The strategy making toolbox
Economic Consultant, MSc in Economics.
Torben Ulf Larsen
tul@landscentret.dk, 8740 5170
DAAC
Danish Agricultural Advisory Service
National Centre
Agenda
• Presentation – Danish Advisory Service
• Strategy and part strategies
• Dynamic strategy
• Risk management
• Case study – Noble Castle - exercises
Danish Agricultural Advisory Service
National Centre
Danish Agricultural Advisory Service
National Centre
1788
The National Centre
Præsentation
Torben Ulf Larsen, cand. oecon., teamleader
Danish Agricultural Advisory Service
National Centre
Danish Agricultural Advisory Service
Danish Agriculture
National Centre 1
Local Farmers’
Unions
78 %
Local Family Farmers’ 17 %
Associations
Local advisory centres 38
Farmers/members 50,000
Organising and/or administrative connection
Danish Agricultural Advisory Service
National Centre
Advice and Information flow
Danish Agricultural Advisory Service
Local centres
Research,
trials and
other
sources
of
knowledge
Danish Agricultural
Advisory Service,
National Centre
”Globally”
Danish Agricultural Advisory Service
National Centre
Farmers
Danish Agricultural Advisory Service
Danish Agricultural Advisory Service
National Centre
Danish Agricultural Advisory
Service
• 38 local agricultural advisory centres and 1
national centre
• Turnover: DKK 1.8 billion
• 3½ thousand employees
• Denmarks largest consultancy
Danish Agricultural Advisory Service
National Centre
Relations between DAAS and
farmers
Farmers are:
Owners
Users
Customers
Key words:
Best and cheapest advisory services
Impartialness
Non-profit
Danish Agricultural Advisory Service
National Centre
Distribution of income, 2008
Total income:
DKK 525 mill
Project funds
Tax reimbursements
17%
Danish Agriculture
19%
3%
User fees and sales
61%
Danish Agricultural Advisory Service
National Centre
Tasks of the National Centre
Dissemination 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
Staff education and age
350
330
300
250
281
350
321
292
Academic advisers
Technicians
200
Secretaries and
assistents
150
100
96
69
50
97
69
108
72
103
80
105
63
Staff, Average age
2006 43.9 years
2007 44.1 years
0
2004
2005
2006
2007
2008
Danish Agricultural Advisory Service
National Centre
12
Number of farms in Denmark
Bedrifter
Farms, no.
160.000
140.000
Full time
Heltid
120.000
Deltid
Part time
100.000
80.000
60.000
40.000
20.000
1964
1967
1970
1973
1976
Danish Agricultural Advisory Service
National Centre
1979
1982
1985
1988
1991
1994
1997
2000
2015
Landbrugsraadet, sept. 05
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)
Danish Agricultural Advisory Service
National Centre
Strategy and part strategies
Danish Agricultural Advisory Service
National Centre
Danish Agricultural Advisory Service
National Centre
Danish Agricultural Advisory Service
National Centre
”It is not the strongest of the species
that survive, nor the most intelligent,
but the one most responsive to
change”
Charles Darwin
Danish Agricultural Advisory Service
National Centre
Danish Agricultural Advisory Service
National Centre
Management levels
Strategic, 3-5 year
Tactical, 1-2 years
Operational,
Less than 1 year
Danish Agricultural Advisory Service
National Centre
Development,
Capacity and
finacing
Exploit existing
capacity- and
financial basis
Up to date production,
Purchase, sale, and
payments
What is strategy?
The direction to
the goal!
