In a recent webinar, “A Playbook for Winning,” tied to the book Playing to Win: How Strategy Really Works (Harvard,2013), Procter & Gamble chief executive A.G. Lafley and Roger Martin, dean of the University of Toronto’s Rotman School of Management, echo Porter’s assertion that strategy is about choices. Strategic decision-making, they argue, involves five key questions: What is our winning aspiration? Where will we play? How will we win? What capabilities must we have? What management systems are required?
“These are the same questions I would ask and they are applicable to any and all industries,” Green says. “Additional questions for produce companies might include: What market forces are at play with food and perceptions of health? How do we leverage those trends? Do we want to educate our market or follow the lead of someone else who does? Who are the key stakeholders in our industry that can most drive desired change for us?”
At Grant J. Hunt, “We generally ask ourselves about each of our business segments:‘if we weren’t already doing this function, would we want to start doing [it] to grow the business in the long run?’ If the answer is no,” Hunt explain “then that’s an area for acute analysis.”
Further, Hunts says, when considering a new commodity, there are a host of questions that must be asked and answered: “Who are the ultimate shoppers that will consume it? What will they be willing to pay? Who will be our customer base to take this commodity to market? Do we have access to that channel of distribution? It seems simple,” he says, “but our industry is littered with folks who planted crops or orchards because it was ‘perfect growing conditions’ without a thought in the world about who would buy that product or for how much money.”
Not everyone thinks Lafley and Martin’s five-step process applies well to produce. “I think Lafley is too focused on manufactured products and his comments do not fit the reality of the fresh produce industry, or perishables in general,” Athanassiadis says. “While it seems relatively straightforward for a produce company to develop a strategy from an intellectual perspective, it has been more difficult, many times, to implement it successfully.”
The word “strategy” has many definitions; one element they all have in common, however, is that strategy involves choices.
Produce company executives and owners make strategic business decisions every day, but those who do so with forethought and an eye on market forces can differentiate themselves from their competition—and carve out a unique and valuable place within the industry.
Creating A Sustainable Difference
In his classic 1996 Harvard Business Review article “What Is Strategy?,” Michael E. Porter defined strategy as having three key or ‘trade-offs’; and determining your ‘fit’ within the industry.
Regarding the first step, it is crucial to pursue a unique set of activities, such as focusing on a particular group of products, a certain customer segment, or a particular means of reaching customers.
Holly G. Green, managing director of The Human Factor and author of Using Your Brain to Win in Today’s Hyper-Paced World (Amazon, 2013), says, “Every organization or company has to determine what brings unique value to a customer—whether that’s a commodity item you deliver in better condition, with better customer service, with a better price point, or with additional value (such as inventory tracking or monitoring).”
Further, she notes, your company’s resources must be fully aligned to support this product differentiation.
In the produce industry, positioning can be a simple matter of concentrating on one or a few commodities and doing it well. “Some companies compete on the basis of growing their products in uniquely favorable locales,” explains Minos Athanassiadis, managing partner at marketing consultancy FreshLink Group, LLC.“Examples include celery in the Oxnardarea during the fall/winter season, lemons and avocados in Ventura County, lettuce in the Salinas and Yuma areas, and grapes and tree fruit in California’s Central Valley.”
The second element of Porter’s strategy involves trade-offs. “The essence of strategy is choosing what not to do,” he writes.“Without trade-offs, there would be no need for choice and thus no need for strategy. Any good idea could and would be quickly imitated.”
Green puts it this way: “Like all other industries, there are numerous opportunities that can be pursued,” so, she says, it is very important for produce companies to be clear about what products or services they do not offer as part of their business. “What gets in the way of providing the best possible value for whatever it is you do? Many times we continue doing things long after they add value in a market—mostly because they have become habit or ‘just the way we do things in our industry or our company’—and these old habits need to constantly be updated so you can keep up in a rapidly changing world.”
Porter’s third element of strategy is “fit”or the combination of activities or products that are not only consistent but will reinforce one another to optimize a company’s efforts.“Competitive advantagegrows out of the entire system of activities,”says Porter.“
Strategic fit among many activities is fundamental not only to competitive advantage but also to the sustainability of that advantage. It is harder for a rival to match an array of interlocked activities than it is merely to imitate a particular sales-force approach,match a process technology, or replicate a set of product features.”
