What If Your 'Plan A' Hits the Wall?

Ask any food industry CEO and he or she will tell you that while every business function serves a vital purpose--Marketing uses customer intelligence to create products, Operations creates inventory by producing products, and so on—it’s Sales that converts organizational activity to cash.

When CEOs put sales management at the heart of their corporate agenda, they capture astonishing growth, outstripping their peers by 50-80% in sales and profitability. (HBR)

Today, our industry remains extremely volatile, and supplier CEOs need to take much more serious note. The last two weeks brought news and commentaries on two giants:

• SuperValu: Dismal earnings report, uncertain future, pending sale, and Standard & Poors ratings downgrade on more sales and profit erosion in fiscal 2013 and 2014.
• US Foods Inc: Moody's review for downgrade on factors such as debt load, liquidity and operating performance trends.

Both are expected to make changes to their business models that could present significant volume and financial issues for their suppliers. But challenging circumstances don’t end there:

• At least 1/3 of the corn crops in the US are damaged from the worst heat and drought in 50 years, jacking up crop prices and putting more pressure on supplier costs, margins and food prices.
• A growing number of economists predict another recession in the 1Q 2013, with the slide apparent by the 4Q 2012. January-June’s job creation average and weak GDP yielded no productivity growth and a sharp slowdown in corporate profits.
• Economic stimulus aimed at kick-starting stalled employment numbers won’t happen until late in 2013 due to normal political delays in an election year. Until then, many consumers continue to choose between groceries and gas.
• Healthcare costs from new legislation are expected to rise 40-45% in 2014, virtually wiping out the equivalent of an entire year of profit for many operators. This staggering effect will force closures and growing use of third-party purchasing agents at lower margin to manufacturers and distributors.

These issues were not likely on the radar to be factored into 2012 growth strategies, which were built on hopeful, leap-of-faith assumptions about a promising turn around in business conditions.

But as a famous boxer once said, “Everyone has a plan 'til they get punched in the mouth.”

If the last few years taught us anything, it taught us the value of contingency planning. Leaders must prepare their organizations for any eventuality: shifts in customer business models, market downturns, competitive entry, customer failures, key executive turnover, poor operational implementation.

The question for every organizational leader today is, “What’s your B plan?” One missed forecast may be forgiven under the right circumstances, but tolerance is growing very thin for repeat underperformance. This is an era of real-time information and rapid cause-and-effect; getting caught off-guard is as outdated as VCRs and the 5 o'clock news.

Blueberry cannot over-emphasize the need for B Plans, enabling the best strategic minds from inside and outside the company to stand ready to combat the unexpected and grow new opportunities with speed, force and sound decision-making:

• Senior executives adopt a heightened state of alert to market or customer triggers that signal a shift away from Plan A.
• They are willing to realistically assess the trajectory of the numbers, recognizing early nuances that indicate pending stalls or declines.
• Reviewing progress and execution against strategies on a monthly basis, executives are prepared to counter the impacts from a growing list of probable derailers.

It's not getting any easier for our industry and success is far from ready-made. Before writing off yet another underperforming year or transferring their hopes to 2013, successful CEOs insure their organizations are equipped with an arsenal of plans to deliver the top line as well as bottom line numbers in spite of all obstacles.

Drive Your Ducks To Mightier Ponds

A recent McKinsey survey revealed that companies allocating the same amount of resources to the same business units as prior years can expect static results. On the other hand, those that shift an average of 56% of capital across a wider range of businesses earned an average of 40% higher returns over a multi-year period, thus generating a reinforcing cycle of growth that stimulates ongoing value-creating investment opportunities in new markets, new segments, joint ventures, pilot programs or acquisitions.

 Most food companies are anchored in old budgeting processes and spending habits, and the reasons for this are many. Companies default to budgeting patterns that provide no clear link to new strategies. Or there’s no bottom-up build to the process, no proper auditing of returns on current investments. No measurement stick to trigger re-deployment. Even politically, some executives dominate decisions with a personal bias toward their own divisions and teams or pet projects. No wonder delivery on strategy falls short; there’s been no meaningful shift of resources to support it!

You may believe your company avoids these anchoring traps, but be willing to be challenged. All budgeting if left unchecked can undermine your organization’s ability to achieve its goals. CEOs must be alert to any tendency to use irrelevant numbers mired in politics or habit to influence capital allotment, and insist their teams re-balance resources to create value.

A simple guide is to categorize business units into buckets such as “grow”, “maintain” or “dispose”, and then change the default budgeting process to one requiring burden of proof and performance measures. After careful deployment, the CEO could apportion the remaining 2-3% in available capital to ventures outside of traditional business units to seed future growth, or use variable cost savings or profit from as little as 1% revenue growth over target for the same purpose.