Danish Agricultural Advisory Service
National Centre
Objective
Accept the complexity of reality
Surrounding world
Legislation
Desired situation
Actual
Technology Market
Manpower
Vision
Human resources
Present situation
Time
Danish Agricultural Advisory Service
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I
The strategy process
M
P
L
C
S
Environment
Farm
Family
⇒
Mission
W
O
⇒
T
⇒
Vision
E
H
M
O
E
I
⇒
Goal
⇒N
T
C
A
E
T
S
I
O
N
Danish Agricultural Advisory Service
National Centre
Udvikling
The strategy process
I
M
P
L
Mission
Surroundings
⇒ Farm
Vision
Family
⇒
S
C
W
H
O
T
⇒
O
I
C
Danish Agricultural Advisory Service
National Centre
E
⇒
G
M
O
E
A
L
⇒
N
T
A
T
E
I
S
O
N
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.
Danish Agricultural Advisory Service
National Centre
Udvikling
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.
Danish Agricultural Advisory Service
National Centre
”Car phones? That will never be good
business. Nokia must concentrate on
television sets.”
Kari Kairamo
CEO of Nokia
Early 1980’s
Danish Agricultural Advisory Service
National Centre
PEST
1. Political factors
2. Economic factors
3. Sociocultural factors
4. Technological factors
Danish Agricultural Advisory Service
National Centre
Political factors
• EU agricultural policy
• National agricultural policy
• Environmental policy
• Commercial policy
Danish Agricultural Advisory Service
National Centre
Economic factors
• International economy
• Prices
• Sales
• Subsidies
• National economy:
• Unit and capacity costs
• Interest rates and land prices
• Wages
Danish Agricultural Advisory Service
National Centre
Sociocultural factors
• Traceability
• Nature experiences
• More employees on plant production farms
– size?
• Image
• Sustainability
Danish Agricultural Advisory Service
National Centre
Technological factors
• Technological possibilities
• Larger, more efficient and automatic
machines
• Milking robots
• Reduced soil processing
• IT
• Manure separation
• Processing possibilities
• GMO
Danish Agricultural Advisory Service
National Centre
Tools: Farm analysis
Use everything you know already!
Go for the important facts.
Don’t waste time and money to go into useless details







Land
Buildings
Machinery
Technical equipment
Herd
Environment
Economy
Danish Agricultural Advisory Service
National Centre
 Use experts’
statements
 Present the draft report
for the farmer and the
involved experts
 Get full accept on the
final report
The DiSCmodel
Ego:
Stronger than others
Innovative
Environment:
unfavourable/
hostile
Evaluative
Ego:
Less strong than others
Adapting
Danish Agricultural Advisory Service
National Centre
Environment :
favourable/
friendly
Accepting
Human resources analysis
one of many tools for assessing human resources
is the DiSC; here we help the farmer to clarify his attitudes
D
dominating
I
integrating
S
social
C
competent
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
Danish Agricultural Advisory Service
National Centre
The DiSC model
D = dominance
Motive:
•
Control and management...
Fears:
•
Loss of control
Wants:
Characteristics:
•
Self-confidence
•
Taking risks
•
Makings decisions
•
Force
•
Focusing on results
•
Challenges
•
Demanding
•
Direct answers
• Limitations:
•
No rules
•
No respect for others
•
New activities
•
impatience
•
Individual perfomance
•
Lack of quality focus
Danish Agricultural Advisory Service
National Centre
The DiSC-model
i = (social) influence
Motive:
•
social respect
Fear
•
social rejection
Want:
•
A round of applause
•
popularity
•
Praise
•
Group activities
•
Positive relations
•
No control and regulations
Danish Agricultural Advisory Service
National Centre
Characteristics:
•
•
•
•
•
•
optimistic
Inspires confidence
emotional
Involved with human beings
Extroverted
Charming
Limitations:
• Impulsive
• Promise to much
• Lack of completion
DiSC-modellen
S = stability
Characteristics:
Motive:
•
Stability
Fears:
•
Changes
Wants:
•
genuine appreciation
•
Cooperation
•
Work with well-known methods
•
Safety
Danish Agricultural Advisory Service
National Centre
•
•
•
•
•
•
•
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
The DiSC-model
C = competence
Characteristics;
Motive:
• Quality and precision
Fear:
• Failures, criticism,
emotions
Wants:
•
•
•
•
Win discussions
General view
Praise
Limited risk
Danish Agricultural Advisory Service
National Centre
•
•
•
•
•
•
•
Analytical and factual
Aware of details
Conscientious
Diplomatic
Business-minded
Curiosity
Reliable
Limitations:
• Critical
• Indecisive
• Lacks creativity
DISC Profile
D
I
S
Danish Agricultural Advisory Service
National Centre
C
Danish Agricultural Advisory Service
National Centre
Tools: assessment of analyses
The critical SWOT- a practical example
Positive
Internal
factors
External
factors
factors
Strengths
factors
Weaknesses
Strong economy
Farmers health
Herd management
Poor milking parlour
New machinery
Close to town
Opportunities
Threaths
Ecological production
Lack of new imployees
Diversified production
Decreasing milk prices
Danish Agricultural Advisory Service
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Negative
Demands for a good strategy:
• Consistent
• Feasible
• Competitive advantage
• Need for innovation
Danish Agricultural Advisory Service
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GOALS
NOW!
