By Maurie Cashman | Guest Column
“Only when the tide goes out do you discover who’s been swimming naked.” – Warren Buffett
Repositioning your business for the new COVID-19 and post-COVID-19 environment will be critical to its continued success. The urgency of that task has increased even more in recent weeks, as we witness the impacts of market dislocations on business models with unforeseen weaknesses.
Let’s look at a few key impacts using the meat industry as our focus:
• Meat production will continue under extreme pressure as livestock numbers decrease, with much smaller numbers coming to packers in the fall.
• Food processors are challenged by low volumes, labor shortages and supply chain dislocations.
• Commodity prices will remain low due to reduced demand.
• Land prices may be soft but low interest rates will be supportive.
• Huge government stimulus expenditures will create long-term volatility.
Substitute your industry for the meat industry and I’ll bet you are facing most of the same concerns, plus a few unique ones. Take a hard look at those in your industry. I’d wager that not all of them will be around a year from now. Those who survive will identify their weaknesses, mitigate them and use the opportunity to strategically reposition themselves to go forward in a much stronger position.
The management theorist Henry Mintzberg famously defined “strategy” as the five Ps: plan, ploy, pattern, position and perspective. At my firm, we’re using a similar 5P process when assessing a business and plotting opportunities to reposition:
Plot SWOT. Develop an in-depth knowledge of the business and plot their strengths, weaknesses, opportunities and threats. Do you have a fatal flaw? Most of the time, mild weaknesses do not impact overall effectiveness; fatal flaws, however, are different. These are weaknesses that are so extreme that they can have a dramatic negative effect on an organization.
Pattern Recognition. What is the current value of the entity and what factors could be improved to increase value? Many businesses are struggling but some are enjoying unprecedented success. Can you identify them and pattern their success strategies? This is when strong management creates its most value.
Risk Perspective. Is the financial structure appropriate for the amount of risk in the operation? What were once appropriate risk perspectives pre-outbreak may now look much different to you, your lender and your investors. Some traditional risk management strategies may have disappeared altogether.
Positioning. How does the value chain work in the industry and where is the business positioned? What opportunities exist to improve position to capture more value? Your suppliers and customers are likely asking similar questions of themselves. Is now a good time to acquire a business on either end of your value chain or a competitor? Perhaps you should explore being acquired by someone who may be looking for a strategic acquisition.
Partnering. What strategies, structures and partnerships can we implement to maximize value while controlling risk? Others are looking to do the same things you are, and are more likely to consider strategic partnerships to mitigate risk or capture opportunities that were not as apparent a few months ago.
A key part of partnering is aligning your company with key advisors who:
• Have managed through similar situations successfully before. These experiences aren’t acquired with an MBA, they are earned by being in the heat of battle when everything comes apart.
• Can manage complexity. This is an unprecedented crisis and the solutions will be complex and may involve many industries. Trying to navigate this alone may not be possible.
• Are creative. Opportunities abound, but it will take creativity to envision them and to navigate the roadblocks that will be put in place by the status quo, which will focus on perpetuating itself.
• Has multiple skillsets. In order to navigate all of this, it will be important to have a team of experts that can come together with the right skills at the right time to shape strategies and capture opportunities. •
Maurie Cashman is a member-owner of Agri-Management Farm Services LLC and manages its Aspen Grove Investments brand.