I’ve had lively discussions with my AP friends recently on the issue of Philippine agriculture. It was an offshoot of a recent soiree into Negros – the epicenter of the golden age of Philippines Sugarlandia.
We all agreed that:
- CARP doesn’t work – DAR is not needed.
- Corollary to #1 – Land redistribution via state’s direct coercive intervention, seizure and redistribution of private property violates one cornerstone of private enterprise – ownership of private property.
- Agrarian reform as we know it – is a failed strategy to alleviate poverty and creates more problems than it solves.
- Industrialization is a better alternative to alleviating poverty than plantation-type agriculture.
However, I went further to state that the typical response of the Filipino businessman has been to invoke state protection – instead of focusing on private innovation, strategy, planning, flawless execution, targeted marketing, optimum distribution, and continuous improvement – which is what the competitors of the Philippines are doing sans government intervention.
The fact of the matter is the world of business has drastically changed. New technologies have emerged which for the first time in the history of humanity – created wealth from a greater emphasis on knowledge – having the right information at the right time – to be able to deliver goods and services to customers where they want it, when they want it, at a price customers are willing to pay for.
It doesn’t matter whether your customer is a block away, in the next town, the next province, the next country, or overseas – the principles are the same – a lack of knowledge will be devastating to the bottom line of any company that stakes new ground without understanding how the new economy operates.
Toffler might be too much for my first wave-centric friends – and I figured why not let a first wave sage’s words provide a better perspective on the need for Philippine agri-businesses and not just the agriculture sector – to seriously re-evaluate our fundamental beliefs on how we Filipinos should do business and relate to the world.
I am aware of the clamor about global inequality, the fear of globalization and the fear of competition – and these are very valid issues. My take is that in the face of these challenges – we ought to step up by confronting the challenges head on. Blaming the world because it moved into the knowledge economy – the third wave and asking for government protection in one industry while clamoring for liberalization in other industries does not provide for coherent economic policy. Industries come and go – and companies which are protected from market pressures to innovate do not do society any good in the long run.
Money of course is a contentious issue – and changing our beliefs and perceptions on our way of life is just like saying that everything we learned in the first half of our lives was totally wrong – or that most of it was wrong – or at least misguided, misinformed. Or perhaps, it was the thought that was fit for the spirit of the times – the zeitgeist. The times however keep on changing – but there are some gems that transcend the changes of the times. I consider Sun Tzu’s work to be one of those gems which are applicable to a broad range of existential questions facing Negros Sugar Industry.
Confront them with annihilation, and they will then survive; plunge them into a deadly situation, and they will then live. When people fall into danger, they are then able to strive for victory.
– Sun Tzu
For to win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill.
– Sun Tzu
The Value of Planning
Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.
– Sun Tzu
Thus it is that in war the victorious strategist only seeks battle after the victory has been won, whereas he who is destined to defeat first fights and afterwards looks for victory.
– Sun Tzu
Nicheing Strategies/Market Segmentation
He who knows when he can fight and when he cannot, will be victorious.
– Sun Tzu
The Value of Benchmarking
Know thy self, know thy enemy. A thousand battles, a thousand victories.
– Sun Tzu
The Knowledge Economy
Now the reason the enlightened prince and the wise general conquer the enemy whenever they move and their achievements surpass those of ordinary men is foreknowledge.
– Sun Tzu
The opportunity to secure ourselves against defeat lies in our own hands, but the opportunity of defeating the enemy is provided by the enemy himself.
– Sun Tzu
You have to believe in yourself.
– Sun Tzu
All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved.
– Sun Tzu
Hitting the Reset Button
The golden age of sugar cane is over. Society’s take on the division of labor has grown from one that involved landowner and tillers of the land – and has gone far beyond it. Monocrop economies like Negros should take a cue from Hawaii – which has lost more than 60 percent of its cane fields over the last five years — “victims” of urbanization and conversion to better-paying crops like macadamia nuts and coffee, says Roehl Flores , director of marketing for C & H Cane Sugar Co.
So yes, a portion of the sugar industry died, but another agricultural industry was born – macadamia nuts and coffee. Has Negros explored this option? The point being that changes detrimental to the Philippine sugar cane industry do not necessarily mean doomsday for Philippine agriculture – because new industries rise to take up the vacuum left by the sunset of old industries.
From a business perspective point of view, to me anyways, the question is this – what new product/service line can I develop to replace the revenue lost from the maturing product lifecycle of sugar cane? Or perhaps, are there new market segments that put a premium on cane sugar that they haven’t identified yet? Does the main market always have to be the US or the OECD countries? Have we looked at other countries – and even locally for new markets – or looked at new uses? My hunch is that we need to work harder at asking the right questions – lots of it – that will question our basic assumptions. What are we doing? What are we not doing? What can we do better? What can we discard?
My search for opportunities, efficiencies, improvements begins with an attempt to understanding the supply chain – and how I can craft a viable strategy given my unique blend of resources – land, labor, knowledge, capital, and business relationships.
As landowner, my position in the chain becomes clearer – I am into breeding/growing.
As a business – I have to make a couple of decisions – should I engage throughout the chain – and become vertically integrated? Our should I focus on areas where I have core competitive and comparative strengths? My available resources will guide me on how best to structure my company’s ownership structure, processes, and industry linkages.