Regardless of the method you choose, directly and transparently tying budgeting and resources to corporate strategy improves results and creates value. In doing so, the company’s strategic and financials teams must work closely together under clear guidelines mandated from the top spot. And don’t underestimate the importance of an outsider’s point of view, fully supported by the CEO, to challenge the status quo and offer bold recommendations that have the potential to be unpopular but avoids disproportionate power and influence over capital, talent and resource decisions.

In other words, someone to help you drive your ducks to mightier ponds.

The Spark of Celestrial Fire

As food industry firms restart their growth engines and continue to emerge from the recession, they are resolved and naturally conditioned to apply focus and resources on their core business. This is where profit and cash flow reside, so who should dare to take an eye off the Now and extend focus ahead on the Later and Much Later?

The CEO.

"The manager has his eye on the bottom line; the leader on the horizon.” – Warren G. Bennis

McKinsey’s The Alchemy of Growth describes three strategic Horizons that must be managed simultaneously for exceptional long term performance and sustainable growth. Horizon One, defending and growing core business, is characterized by the following common organizational activity:

• Competitive positioning
• Marketing
• Product extensions
• Productivity enhancements
• Cost control

The immediacy, attitudes and annual budgeting processes keep many firms stuck in Horizon One, but it’s imperative that the CEO take measurable steps that balance attention and investments in Horizons Two and Three to speed growth and deliver extraordinary results and innovation while simultaneously managing the differences between all of them.

Horizon Two is fast-moving and entrepreneurial, requiring investment in time, money and resources to focus on emerging opportunities that build new revenue streams and capabilities. This is where substantial profits will come in the future. They include new customers, innovative new product lines and/or new operational or service capabilities.

Horizon Three is blue-sky and captivating by its very nature. It sows the seeds of future growth through smaller test-ventures such as taking minority stake in new business. Many Horizon Three initiatives will fail given their exploratory nature but that exploration is necessary in order to decide what to foster down the road.

A well-managed growth strategy requires all three horizons are in play at once, with management residing primarily in One, and C-leaders additionally focused on Horizons Two and Three.

Only then can organizations reach for the stars, staying aglow with celestial fire by growing innovative business in all its heavenly forms, Now, Later and Much Later.

Baby, It's Hot Outside

Food industry chief executives engage Blueberry when they want change. Something, Somewhere or Someone in the company is not producing the right results, or the right plan needs help getting started. By the time we arrive, we often find that mediocrity was tolerated for far too long and companies have fallen behind the hot, fast pace of the industry--requiring swift, sometimes uncomfortable, action to turn things around.

Maybe the CEO just didn’t notice millions of dollars in lost opportunity slipping through the cracks. Maybe he confined his attention to what’s going on inside the walls of the organization. Maybe she wasn’t alert to core products or business under attack by innovative competitors. Maybe he didn't realize the company was wasting time and money on ventures that have no real wings. Maybe she couldn't accept that a high profile executive was failing...because he's an executive with a big corporate pedigree. The red flags were there but the CEO wanted to know for sure, so he waited for a bigger flag. Then a bigger flag. Like a frog on a hot stove, he had a strong inkling to take a leap now, but bought into the line that results would come next quarter. Or the quarter after that. Or the quarter after that.

While market heat turns up yet another notch.

If a company isn't moving forward, it’s falling behind. Flat is the new decline.

What are CEOs waiting for? How long will they excuse underperforming areas of business without taking decisive--unpopular--action to get the company on the right track... especially a new track? Why is what’s not working allowed to continue? Remaining just one more day within the boundaries of yesterday will lead to big regrets tomorrow, I promise.

"The most powerful weapon on earth is the human soul on fire."

It's up to you. To survive the incoming waves of change in the food industry, chief executives must tear off the blinders. What worked in 2011 is simply not going to work this year. Each new piece of business, every new innovation, every case sale must be won with a repeatable, sustainable excellence and expertise aligned with the rest of the market.

Slow industry? No. We've never seen it so full of opportunity--and risk. Some executives are invigorated by it; many are overwhelmed. Ralph Marston said, “You've done it before and you can do it now. Redirect the substantial energy of your frustration and turn it into positive, effective, unstoppable determination.” Insist on organizational renewal this year. Take a non-negotiable stand on performance and results from new, vibrant areas of the industry. Don’t create waves; create tsunamis. Break out of your company's walls to see what's happening on the outside and prepare now for what's coming your way, including never-before ways of engaging with customers and trading partners. Be alert to the biases, outdated attitudes and thinking standing in the way of opportunities right in front of you.

And finally, by all means, overhaul the protectionism and sacred cows that are sacred to no one but you.

It may be January, but Baby, It's Hot Outside. Our industry is and will continue to demand more from your company. Are you prepared to respond and deliver in 2012?