Strategy

NZ Ag: why our co-operatives need to fail fast

failure creativity successA few weeks ago I spent the third phase of my Kellogg Programme privileged to be in the company of many dairy farmers. They know the problem is commodity leading to volatility and not enough value add. The sheep farmers weren’t feeling that much better either. They are all frustrated because everyone is talking about disruption in the value chain but don’t have the capital to make this disruption happen by themselves and in most cases their co-operatives too. Of course the jury is out on the Shanghai Maling deal with SFF and what a stronger balance sheet will mean (subject to an Overseas Investment Office ruling of course).

So here’s an idea:

Farmers challenge the Boards of our biggest co-operatives to commit a small % of profit to “Fail Fast Funds.”

Google let their engineers decide how to spend 20% of their working week which they call ROWEs – Results Only Work Environments. Out of this 20% of ungoverned time has delivered 50% of Google’s newer revenue streams such as Gmail, Google Maps and Google Translator. So if it’s good enough for Google it should be good enough for NZ Agriculture.

In Daniel Pink’s book Drive he explains how Atlassian, a Sydney based development firm, had 24 hours to deliver something new overnight. They call them FedEx days. It’s this lack of a fail fast attitude and experimentation that is stifling our innovation and ability to compete. We seem very risk averse and our co-operatives in the majority of cases are destined to be the same because of their lack of capital.

Clay Christensen, pioneer of Disruptive Innovation, talks in his Oxford University Lecture about why companies and countries are struggling so much. It’s a 55min video (and well worth a watch) but the key message is this: we need to innovate at a higher level. Incremental, or “efficient innovation” does not create jobs or wealth because it only “sells the same products to the same people at a lower price like Walmart”. That’s the reason why Japan’s economy is still stagnated ironically after having been very good at innovation in the 80s and 90s (Sony, Toyota, Nissan, Sharp). Christensen also argues efficiency innovation is the reason why recessions are now taking longer to resolve. Our processors have got very efficient with throughput and lean processes but are these efficiency innovations delivering new breakthrough? Is it creating new products or markets? I think we all know the answer. We only have to look at the rate of return on assets or balance sheets to find out. We need more disruptive innovation if we want to make bigger gains but that comes with some risk.

Paul Sims in his book Little Bets talks about the importance of “failing forward” and experimentation. He also talks about the fixed mindset vs. growth mindset. Sims says “it’s easier to fix problems than prevent errors.” Electronic Arts, a major games player, uses a process of “smallifying” which takes large overwhelming projects and breaks them down into smaller parts to solve.

Like humans, our co-operatives have risk aversion where they seem to be more interested in defending status quo and minimising their losses rather than making gains with some commentators suggesting they’re all playing a game of last man standing. Innovation never happens in these environments. However Synlait and their A2 milk and sleepy milk are good examples of innovations swimming against the tide. Tatua do a great job with their value add story too. Richard Jones and his team at Poutama Trust are showing vision too with their planned niche multi-purpose drier in Kawerau. Landcorp deserve credit for what they’re trying to achieve with their little bets with sheep milk and merino too.

Status quo is not an option for NZ Agriculture. We can stand still. Winston Churchill said “Doing the same thing again and again expecting a different result is the definition of insanity”. Doing business as usual also means the law of diminishing returns. And if this change can’t start with our co-operatives, then it has to start with our farmers. Mike Barton from Taupo Beef is one such farmer and we need more like him and his wife Sharon.

Ireland has recently taken its own stand: www.origingreen.ie. It’s an impressive story and it looks a lot like us. But with substance, certification and measurement.

It’s time we defined our own brand of agriculture before someone defines it for us.

Let’s take those little bets and fail fast.

 

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