How will farmers compete in the future?
There are only two types of successful business on the Business Spectrum. There are those businesses which are the Dominant Competitors and those businesses which are the Niche Competitors.
Dominant Competitors, as the name would suggest, are always trying to compete, by being the most dominant force in their market. Dominant Competitors tend to focus on:
“Value” - offering the lowest possible price to the customer
Increasing scale of operations (quantity more important than quality)
Reducing cost of production through efficient operations and automation
Low touch / no personal relationships with customers
Offering something for everyone, or mass market
As references, think of the way Amazon operates or of the recent merger between Asda and Sainsbury in which many of the above points were explicitly referenced as positive benefits for the merger.
The Niche Competitor, if they are successful, competes in a completely different way. The modes of operation for the Niche Competitor are:
1. Focusing on the quality of product or service or experience and creating a premium brand around this
2. Maintaining a relatively small scale, in order to protect quality and customer interaction
3. Not worrying too much about cost of production but instead focusing on producing something or designing an experience, in a way that benefits all stakeholders
4. High touch, emphasising and cultivating a personal relationship with customers wherever possible
5. Focusing relentlessly on a small segment of the market which loves their product
As references, think of a really good local butcher or baker, who always has fantastic products and greets everyone by name. They’re not the cheapest, but you go there all the same because you enjoy the experience.
There are exceptions to this list. It is, for example, possible to be a Niche Competitor and operate at a significant scale. One of the best examples of this is probably Apple, who have a less than 20% share of the smart phone market but make around 80% of the profit in that market. They do this by focusing on experience, brand and design.
Now think about how a conventional farm business operates. Which set of characteristics from the two lists above best matches the way they think about themselves and their businesses.
You only have to overhear a pub conversation with two farmers at this time of year to know the answer.
Farmers focus relentlessly on scale - the first question in that pub would undoubtedly have been “How many acres do you farm?”
We talk about efficiency of operations and how to achieve marginal gains. We benchmark against each other (and these are considered to be the most progressive farmers), so that we can find ways to incrementally reduce our cost of operations, maximise our efficiency, automate our operations.
Surely we are thinking about our businesses in the wrong way. We think like Dominant Competitors, we act like Dominant Competitors but we are not dominant. We are anything but that. Last year on our farm we grew about 200ha of wheat, giving us an approximate global market share of 0.00000079%.
As a farmer, what is my next step from this point? ... Do I get the team around and announce the start of “Project 0.0000008%”? .... I mean, I think there’s some land coming on nearby for rent, maybe we should go for it. It would increase our scale, maybe we could buy some bigger kit....We could even stick up that new grain store we’ve been thinking about, turn us into a really professional outfit.
Of course we’re not going to do that! This pattern of thinking is nonsense, but it is unfortunately one that too many of us get sucked in to. Whether you farm more land than your neighbours or the bloke in the pub is irrelevant.
We are in danger, as farmers, of creating a game that we have no chance of winning. But if you are running a farm business, this is your life and your career, so use the opportunity you have to create a game which you can win.
If you are a tiny player operating on a global market, embrace that fact. Stop thinking marginal gains and start thinking defensible margins. You
will already have ideas for products, services or experiences that you could create with the assets and skills that you have. Embrace these ideas!
Find one or two people(it doesn’t need to be more than that at first) who you think would be prepared to pay you for this and try out the idea with them. If they like it, bring your idea to life and try it with your customers (getting them to pay for it up front wherever possible). If they don’t like it, refine your idea and try again with some new potential customers.
All farmers need to decide if they are a Dominant Competitor, or a Niche Competitor. For me, I only want to play in a game I at least have a chance of winning.
Farmers are not thinking about their businesses in the right way. The thinking, the approaches and the skills that worked in the past will not be the ones that work in the future.
If you are a farmer worried about the future of your business, the first thing you need to address is how you are thinking about yourself as a farmer, and how you are thinking about your business.
At Small Robot Company, we can help you with that through our new programme, Farm Coach. Designed by farmers, for farmers, it is the only coaching programme specifically designed around the farm business. If you want to develop the thinking tools that will help you to grow a successful business that works for you, please get in touch with us today.
We'd love to hear from you.