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Be ready for anything

Agriculture.com Staff 11/17/2011 @ 11:58am

In the three years since the 2008 global economic meltdown, veteran marketing adviser Bryan Doherty has seen a definite shift in farmers' questions about the markets.

“I hear fewer questions like ‘What's going to happen?’ and more questions like ‘How do I prepare my business for what's going to happen?’ ” he says.

Doherty believes this is a good shift for producers. “It's a realization that, although you can't control the market, you can control your preparation,” he says.

The new mind-set reflects what has gone on in businesses worldwide: Risk management within corporations is no longer something to do in a crisis, according to a 2011 survey of business executives by the consulting firm Accenture. Since 2009, companies have improved their risk-management capabilities and view it as essential to sustainable profitability.

Basically, companies are putting people and systems in place to help them prepare and succeed in the new era of volatility. As the world's leading CEOs are getting their risk-management houses in order, farm businesses are looking to do the same, especially when it comes to commodity marketing.

How can farmers create a marketing plan that is dynamic enough to flex with today's markets? Again, agriculture can learn some lessons from the wider world of business, says Scott Stewart, president and CEO of Stewart-Peterson Inc.

Stewart's firm uses a process called scenario planning and applies it to commodity marketing. In business, scenario planning is used to make flexible long-term plans. It is often used when:

● There is a great deal of uncertainty in a market.

● There is a history of costly and unpredicted surprises in the market.

● There is significant and ongoing change present that could result in any number of future scenarios.

For farmers, those conditions sound familiar, especially when it comes to marketing.

“Aside from the weather, price volatility is one of the most uncertain aspects of farming,” Stewart says. “Just when you think you have it figured out, you find out something new or the unexpected happens, and you've missed an opportunity.”

Stewart says marketing plans need to be dynamic, taking into account rapid change. “That's why I don't like the word plan,” Stewart says. “Who can plan for an earthquake or currency failure or a political development that completely shakes the markets? Marketing today needs to be a dynamic process rather than a static plan.”

A better way

In the late 1960s and early 1970s, a corporate planner named Pierre Wack at the Shell Oil Company saw an uncertain future and potential for an energy crisis. Wack was an imaginative thinker. He thought, “What if the predictions and assumptions we make about the world are wrong?” Shell Oil could throw its strategic plan out the window.

Wack then led the company through scenario thinking, strategizing for what Shell Oil would do if any number of scenarios emerged as true. As a result, Shell Oil was prepared for the 1973 oil shock (while other companies were still trying to figure out what was happening) and how to adapt their strategic plans.

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