Strategy determines the future of any business. Don’t get confused. Strategy is a simple concept. It’s what you choose to do and how you choose to do it, and, most importantly, what you choose not to do. Any chosen business strategy, whether the outcome of formal planning or the intuition of its leaders, sets the entire team of managers and employees on a path that dictates how they will spend their time. So take great care.
Strategy selection either leads to the business prospering, or, alternatively, drains the time and energy of everyone involved, achieving little. While the concept may be simple, strategy selection is not. There have been several excellent publications dealing with this process.
While many business books provide a framework for selecting strategies and practices, the options are so numerous it remains a daunting and risky task. There was a need for something simpler, and Michael Raynor and Mumtaz Ahmed provided it in their book The Three Rules: How Exceptional Companies Think.
They researched thousands of companies worldwide, and boiled the selection of key characteristics down to just three simple rules:
Rule 1: Better before cheaper: Always choose actions that improve quality rather than reduce price or costs.
Rule 2: Revenue before cost: Always favour revenue-increasing options over cost reduction.
Rule 3: There are no other rules: As long as you follow the above two rules, select whatever you prefer in all other areas.
Let’s look at a few ideas: Better before cheaper
Every farm product has quality differentiators that matter to the buyer. Apart from meticulous attention to the product quality itself, take packaging as an example.
Even if there is little room for creativity, there is always opportunity to create practical and useful packaging. Even something as mundane as a cotton or a wool bale, filled to capacity, neatly sewn and clearly labelled is much easier to store and handle at the gin.
If you’re in the fruit and vegetable game, the sky is the limit with differentiated packaging.
What about reliability of supply? Ensure that the delivery of your product arrives precisely on time, every time, with the promised goods. The retailer knows they can count on you.
Revenue before cost and putting yield first
Business success never depends of how little you spend or how much turnover you generate. It’s the difference between the two that counts. Profit!
Raynor and Ahmed found that companies focusing on driving up revenue are the true successes. Obsessive focus on costs kills creativity. Don’t do it. Then there’s the factor that affects the success of your farm like no other: yield!
How can you increase this?
Have you explored, for example, the opportunity for ‘precision farming’? Or one of the other incredible new digital technologies available for identifying underperforming crops or ailing livestock?
These technologies come at some cost, but always lead to yield or quality improvement.
What about land that is not fully utilised?
With city-dwellers longing to escape to the country, wide-open spaces, tranquillity and fresh air, maybe you should investigate entry into the tourist or lifestyle market.
There are no other rules
Despite an intensive search for patterns of behaviour and management practices in the thousands of companies that Raynor and Ahmed studied, they found no other consistencies characterising top performing companies other than rules 1 and 2, ‘better before cheaper’ and ‘revenue before cost’.
As long as these two rules were the guiding principles for selection of strategy and implementation, the companies thrived. It’s tough times for all businesses in South Africa right now. Take note of what Raynor and Ahmed found, and build a business that stands on these three rules, and then face the present challenges successfully.
Peter Hughes is a business and management consultant.