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04 Jan, 2021

Plans are nothing, planning is everything

As business owners take on the challenge of navigating through 2021 here’s a timely read from our Food & AgriBusiness Report

John Moloney is well-known to most people in the Irish agri-food sector. He is widely credited with transforming Glanbia into a very successful international ingredients business as Group Managing Director. Currently, he acts as chairman of DCC plc and is a non-executive director on a number of boards. He also chaired the Irish Food Wise 2025 Agri-Food Strategy Committee. He recently spoke to ifac’s David Leydon.

We sat down in Waterford in August and I began by sharing some context for our conversation. Our experience in ifac is that many business owners and CEOs spend much of their time working in the business, not on the business. The Food & AgriBusiness survey highlights this with just 36% of SMEs in the sector having a documented strategic plan which is used to guide the business. As many as 32% have the plan in their head while 17% have no strategic plan. While this is understandable given the pressures on business owners in the SME sector, it is none-the-less concerning.

As an experienced executive and board member, John has a very clear view on management. He is practical and sensible with lessons which all business owners and managers can take on board

The Planning Process

I began by asking John about the value of the planning process. “Strategic planning is a grand-sounding term but the world is very dynamic today. There is a lot of change and complexity so needing to think about the business all the time is pretty important. Particularly as the business gets bigger, finding time and space to stand back and think about what the future looks like, what’s happening that will affect us and how do we need to respond to that over time is very important.”

John quotes Eisenhower, the World War II general, “plans are nothing, planning is everything”. He believes that thinking deeply about the scenarios that can impact your business is crucial.

The sceptics of strategic planning might say that Covid-19 was not part of anyone’s strategic plan. John counters that while you may not have anticipated Covid-19, those companies who have spent time thinking about how they will respond to change in their environment, how they can adapt and particularly those companies who have thought deeply about their routes to market and their customers, are the companies that can make changes effectively to mitigate the worst effects of Covid-19.

John is not a fan of hockey stick projections, you know the ones, year 1 to 3 suggests realistic growth but year 4 and especially year 5 has a hockey stick shape in terms of revenue growth. He prefers the analogy of any plan being like a stairway, you get a different perspective as you climb each step of the stairs. John suggests that “the building blocks of this are the projects you plan and deliver each year”.

In practical terms, the business plan for next year should be the first year of your three to five-year strategic plan. Within that, you have agreement on what projects will be delivered to get you onto the next step on the stairway to growth.

John’s view is that this all begins with the business owner having a clear view on what they want the business to be, how they would like it to operate and how they want people to think about it.

A good financial plan is a must-have as is a good understanding of where your business is going to play, “in what channels, in what segments and with which customers are you going to focus on? Have you an understanding of where profit is in the value chain... you want to fish where the fish are. Ultimately, planning is a series of choices. Alternatives have to be chosen all the time. While it’s good to have choices, making the right choices is clearly important.”

The Culture of Progress

Once this is relatively clear, John’s view on execution is applicable to any business or indeed any department within a business. For him it is all about instilling the right routines and right review processes to develop a culture of progress.

Assessing weekly, monthly, quarterly and annual progress allows the organisation to review successes and understand the learning where projects didn’t meet expectations.

The Customer

Clarity on the customer and route to market is very important. John notes that intellectual property or manufacturing assets will not be enough to sustain a business. Having “deep customer knowledge and insight is a really important pillar for any business and if you’re supplying to a reseller, understanding your customers’ customer is important as well.”

The customer focus is a consistent theme throughout the conversation and for those embarking on the planning process, you need to ask yourself “Who’s going to buy from you, why will they buy, why from you, how will they see you as better than the other guy, why choose you over competitors, why will they see you as better?”

People

As you would expect from any experienced executive, having the right people is high up on John’s list of priorities. In terms of delegation, his advice is, “allow people to get on with it. Owners have to let go a bit, otherwise the business won’t be flexible and won’t grow. Hire better people, the founder cannot do it all themselves”.

To allow this to happen though, people, have to be operating within a framework, “basic frameworks need to be set out in terms of how you want things done, our ethics, the way we deal with customers, complaints and each other.

Manage this through a review process. Check in with people and understand how they are getting on. Come with an issue but have a solution. As the business expands and grows, having the right people is even more important”.

Family Business

We touched on the specific circumstances that family businesses have to deal with. Often with small management teams, the use of trusted outside facilitators who can share expertise is valuable. John also advocated that business owners should look at setting up “small board structures. Find local people who have worked in bigger businesses who would be in a position to help the business for modest sums. As the business grows, formalising the board structure will be important and not just for governance. The board should drive strategic leadership and support and challenge the owner/manager”.