HR
strategy
CommuFinancial nication
strategy strategy
Danish Agricultural Advisory Service
National Centre
Environmental
strategy
Dynamic strategy
Danish Agricultural Advisory Service
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Areas of Focus During
Development
1. The strategy product must be appropriate for
current times
2. The strategy product must be appropriate for
the farmer’s situation
3. The farmer must be serviced with the
requested advisory role
4. A platform for communication with interested
parties
Danish Agricultural Advisory Service
National Centre
The strategy product must be
appropriate for current times
- General strategy versus dynamic strategy
Strategic planning
Emergent strategic
development
•
5 year plan
•
Continuous adjustments
•
Focus on operation
•
Focus on development
•
The strategy is prepared by
the expert
•
The strategy is prepared by
the man on the floor
•
Decisions are made on basis
of complete information
•
Many decisions are made on
basis of limited information
Danish Agricultural Advisory Service
National Centre
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
Danish Agricultural Advisory Service
National Centre
The overall production
Production of
7,000 hogs
Purchase at 30 kg
- Key map of the farm
750 ha
Agriculture
Gross proceeds appr. xx DKR
Pigs
Gross proceeds appr. xx DKR
370 ha grass
40 ha corn
100 ha growing crops
80 ha oat
160 ha chorophyll granule
BlueSPF
JB 1 to JB 3
Water appr. 80%
2 600 KW windmills
Yearly production of
2,500,000 KW/H
Windmills
Turnover appr. xx DKR
Each branch of production should be
internationally competitive on proceeds and
costs. The aim is that the farm is saleable at all
times. In the strategic development job
satisfaction and financial latitude are
important values.
1 windmills in Germany
Authorized sewer contractor
450 milk cows
5 year plan for the farm
Milk production
Gross proceeds appr. xx DKR
4 mio. kg milk yearly
2 separation units
Contractor work
Turnover appr. xx DKR
40 spaces in an indoor
Delaval carousel
Production of appr.
