – the larger grower – is very different than how we service growers today.”
Innovation is key, and as Pottinger says in summing up, “if you are not marketing value then you are selling stuff. Change your mindset – think of yourself as an investment counselor that just happens to be selling fertilizer and crop protection products.
“Most companies make money when times are good – that’s nothing special. An organization needs people who are uncomfortable with doing too well, and as former NBA coach Pat Reilly says, be very suspicious of past successes.”
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