Athanassiadis finds it interesting that many “produce companies develop a competitive advantage based on strategies outlined by Porter, without having necessarily studied his work.” Examples of Porter’s costleadership strategy include specializing in bagged salads or sliced cantaloupe, as opposed to selling head lettuce or bulk melon.
Strategy vs.Operational Effectiveness
Porter emphasizes that operational effectiveness is not strategy. “Competitionbased on operational effectiveness alone is mutually destructive, leading to wars of attrition that can be arrested only by limiting competition.” Strategy, on the other hand, allows a company to create a sustainable competitive advantage.
Green believes strategy sets overall direction,but operational effectiveness “is what brings the strategy to life.” Further, in a fast-paced industry like produce, where products have a short shelf life, it is typical for energy to be “more focused on what has to happen day-to-day, and not on stepping back every now and then to consider the forces at play with your customers, markets,competitors, and the world at large.”
In perishables, however, strategy and operations are closely intertwined. “In anindustry where it is inherently difficult to derive tremendous value from product differentiation,the value-based deliverable is being able to focus strategic efforts to reinforce the tactics of going to market,” says Grant M.Hunt, president of Oakland, CA-based distributor Grant J. Hunt Company.
That said, having a clear strategy is critical. “Firms successful over the long run usually have an underlying strategy that is enhanced by their operational effectiveness,”Hunt says. “By definition, it is easy to concentrate on tactics because of the fast-paced nature of the industry. Firms that ignore following a core strategy may succeed over a shorter horizon, but eventually the changes inherent in the produce industry will overwhelm a company that is merely operationally effective.”
Asking the Right Questions
In a recent webinar, “A Playbook for Winning,” tied to the book Playing to Win: How Strategy Really Works (Harvard,2013), Procter & Gamble chief executive A.G. Lafley and Roger Martin, dean of the University of Toronto’s Rotman School of Management, echo Porter’s assertion that strategy is about choices. Strategic decision-making, they argue, involves five key questions: What is our winning aspiration? Where will we play? How will we win? What capabilities must we have? What management systems are required?
“These are the same questions I would ask and they are applicable to any and all industries,” Green says. “Additional questions for produce companies might include: What market forces are at play with food and perceptions of health? How do we leverage those trends? Do we want to educate our market or follow the lead of someone else who does? Who are the key stakeholders in our industry that can most drive desired change for us?”
At Grant J. Hunt, “We generally ask ourselves about each of our business segments:‘if we weren’t already doing this function, would we want to start doing [it] to grow the business in the long run?’ If the answer is no,” Hunt explain “then that’s an area for acute analysis.”
Further, Hunts says, when considering a new commodity, there are a host of questions that must be asked and answered: “Who are the ultimate shoppers that will consume it? What will they be willing to pay? Who will be our customer base to take this commodity to market? Do we have access to that channel of distribution? It seems simple,” he says, “but our industry is littered with folks who planted crops or orchards because it was ‘perfect growing conditions’ without a thought in the world about who would buy that product or for how much money.”
Not everyone thinks Lafley and Martin’s five-step process applies well to produce. “I think Lafley is too focused on manufactured products and his comments do not fit the reality of the fresh produce industry, or perishables in general,” Athanassiadis says. “While it seems relatively straightforward for a produce company to develop a strategy from an intellectual perspective, it has been more difficult, many times, to implement it successfully.”
Leadership Considerations
According to Porter, the challenge of “developing or reestablishing a clear strategy is often primarily an organizational one and depends on leadership.”
Green counsels leaders to carefully listen at meetings for what is said and definitely what is not said, asking, “Where is energy focused? Is it on the day-to-day or what happened last week, or is there time carved out to discuss ‘winning’ and the future? What gets rewarded in a system? Is it firefighting to address the latest crisis or an idea that could dramatically change something?”
It can also be helpful to enlist the services of an outside consultant to help develop or implement a strategy. According to Green, successful individuals and organizations can “be very stuck in ways of thinking and behaving, and it is incredibly difficult to break these patterns…to consider alternatives, challenge assumptions, and change perspectives.”
The best strategy might be an unexpected one, and discovering it requires out-of-the-box thinking. “Keep in mind Coca-Cola is the most valued brand in the world, and it’s chemicals in a can,”Green comments. “Humans are not logical, rational creatures, and understanding this is critical to determine a successful strategy for today’s world.”
Final Thoughts
Management consultants and executives agree the produce industry is continually evolving and that any effective business model must adapt accordingly.
As Hunt points out, “The key sustainable strategy in the produce industry is to embrace change and to remain flexible.”
