Change is not death, fear of change is death. Have you often thought about making changes to your business to improve growth? Where do collaboration skills and partnerships fall on your list? Probably pretty low is our guess. That is the surprising response we get from many of our clients.
Successful businesses grow. Through better products and processes, they win the favor of customers, increasing their volume and margins. That success often translates into further advantages as they invest in new and better equipment, develop expertise and gain bargaining power with suppliers.
As Warren Buffet has so famously said, “When the tide goes out, you see who’s not wearing a bathing suit.” Well, the tide has certainly gone out and there are a lot of naked companies around. Many of the failed companies will insist that they had been the victims of a “perfect storm.”
However, in the years to come, it will become apparent that some companies have actually used the crises to gain market share, increase employee loyalty and enhance profitability while their competitors were crumbling.
So it’s curious that so many successful businesses fail. Today, in fact, only 13% of the original Fortune 500 companies from 1955 are still around. Once great firms like Bethlehem Steel and RCA no longer exist and others, such as General Motors and IBM have had near-death experiences.
The typical story for why good firms fail is that they somehow lost their way, but as Clayton Christensen explained in The Innovator’s Dilemma, that’s not really true. Yet while he attributes the problem to disruptive innovation, the broader truth is that the likely cause of your business’s future failure is a factor in its success today.
Check out our thoughts on team leverage.
We are always on the lookout for good examples of collaboration skills and partnerships for successful growth. Here is an awesome example found in our local region of the Finger Lakes.
One that will probably surprise you, as it involves some dairy farmers in Cayuga County. Let’s start the discussion with a little background.
Background
In 1986, eight dairy farmers in the Finger Lakes region started meeting to discuss the current milk market. They eventually joined together to form Cayuga Marketing, LLC, to collectively bargain for higher milk prices while making it their mission to offer the best milk products possible.
With their great success, they grew to include 29 member farms, all located in the Finger Lakes region. Cayuga Marketing continued to explore ways to increase their responsibility and traceability throughout the milk market.
Here are a few facts about the Dairy Industry in Cayuga County:
The average size of farms: 270 acres
Average total farm production expenses per farm: $125,325
the percentage of farms operated by a family or individual: 88.65%
The average age of principal farm operators: 54 years
Average number of cattle and calves per 100 acres of all land in farms: 24.68
Milk cows as a percentage of all cattle and calves: 49.25%
Collaboration skills … early collaboration
In the beginning, some of the more progressive dairymen formed Cayuga Marketing, LLC. They launched this collaborative effort well over twenty years ago when a group of eight visionary dairymen began working together to bargain for higher milk prices.
Along the way, they found additional ways to collaborate, such as group buying of dairy supplies. From its humble beginnings, Cayuga Marketing has grown to 26 members with over 32,000 cows who produce 830+ million pounds of milk annually. The members of Cayuga Marketing are the stewards of over 50,000 acres of fertile farmland and employ approximately 600 people.
Looking for ways to reduce nutrient losses, odors, and other negative effects the dairy industry has on communities and the environment, Cayuga Marketing hired a national organic residual management company in 2002, and began implementing proposed plans a year later. Several member farms still utilize this system.
Effective collaboration skills … the genesis of a milk processing plant
In 2008, member farmers began exploring ways to reduce milk-hauling costs. For the next few years, they researched the most effective ways to accomplish their goals, and it was determined that it would be in their best interests to construct a local processing plant.
On April 24, 2012, Cayuga Milk Ingredients (CMI) was created by 21 of the Cayuga Marketing member farmers who were passionate about continuing to increase traceability and adding family-owned farm value to every product.
The board decided to begin construction was approved on October 10, 2012, and a ceremonial groundbreaking occurred soon thereafter.
The plant
Unlike most dairy companies, CMI’s proximity to our milk supply reduces the economic and environmental costs associated with hauling. All of the farmer owners are within 40 miles of the plant, and 70% are within 12 miles. This allows fast processing to ensure the freshest ingredients possible.
These 26 farms ship about 36 trailer loads of milk per day. The plant will take 26 of them under this phase of operation and is being built with expansion in mind. As the export market continues to grow, the need for products from this plant will grow also.
The decision to partner for a milk processing plant was not hard. It helped reduce transport costs and provide more control over milk pricing and their product base through vertical integration. So making the investment to have some control–or at least some return to the farm–as an owner of the plant was a key factor in this increased scale of collaboration.
The location of the plant is ideal as it is only 12 miles from 70 % for most of the 26 farms. The closest plant that farms ship to now is over 100 miles, so the new plant will have a great impact reducing hauling costs.