In terms of external investment for family businesses, John urges owners to have a clear vision of what they want for their business. “Is the vision to retain ownership within the family and grow over time? Growing very quickly means a trade-off with risk and if you are thinking about private equity, which is based on third party funding, then this capital will need a return which might just need a trade sale. Be careful with this option.”

Digitalisation

Digitalisation rates exceptionally highly on John’s list of priorities for any business. For John, digitalisation is a disrupter which has multiple facets, including “business process, e-commerce, blockchain, automation, sensors, EDI (electronic data interchange) and cyber security. Businesses need to think about systems from their customers’ perspective. How are our customer processes going to adapt in digital world? How do we avoid competitors with more nimble or better approaches from taking our customers? This is probably the biggest issue facing most businesses and has been accelerated by Covid-19.”

Business Transformation

John has quite a bit of experience of business transformation. I asked about the thought process involved. “You have to be clear on the goal and purpose of transformation. Is it to accelerate the pace of growth, are you becoming uncompetitive, do you need to change your operating model or get to lower cost? What is the objective and how are you going to achieve it? Are you going to merge or acquire another business? Is the finance model robust?”

Making it happen can be challenging. John was clear though, “in my view, there is only one way to make it happen and that’s through talking. You have to talk to people, articulate the reason and approach. Once people hear about the business changing their thinking quickly turns to understanding how these changes are going to affect them. Will it lead to redundancies, relocation, closing down plants? People then move from shock to mourning to acceptance and finally get back up the curve to a good place in the business. It is not a simple process and needs to be very well thought through.”

Words of Advice

We closed off the conversation by getting a view of what John’s advice would be for SME business owners today. He kicked off with “get the best digital capability you can into your business”. Secondly, “have a sense of where you’re going to be in 3 to 5 years’ time and how you are going to fund it”, thirdly, “be very clear on how your customers are going to evolve and how they will think about you and your product or service”. Finally, “be sure to get the best people you can get.”

There are lessons here for all business owners. Putting in the time to plan the future of your business is something we strongly believe in and we spend time with many food and agribusinesses going through the process of business planning and strategy development. Through this conversation, John has highlighted some of the key questions that business owners need to ask themselves. The importance of investing in this planning process cannot be underestimated. It will help you unlock your businesses potential.

John Moloney on...

Banking... “The unfortunate thing in Ireland is that bank funding does not appear to grow with businesses to the same scale over time as we have seen, for example, in Germany where large family-based businesses have developed with debt financing. This has enabled family businesses to become very large. We haven’t seen that here. When we bring in external financing it becomes about the sale and consequently, businesses don’t reach their full potential within Ireland”.

Brexit... “ Trade is driven by proximity. We share a common language, dispute resolution framework, etc. with the UK. That still counts post-Brexit. The challenge for SMEs is compounded by Covid-19 and makes it hard to diversify markets at the necessary speed given our dependence on UK markets. Ultimately you need to stand back, think about your key customers, the current supply chain and how you can deal with the issues along that chain efficiently. Finally, suck in every bit of help you can and push state agencies to deliver up support”.

Purpose... “ Purpose is now more important in a wider social context. Business needs to be responsive to wider society in terms of sustainability, dignity and diversity”.

Company culture... “ Culture stems from the tone at the top. What way do you want to see things done in your business?”

Intellectual Property (IP) and patents... “ IP rarely sustains a business over time. While patents are valuable if you are prepared to invest in them and defend them over time. It’s more important to get the product out, to get it in use and to get and keep your customers”.

Legacy of Covid-19... “ The standout legacy will be the increased levels of digitalisation across all elements of business”. Commenting on business relationships, “there will be critical points in relationships when you have to meet key customers and decision-makers. It cannot all be on Zoom. There is a brutal efficiency to Zoom where it is hard to read body language and to understand how a customer actually feels about an issue at a sharp point in a conversation”.

Food trends... “ Distribution driven by digitalisation is a massive trend. The trend towards flexitarianism1 is here to stay. Consumers also want to understand food provenance more clearly”.

Ireland as a food island... “ As a food island, we need to continue to articulate the natural base of dairy and beef production in Ireland. Even at scale our dairy produce still derives from a grass-based system and articulating the sustainability credentials of this is a very good proxy for the provenance that people want”.

Capital allocation... “Have clarity on return criteria and be disciplined. Make sure strategic capital investments return more than the cost of capital, otherwise you will destroy value”.

Embracing failure... “ I’m probably against the concept of ongoing heroic failure! However, a team has to feel it’s safe to try things. There must be some analysis and rigour beforehand, and some mitigation of the downside risk. If it didn’t go great, sit down afterwards and understand what was learned and how to improve”.

Work-life balance... “ If you put all your time into the business that is time you won’t get back. And you will miss things – you may miss things about the business, and you will definitely miss time with your family and friends. Business owners need to stand back – it helps keep perspective”.