The strategy making toolbox

1. The strategy making toolbox Economic Consultant, MSc in Economics. Torben Ulf Larsen tul@landscentret.dk, 8740 5170 DAAC

2. Agenda • Presentation – Danish Advisory Service • Strategy and part strategies • Dynamic strategy • Risk management • Case study – Noble Castle - exercises

3. 1788

4. The National Centre Præsentation Torben Ulf Larsen, cand. oecon., teamleader

5. National Centre 1 Local Family Farmers’ Associations Local advisory centres 38 Farmers/members 50,000 Organising and/or administrative connection Advice and Information flow Danish Agricultural Advisory Service Danish Agriculture Local Farmers’ Unions 78 % 17 %

6. Local centres Danish Agricultural Advisory Service Farmers Research, trials and other sources of knowledge”Globally” Danish Agricultural Advisory Service, National Centre

7. Danish Agricultural Advisory Service

8. Danish Agricultural Advisory Service • 38 local agricultural advisory centres and 1 national centre • Turnover: DKK 1.8 billion • 3½ thousand employees • Denmarks largest consultancy

9. Relations between DAAS and farmers Farmers are: OwnersUsersCustomers • Key words: • Best and cheapest advisory servicesImpartialnessNon-profit

10. Distribution of income, 2008 Total income:DKK 525 mill Project funds Tax reimbursements 17% 19% 3% Danish Agriculture User fees and sales 61%

11. Tasks of the National CentreDissemination of Knowledge LandbrugsInfo 105,000 documents 27,000 page references per day 55,000 visitors per week 50 interactive programs plant protection calculation of animal units and area requirement weather forecast and weather radar via sms 2.3 mill. people visit LandbrugsInfo and Landmand.dk every year

12. Staff education and age Staff, Average age 2006 43.9 years 2007 44.1 years

13. Number of farms in Denmark Farms, no. Full time Part time Landbrugsraadet, sept. 05

14. The Danish Agricultural Advisory Service • Managed by the users and organised by agricultural organisations • Government aid/subsidies until 2004 • Officially and universally recognised as independent and impartial • Supplies advisory services to all production branches • Two-level services • Independent of the State when rendering advisory services (e.g. environmental regulations)

15. Strategy and part strategies

18. ”It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change”Charles Darwin

20. Management levels Development, Capacity and finacing Strategic, 3-5 year Exploit existing capacity- and financial basis Tactical, 1-2 years Up to date production, Purchase, sale, and payments Operational, Less than 1 year

21. What is strategy? The direction to the goal!

22. Accept the complexity of reality Objective Surrounding world Desired situation Actual Legislation Technology Market Vision Manpower Human resources Present situation Time

23. The strategy process I M P L E M E N T A T I O N C H O I C E S S W O T Environment Farm Family Mission Vision ⇒ ⇒ ⇒ ⇒ ⇒ Goal

24. The strategy process I M P L E M E N T A T I O N S W O T C H O I C E S G O A L Surroundings Farm Family Mission Vision ⇒ ⇒ ⇒ ⇒ ⇒

25. The vision – a guiding star – a picture of the future in the long run A scenario for the future. A continous description of what you want your business to be in 3 – 5 – 10 years.

26. Vision • Through high standards in food quality, an economic consolidation must be made, this brings the possibility for an up to date development. This must be done on an environmental and harmonic farm, where the working environment is of high importance, among the best in business, and including time for freedom and a close contact with the enduser.

27. ”Car phones? That will never be good business. Nokia must concentrate on television sets.” Kari Kairamo CEO of Nokia Early 1980’s

28. PEST

29. Political factors • EU agricultural policy • National agricultural policy • Environmental policy • Commercial policy

30. Economic factors • International economy • Prices • Sales • Subsidies • National economy: • Unit and capacity costs • Interest rates and land prices • Wages

31. Sociocultural factors • Traceability • Nature experiences • More employees on plant production farms – size? • Image • Sustainability

32. Technological factors • Technological possibilities • Larger, more efficient and automatic machines • Milking robots • Reduced soil processing • IT • Manure separation • Processing possibilities • GMO

33. Land Buildings Machinery Technical equipment Herd Environment Economy Use experts’ statements Present the draft report for the farmer and the involved experts Get full accept on the final report Tools: Farm analysisUse everything you know already!Go for the important facts.Don’t waste time and money to go into useless details

34. Ego: Stronger than others Innovative The DiSC- model Environment: unfavourable/ hostile Evaluative Environment : favourable/ friendly Accepting Ego: Less strong than others Adapting