But let’s say for this instance – I just want to own the land – or I already have the land – what can I do? Given that all of us landowners are getting a bum deal from CARP – I’d say we are all equally screwed – but am gonna do something about it. Some say I should spend time lobbying for the repeal of the CARP. Sure, I’ll put in my contributions to having it repealed – but for the meantime, while CARP has not been repealed yet – I gotta make some dough – and I don’t have the luxury of time. The more I do nothing, the more money I am losing.
Given that I have less land at my disposal what can I do to ensure sustainability and viability of an ongoing concern? What fundamental assumptions in my business model can I re-imagine, re-engineer, take apart, re-invent – What question can be raised if I were to:
Crop Diversification – Is there a crop that has higher yields of sugar than sugar cane per land unit area? It turns out – there is such a crop – sugar beets. Of course there has been a debate whether beet or sugar cane is better among culinary enthusiasts – a debate which can be settled by segmentation strategies.
New Uses – Should I stick to raw sugar, how about ethanol? If I were to go ethanol, is sugar cane the best crop? If I were to use another crop like Jerusalem artichokes – what’s the impact?
New industry linkages – I have limited land for cultivation – can I work with other similar tiller/owners, synchronize purchasing and cultivation in order to leverage the bulk power of our consolidated output – whether in purchasing inputs such as fertilizer – or in opening markets.
Switch industries – Is sugar cane cultivation really the best use of the land? What are the prospects for converting idled sugar lands into real estate development – commerce, ecozones, tourism facilities, warehousing and distribution- is the yield per land area greater? How about cutflower production or poultry or livestock?
How are our competitors in the global markets faring? You will find out that they have the same concerns as Filipino farmers. You will also see how they are addressing the same concerns. For example — instead of competing globally and losing against Brazil’s corporate farms — Canadian farmers:
- diversified into organic produce
- sold the produce locally thereby reducing the carbon footprint
- positioned their product in a market where the Brazilians can’t compete
These private enterprise adjustments turned a red bottom line into black – without having to resort to government intervention and constitutional protectionism.
The question is what are our competitors doing — that we are not doing, which we actually have the capability to do so but we are not doing it. And why aren’t we doing it — as we identify each disparity — we craft a strategy to close the gap and gain parity in the market. Identify what they are doing, find out how we can do better, implement, and follow through.
Our competitors also face the same concerns as we do — however their response is different from us. It might help to learn and know what other farmers are up to — study the succesful ones — we focus too much on what doesn’t work — and forget to pay attention to what works — given the realities of the global marketplace.
As Sun Tzu once quipt — know thy enemy and know thyself — and thou shalt win a thousand battles.
Here’s what farmers and agri-businesses in other countries are discussing. Perhaps if we took the time to find out if the quality of our thinking is on parity with other cultures and economies.
Factors in the Agriculture Supply Chain and Looking at Farm Business Models
Farmers Share Their Insights into the Benefits of Learning Business Management
Top Managers: Does Agriculture Need to Adopt a Business Management Model?
Why Should a Farmer Be the Least Bit Interested with the Word “Local”?
Our competitors are sharpening their blades, learning more about their industry, keeping KPIs, squeezing every last inch of optimization, lean processes, agile supply chains – and we are doing nothing but bitch! How exactly are we going to win market share with our placards and saliva. At the end of the day – the consumer – which also happens to be you and I – will be making decisions on what to buy, where to buy it, and at what price. If we lose sight that the customer is #1 – we shouldn’t be in business and just settle for a desk pushing bean counting J-O-B – just over broke. Beggars can’t be choosers.
Getting our Priorities Straight
We only have twenty fours every day, how do you want to spend those hours — dwelling on what works — and generate revenue.. or dwell on what doesn’t work — and keep on losing revenue. The ball is in our court — the world has been playing the whole time — and all we have been doing is crying from the sidelines that the rules should be changed.
The world isn’t going to wait for the Philippines. Those who find their niches and segments and right-size their operation not only survive, but, thrive.
As to the rigged rules argument — when I hear that (and I mean no disrespect), what I hear is a pinoy politician who never loses — he was cheated because the elections were rigged. The same cultural defects that we accuse our politicians of – are quite prominent in the thinking of our Filipino businessmen. The rigged game argument, is the cornerstone of our protectionist economic policies – which frankly don’t work.
Competing on Cost vs Competing on Value
Filipinos think the game is about cost — when the game being played from the competitor’s perspective is one of value. Listen to how Japan accepted the fact that it cannot beat China, Brazil, Vietnam, Burma — on the basis of cost — it’s the same concern of the Filipino businesses. The right question to ask then is how did Japan overcome the issue of lower labor cost of their competitors? The answer was – to compete on value. What value do Filipino businesses add to their product? — for example consider these advice from Kehnichi Ohmae on “talent and global prosperity”.
There’s a lot of low hanging fruit in Philippine businesses – starting off with our fundamental belief that the world of business should revolve around the Philippines. In a globally integrated economy – that sort of thinking only ensures that we get to play – from the sidelines. This has got to stop.
Ball is in our court.