In today’s market, companies often lose sight of their core. Most feed or grain companies have ambitions to grow their business but few have an actual plan, beyond working harder. With the agricultural sector’s increased understanding of how to optimize animal and plant performance, there is continuous pressure to keep up with genetic improvements. This manifests itself through choices made by owners and presidents whether to enter specialist or niche markets, open up new geographies and supply chains, or adopt new technologies such as analytical or processing equipment. Given these options and the road forward, the question then is, “why do some feed and grain companies prosper while others do not?”
One reason some businesses fail and others succeed lies in “the paradox of growth.” Over the past 10 years, Chris Zook, a consultant with Bain & Co, has developed a set of ideas known collectively as Profit from the Core that offers a practical and useful alternative. These ideas are simple and logical, and, in our experience, are intuitively attractive and practically useful to firms of every size. According to Zook, there are four pillars to a sustained growth strategy.
Pillar 1: Must have a strong, defined core with leadership in the “core of the core”
Every business has a core. Most likely it is the part of the business, which, more than any other, drives customer loyalty and firm profitability. The core is what makes your company unique and is the root of your competitive advantage in the marketplace. Do you know (specifically, not generally) what the core of your business is? For many feed manufacturers, they may simply say producing feed. Grain merchants may say that they are traders. However, is that really the entire core of your business model? Do you have a reputation for producing value-added feed products or are you known for your uniformity and quality control procedures? Perhaps it is your quick delivery or ability to custom mix and design new feed formulations. How many discussions have you had at board level about the core of your business? Is your management team clear on what the core of your business is? Understanding the core is important; it is the starting point for identifying growth opportunities.
In many enterprises, management teams do not agree on the core and some have never even talked about it. By not fully identifying the core or by taking it for granted, companies can prematurely abandon the real core of the business or become involved in growth initiatives that are too far from the core, spread resources too widely and develop confusion in their organizations. An example of this was an organization in northern Europe that started 80 years ago as a fishmeal supplier, then moved into feed, and later animal breeding, biologics and genetics. A venture in the Middle East involving the construction of turnkey plants led to the collapse of this poorly conceived business with the company being sold and restructured. Today, it is successful with a clear mission that its core is in poultry health.
Feed and grain companies should identify their core business and then leverage their strength and success in that core to identify growth opportunities. Many mills and traders have multiple product lines within their core business area, such as feed for cattle, pig or poultry. It is worth examining each of these areas in detail and asking which contributes most to growth in sales and profits and to then examine why. This can be an effective way to begin to understand the core of your business.