“Change is the law of life. And those who look only to the past or present are certain to miss the future.”
A couple of years ago, I sat in a presentation by a prominent NZ entrepreneur. It was soon after the Labour coalition came into power, and there was high degree of uncertainty in the Agri sector as to what the change in government would mean
The presenter posed a question to the audience that has stuck with me ever since – “the most significant political change of the last 10 years has just occurred; your world has changed – what have you changed in your own business as a result?”
Doing nothing is an easy trap to fall into in business. The unsettling feeling that things are changing all around you which you cannot control, or influence is not uncommon. The right strategy here, however, is to accept that you cannot control the uncontrollable, and instead direct your focus towards the things you can control.
By doing this, you will ensure your business continues to adapt and thrive even in situations of change.
The world is going through a period of significant change. Covid-19 has and will bring about substantial change right across the globe, in both a social and business sense. Whilst it would be easy to say the NZ Agri sector has been largely unaffected, this is not the case. Already we have seen the impact in ways such as delays in the processing of animals, restrictions on migrant labour and uncertainty around future demand.
What further changes lie ahead remains an unknown, however, most predictions point towards a substantial and sustained slowdown in the world economy, and that will no doubt have some impact on NZ, and therefore revenue levels in the Agri sector. Other change could include:
- Increased cost of capital
- Monetary policy leading to an increased demand for hard assets (such as farmland)
- Changes to consumer preferences and buying behaviour
- A sustained reduction in migration and the availability of labour
- Ongoing disruption to supply chains
- Increased volatility
- A deep recession in the NZ economy
- An increased focus from consumers on things like traceability, food security and a story.
With this said, it is safe to conclude the world has changed significantly (and was doing so before Covid-19 became a reality), so its timely to look at what you can change in order to adapt.
- What will make you more resilient?
- What will make you more nimble and better positioned to take the opportunities that will inevitably arise?
- What elements of your own business model are ripe for disruption?
- What are the core values and principles in your business that will guide your decisions and your strategy?
- What opportunities are appearing now that were not obvious before?
- How can you think more creatively and laterally to be in a position to take those opportunities?
The following are a few key focuses that will give you a sense of confidence and control in a rapidly changing world, and position you to take opportunities:
- Know your numbers and what makes your business successful
Having clarity on the key elements of your financial and economic engine is crucial. Things like knowing your breakeven milk price, how your cost structure compares to your peers and top operators, the mix of fixed and variable costs in your business, how efficient your operating model is and the strength and composition of balance sheet are vital. Understanding these elements, monitoring them and using the information to drive optimal performance and accountability will give you the confidence you need in your base financial performance. It’s also crucial to support really good financial modelling and scenario analysis.
- Face your reality
Good, bad or otherwise, facing and acknowledging your current position is critical to navigating change. Objectively looking at your business and using independent parties to provide another perspective will put you on the right path to setting an appropriate strategy.
- Surround yourself with good people
There is huge value in a strong team when navigating change. The right people in your business will bring different perspectives, ideas and insights, as well as helping with key decision making and driving accountability. In environments of change its easy to have a narrow focus – and that can mean you may miss opportunities or feel more constrained than you actually are. Creative and lateral thinking from the right people, coupled with a clear understanding of your own business, will help develop the appropriate pathway through change.
- Have a clear risk management plan
If an environment of heightened volatility or change is with us for a while, think about how you can identify and manage the key risks in your business. Doing this effectively will give you the control of your business model, the confidence to manage change and the ability to take opportunities and get the support of key stakeholders.
- Have absolute clarity on how the Bank sees your business
Get a clear sense of the Bank’s view of your business, your ability to access capital and the Bank’s own internal strategy for your business. More importantly, give the Bank absolute clarity on your own strategy, how you are managing key risks and how you are managing change.
- Keep a future focus
There is a governance concept referred to as FICKS –(Future Focus, Issues Identification, Compliance, KPI, Succession). The idea is that in any governance forum you have a structure that deals with compliance, risk management and performance - but there is always a focus on the future. The theory is that you should spend 60% of your time in the Issues Identification and Future Focus areas – essentially a process of scanning your environment, and looking for the issues or opportunities that present themselves. Maintaining that future focus will not only open you up to other options, it’s also great for your mind-set.
- Have a clear sense of your overall strategy
Where do you want your business to head? What needs to happen to achieve those objectives? And what operational and financial performance do you need to support your vision?
- Look objectively at your asset base
Are you using your balance sheet optimally? Can you build greater diversity of asset base and/or revenue streams? Where are the opportunities to better use your balance sheet or to take advantage of opportunities that may present? Are you willing to think laterally in terms of access to capital to take advantage of the right opportunity?
- What are your values?
This should be at the core of your strategy and your decision making. Have a clear sense of why you are in business, what values and principles are important to you and then use those values to guide your decision making and strategy. Change, and the opportunities that come with it, will be much easier to deal with if you have a strong core purpose.
Change is a constant in business, and the next 18-24 months could bring generational change to the way business is conducted. For well run, effectively governed and strategically focused businesses -this sort of environment will open up opportunities and potential new pathways. Having the confidence to act and the ability to adapt to change will position these businesses strongly for the future.
I mentioned the importance of surrounding yourself with the right people – let us be one of those people. We can help you navigate the tumultuous nature of the world as we know it at present.