35. Human resources analysisone of many tools for assessing human resourcesis the DiSC; here we help the farmer to clarify his attitudes By answering a large number of questions the farmer gets an idea of his personal profile, sometimes surprising, sometimes disappointing, often being a good reason to think over once more the strategy for the future

36. Motive: Control and management... Fears: Loss of control Wants: Force Challenges Direct answers No rules New activities Individual perfomance Characteristics: Self-confidence Taking risks Makings decisions Focusing on results Demanding Limitations: No respect for others impatience Lack of quality focus The DiSC modelD = dominance

37. Motive: social respect Fear social rejection Want: A round of applause popularity Praise Group activities Positive relations No control and regulations Characteristics: optimistic Inspires confidence emotional Involved with human beings Extroverted Charming Limitations: Impulsive Promise to much Lack of completion The DiSC-modeli = (social) influence

38. Motive: Stability Fears: Changes Wants: genuine appreciation Cooperation Work with well-known methods Safety Characteristics: Considerate Stability in work Willing to cooperate Patient Loyal Taking care of the group accepting Limitations Own needs are not important Resistance against positive changes DiSC-modellenS = stability

39. Motive: Quality and precision Fear: Failures, criticism, emotions Wants: Win discussions General view Praise Limited risk Characteristics; Analytical and factual Aware of details Conscientious Diplomatic Business-minded Curiosity Reliable Limitations: Critical Indecisive Lacks creativity The DiSC-modelC = competence

40. DISC Profile D I S C

42. Tools: assessment of analysesThe critical SWOT- a practical example

43. Demands for a good strategy: • Consistent • Feasible • Competitive advantage • Need for innovation

44. GOALS Farmer’s STRATEGY NOW! Environ- mental strategy Commu- nication strategy Financial strategy HR strategy

45. Dynamic strategy

46. Areas of Focus During Development • The strategy product must be appropriate for current times • The strategy product must be appropriate for the farmer’s situation • The farmer must be serviced with the requested advisory role • A platform for communication with interested parties

47. The strategy product must be appropriate for current times- General strategy versus dynamic strategy Strategic planning Emergent strategic development Continuous adjustments Focus on development The strategy is prepared by the man on the floor Many decisions are made on basis of limited information • 5 year plan • Focus on operation • The strategy is prepared by the expert • Decisions are made on basis of complete information

48. The farmer’s situation The farmer’s reality on the farm: • The farmer has a lot of time for considering strategy, but not at the office • The farmer is bombarded with strategic input, but does not take 100 percent advantage of them • The farmer demands to be at the head of the table. Only he knows the situation and complexity of the farm

49. The overall production - Keymap of the farm 370 ha grass 40 ha corn 100 ha growing crops 80 ha oat 160 ha chorophyll granule Production of 7,000 hogs 750 ha Agriculture Grossproceedsappr. xx DKR Pigs Grossproceedsappr. xxDKR Purchase at 30 kg JB 1 to JB 3 BlueSPF Water appr. 80% 2 600 KW windmills Windmills Turnoverappr. xxDKR Yearlyproduction of 2,500,000 KW/H 450 milkcows 5 year plan for the farm Each branch of production should be internationally competitive on proceeds and costs. The aim is that the farm is saleable at alltimes. In the strategic development job satisfaction and financial latitude are important values. 4 mio. kg milkyearly Milk production Grossproceedsappr. xx DKR 1 windmills in Germany 2 separation units Contractorwork Turnoverappr. xx DKR 40 spaces in an indoor Delavalcarousel Authorizedsewercontractor Production of appr. 2,740,000 KW electricity Biogas plant Turnoverappr. xx DKR Sale of slurry tanks Turnoverappr. xx DKR Vendor of AgriTank 3,500,000 KW heat

50. Milk production - The strategicmap of competences Selection of type of person 1 Estimatefinancingrequirements and riscprofile Education:Short management training Invite offers 1 Management Support from and chemistrywith management Financing Interest rate Co-ownership– 20% of production unit 1 Foreigncurrencyloan 1 1 Selection – knowledgeand motivation Improve managementand control Overall strategicgoal To producemilk at the lowestpossiblecost,takinganimalwelfareintoconsideration The price has to be internationallycompetitive 1,100 cows gives a goodflow Schools Access to labour Large-scaleproductionadvantages – division into 6 teams 20% more space Agencies Increasemilking of high-yieldingcows Possibilities for burning slurry Logisticscows– transport of heavilypregnantcows Lesscapitaltie-up in land 1 At new purchases land priceshould not exceed 100,000 DKR Approval of expansion Logisticsslurry 1 Logisticsfodder Cheaperfodder Improveyield of corn