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Sixth AnnualFarmer Cooperatives Conference

October 30, 2003

Sixth AnnualFarmer Cooperatives Conference

October 30, 2003

The Speed of ExecutionThe Speed of Execution

John E. GhertyJohn E. GhertyPresident and CEOPresident and CEOLand O’Lakes, Inc.Land O’Lakes, Inc.

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Speed of ExecutionSpeed of Execution

Be fast or be gone!Be fast or be gone!

Dr. Chris PetersonDr. Chris Peterson

Department of Agricultural Department of Agricultural EconomicsEconomics

Michigan State UniversityMichigan State University

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Speed of Execution Speed of Execution

ChangeChange … You don’t have to do … You don’t have to do it. Survival is not mandatory.it. Survival is not mandatory.

Peter DruckerPeter Drucker

Business analyst and Business analyst and authorauthor

In today’s business environment, cooperatives must do things different, better and faster, if we are going to survive and succeed.

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Speed of Execution Speed of Execution

Success in today’s economic Success in today’s economic

environment depends greatly on environment depends greatly on

the ability to envision the future … the ability to envision the future …

and get there firstand get there first!!

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TopicsTopics

How cooperatives can accelerate How cooperatives can accelerate

their “speed of execution”their “speed of execution” Laying the foundationLaying the foundation ImplementationImplementation

What can go wrongWhat can go wrong

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Today’s Business EnvironmentToday’s Business Environment

Accelerating changeAccelerating changeEconomic globalizationEconomic globalizationIndustrialization of agricultureIndustrialization of agricultureIntensifying levels of competitionIntensifying levels of competitionCONTINUED DRIVE FOR SIZE AND CONTINUED DRIVE FOR SIZE AND

SCALE!SCALE!

77Change – The Continued Drive for Size and ScaleChange – The Continued Drive for Size and Scale

Must have the necessary sizeMust have the necessary size

and scale to:and scale to: Meet the increasing demands of Meet the increasing demands of

large and growing customerslarge and growing customers Meet the challenge of large, well- Meet the challenge of large, well-

financed, aggressive competitorsfinanced, aggressive competitors

88Change – The Continued Drive for Size and ScaleChange – The Continued Drive for Size and Scale

Every market will be dominated by three Every market will be dominated by three major players, with small specialty major players, with small specialty players filling niche markets, and players filling niche markets, and any any company caught in the middle will be company caught in the middle will be swallowed up or destroyed.swallowed up or destroyed.

J. Sheth/R. SisodiaJ. Sheth/R. Sisodia

“ “The Rule of Three … Surviving The Rule of Three … Surviving and Thriving in Competitive and Thriving in Competitive

Markets”Markets”

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Change – The Continued Drive for Size and ScaleChange – The Continued Drive for Size and Scale

Land O’Lakes Corporate GoalLand O’Lakes Corporate Goal

“ “To operate businesses with To operate businesses with

number-one or number-two number-one or number-two

market shares or strong, market shares or strong,

defendable market niches.”defendable market niches.”

1010Change – The Continued Drive for Size and Scale Change – The Continued Drive for Size and Scale

Focusing on growth is in itself aFocusing on growth is in itself a

change for many cooperatives …change for many cooperatives …

focusing on achieving growth infocusing on achieving growth in

collapsed time frames collapsed time frames

is a major change.is a major change.

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Speed of ExecutionSpeed of Execution

Laying the FoundationLaying the Foundation Culture/operating stateCulture/operating state Strategic planning processStrategic planning process Communication Communication Balance sheetBalance sheet

1212Speed of Execution – Laying the FoundationSpeed of Execution – Laying the Foundation

Culture/Operating StateCulture/Operating State Commitment to the cooperative as a Commitment to the cooperative as a

business organizationbusiness organizationLand O’Lakes is first and foremost a business organization. The essence of Land O’Lakes mission is to create long-term value for its member-owners through superior financial performance. At the same time, the cooperative has responsibilities to its membership that differ from those of a proprietary corporation. However, only through achievement of our business and financial objectives will the organizationaccumulate the resources required to successfully fulfill the economic, social and political expectations of its owners.

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Speed of Execution – Laying the FoundationSpeed of Execution – Laying the Foundation

Strategic Planning ProcessStrategic Planning Process Good dataGood data Clear visionClear vision Board and management alignment Board and management alignment

Other players skate to where the puck is, I skate to where it will be.

Wayne Gretsky

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Board/Management AlignmentBoard/Management Alignment

1.1. We must continue to grow, if we are going toWe must continue to grow, if we are going to have the size and scale necessary to competehave the size and scale necessary to compete effectively, long-term, on behalf of our ownerseffectively, long-term, on behalf of our owners2. 2. Resources are finite and Land O’Lakes growth Resources are finite and Land O’Lakes growth must be consistent with proactive management must be consistent with proactive management of our portfolioof our portfolio3. 3. Generating industry-competitive financial results Generating industry-competitive financial results is critical to successis critical to success4. 4. Exceptional people will be essential to our Exceptional people will be essential to our successsuccess5. 5. The breadth of the Land O’Lakes system must be The breadth of the Land O’Lakes system must be leveraged where it creates competitive advantageleveraged where it creates competitive advantage

1515Speed of Execution- Laying the FoundationSpeed of Execution- Laying the Foundation

Effective Communication withEffective Communication with

Members and LeadersMembers and Leaders Essential, non-negotiable, Essential, non-negotiable,

cooperative leadership responsibilitycooperative leadership responsibility Critical to member understanding Critical to member understanding

and trustand trust No surprises!No surprises!

1616Speed of Execution –Laying the Foundation

Speed of Execution –Laying the Foundation

Balance Sheet Strength/Access toBalance Sheet Strength/Access toCapitalCapital Intensified focus on performance and Intensified focus on performance and

balance sheet strengthbalance sheet strength Commitment to proactive portfolio Commitment to proactive portfolio

managementmanagement Development of alternative sources of Development of alternative sources of

capitalcapital Willingness to explore new business Willingness to explore new business

relationshipsrelationships

1717Speed of Execution- ImplementationSpeed of Execution- Implementation

Leadership TeamLeadership Team Board RoleBoard Role CommunicationCommunication

1818Speed of Execution – ImplementationSpeed of Execution – Implementation

““The old adage ‘People are your most important The old adage ‘People are your most important resource’ turns out to be wrong, people are not resource’ turns out to be wrong, people are not

your most important resource, the your most important resource, the right right people are.”people are.”

Jim CollinsJim Collins

““Good to Great”Good to Great”

Leadership Team Select leaders wisely Clarify expectations Hold accountable The “intangibles”

1919Speed of Execution – ImplementationSpeed of Execution – Implementation

Board RoleBoard RoleUnderstanding of, and alignment Understanding of, and alignment

with, business objectiveswith, business objectivesWillingness to act in collapsed time Willingness to act in collapsed time

framesframesDiscipline in communicating and Discipline in communicating and

advocating the organization’s advocating the organization’s messagemessage

2020Speed of Execution – ImplementationSpeed of Execution – Implementation

CommunicationCommunication Go to the membersGo to the members

TimelyTimely HonestHonest Two-wayTwo-way CompleteComplete

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Speed of Execution – What Can Still HappenSpeed of Execution – What Can Still Happen

Failure to recognize the time it takes Failure to recognize the time it takes to fully implement change/integrate to fully implement change/integrate growthgrowth

Reactions of customers and Reactions of customers and competitorscompetitors

Management capability to lead a Management capability to lead a larger organizationlarger organization

Difficulty in evolving a new culture in Difficulty in evolving a new culture in a larger, more complex organizationa larger, more complex organization