2,740,000 KW electricity
Vendor of AgriTank
Sale of slurry tanks
Turnover appr. xx DKR
Danish Agricultural Advisory Service
National Centre
Biogas plant
Turnover appr. xx DKR
3,500,000 KW heat
Milk production
1
Estimate financing
requirements and risc profile
Selection of type of person
- The strategic map of competences
Invite offers
1
Education:
Short management training
Management
Support from and chemistry
with management
Financing
Interest rate
Co-ownership– 20% of
production unit
1
Foreign currency loan
1
1
Improve management
and control
Selection – knowledge
and motivation
Overall strategic goal
1,100 cows gives a good flow
Large-scale production
advantages
– division into 6 teams
20% more space
To produce milk at the lowest possible cost,
taking animal welfare into consideration
Schools
Access to labour
Agencies
The price has to be
internationally competitive
Increase milking of
high-yielding cows
Possibilities for burning
slurry
Logistics cows – transport of
heavily pregnant cows
Logistics slurry
1
Less capital tie-up in land
Approval of expansion
Logistics fodder
Danish Agricultural Advisory Service
National Centre
1
Cheaper fodder
Improve yield of corn
At new purchases
land price should not
exceed 100,000 DKR
Benefits for the farmer
1. Ownership of the strategy
2. A simpel lay-out of his strategy that
allows continuous adjustments
3. Keeps focus – maintains ideas
4. Clear goals – strenghtening of the
management
5. Focus on realizing the plans of
action
Danish Agricultural Advisory Service
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Benefits for the advisor
1. A tool that brings you closer to the
client
2. Kick-starts strategic focus
3. A great tool for a ”like it” task
4. Better sparring partner
5. Improves interdisciplinary
collaborations with colleagues
Danish Agricultural Advisory Service
National Centre
Visual action plans
Improve profits on corn
1 Consulting visit weed control
2nd consulting visit
weed control
2
Statement of yields of each
4
fields by counting
number of loads
Yield statement and
analysis results for LL
and plant consultant
Improve corn yield
Yield 10,000 feed units/ha
and max. 1.15 kg dry
matter per feed unit
6
Danish Agricultural Advisory Service
National Centre
Visit concerning harvest time
3 - Samples for dertermination af
dry matter content
Measurement of total yields of
5 silage and extraction of sample
for analysis
Follow-up on yields per field
7 and evaluation of action plan
Visual action plans
Example of Gantt map
Activity
Management
a 1 Kontakt med bureau
Stillingsopslag skriv og
a 2 annoncering
a 3 Samtale med kandidater
a 4 Ansættelse
a 5 Introduktionsforløb
Yield in corn
b
b
b
b
1
2
3
4
Responsible Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Status Follow up
Lars
10/1
√
Birte
Lars
Lars
Lars
Lars
20/1
√
√
√
√
Konsulent
Birte
Konsulent
Birte
Poul (pl
Rådgivningsbesøg 1
konsulent)
Rådgivningsbesøg 2
Poul
Rådgivningsbesøg før høst Poul
Udbytteopgørelse (antal læs) Lars
b 5 Udbytte opmåling + Analyser
Aflevering af
b 6 analyseresultater
b 7 Evaluering af handlingsplan
Loan offers
Drøftelse af
c 1 finansieringsmuligheder
c 2 Indhente lånetilbud
c 3 Møde med bank
c 4 Hjemtage lån
√
4/6
Kurt
(kvægrådg.)
30/9
Poul
Kurt
Poul
Poul
Kurt
Niels
Niels
Lars
Niels
Birte
Danish Agricultural Advisory Service
National Centre
15/5
25/7
15/8
Niels
Lars
Report for decision-making
The purpose of the report for decision making
is to present all relevant information for the
decision-maker precise and concise
Danish Agricultural Advisory Service
National Centre
How to organize the report
• Start with the most important information –
your evaluation of the project
• What is the strategic fit of this project
compared to the strategy og the firm?
• Include persons relevant in analyzing the
alternatives
• Arrange two meetings with the decision-maker
to clarify assumptions and to present the
results
Danish Agricultural Advisory Service
National Centre
Elements in the report
•
Evaluation
•
Company image
•
Strategy
•
•
SWOT analysis
Project profitability – INVE
Online
•
Alternatives
•
Company budgets
•
Project description
•
Financing
•
Assumptions – internal and
external
•
Liquidity constraints
•
Break even analysis
•
Employees
•
Risk analysis
•
Management
•
Follow up
Danish Agricultural Advisory Service
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Evaluation of the project
• Comment on the essentials
• Communicate your own evaluation of the
project
• To be based on the analysis and the
calculations in the report.
• If you do not agree with the assumptions used
in the report let it ”shine through”
Danish Agricultural Advisory Service
National Centre
Assumptions
• Internal assumptions
• Yield (Milk yield, grain yield etc.)
• Factors controlled within the farm
• To be seen in relation to the strengths and
weaknesses
• External assumptions
•
•
•
•
Prices
Qualified employees are to attracted
Factors decided outside the farm
To be seen in relation to the opportunities and
threats
Danish Agricultural Advisory Service
National Centre
Profitability versus budgets
• Profitability
• is based on the cash flows and the timing of these
• Typically analyzed partially
• All incremental cash flows regarding the project
included
• Interpretation easiest using annuities
• Budgets
• Based on accounting rules
• Typically analyzed holistically
• Not showing whether the project is profitable or not
Danish Agricultural Advisory Service
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Personal sale
Danish Agricultural Advisory Service
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What’s in it for the farmer?
• Long term goals – strategy
• Measurepoints to secure everything is going
in the right direction
• Plans of action, that leads to the goal
• We provide the field, but the farmer must be
the one to play the ball.
• What is going to happen?
Danish Agricultural Advisory Service
National Centre
Experiences with strategy work
• Increasing and diversified demand from farmers
• Flexible concepts is necessary depending on the
farmer’s needs and the advisors skills and motivation
• Increased cooperation between advisors – has certain
demands to the organization
• The advisors are the barrier or the critical success
factor
• The advisors demand: easy to use concepts
• Strategy processes generates extra sales of advisory
service
Danish Agricultural Advisory Service
National Centre
This is how we do it
• One day with advisors and farmers – with an
acknowledged need of change
• Eventually half a day with everybody who has
contact with clients
• 1 month for creating a strategy
• One day with to make a report
• Subsequently BSC for implementation
• Differences in the concept
• 15 centres – 160 farmers
Danish Agricultural Advisory Service
National Centre
The customer is in centre
Keep it simple – get through to the conclusions
Ideas
Discussions
Conclusions
Revision
Acceptance
Values, mission,
vision, purpose,
priorities
Facts and figures
Danish Agricultural Advisory Service
National Centre
HR-, farm-, PESTSWOT-, etc. analysis
”You can have the car painted
in any color you like so long as
it is black”
Henry Ford
Early 1920’s
Danish Agricultural Advisory Service
National Centre
Risk Management
Danish Agricultural Advisory Service
National Centre
What is risc?
• Risc is the factors that can affect the strategic
goals negatively
Or in more operational terms
• Risc is the possibility for financial loss –
assets, liabilities and profits
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Purposes of risc management
• Overview – fully and interdisciplinary
• Assesment and actively taking a stand
• Methods and tools
• Better sleep
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Stages of risk management
1. Mapping of risc factors on the farm
2. Assesment: Relevance and probability
3. Handling: Lay-out of possibilities for action
and related costs
4. Implementation and follow-up
Danish Agricultural Advisory Service
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Mapping- systematic
• Human
• Divorce, illness, death
• Inability to get qualified assistance, generational change
• Market
• Prices of sales products, prices of raw materials
• No demand
• Loss of buyers for small pigs
Danish Agricultural Advisory Service
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Mapping – systematic (continued)
• Financial
• Price of money (increasing interest rates)
• Lack of liquidity
• Negative bank
• Production
• Disease in the herd
• Lack of efficiency in the stable
• Special crops that fail
• Institutional
• Changed environmental requirements – sale/depositing of slurry
• Agricultural policy of the EU
Danish Agricultural Advisory Service
National Centre
What can we do about risks?
• Accept
• Avoid
• Share, spread, ensure
• Reduce
Danish Agricultural Advisory Service
National Centre
Attitude towards risc
• Risk avert / little willingness to take risks
• Risk neutral
• Risk preferment / great willingness to take
risks
Danish Agricultural Advisory Service
National Centre