Innovation a necessity, not a
choice, for 21st century co-ops
By Kimberly Zeuli, Assistant Professor;
Judy Turpin, student researcher
University of Wisconsin-Madison
Editor’s note: This is the third of a threepart
series of articles with highlights from
the seventh annual Farmer Cooperatives
Conference — Cooperative Innovation —
held in Kansas City in November:
ost of the business
innovation occurring
today is in response
to market pressure,
according to Chris Peterson, a professor
at Michigan State University.
Co-ops, like their competitors, are
being “forced” to innovate. In
order to remain competitive,
Peterson warns, co-ops should be
implementing innovative ideas constantly.
Florida’s Nat-ural Growers
is one cooperative that has clearly
heeded this counsel.
Citrus co-op competes
with beverage giants
About 1950, the chairman of
Florida’s Natural said: “It is most discouraging
to do everything possible to
maintain prices that will bring decent
returns to our growers and then have
these prices made meaningless by ruthless
cuts of competitors.” If anything,
this situation is even more acute today.
Florida’s Natural is pitted against
the two biggest names in orange juice:
Tropicana, owned by Pepsi, and
Minute Maid, owned by Coca-Cola. As
a result, the co-op faces continuous
cut-throat competition while trying to
maintain a high return for its members.
According to Walter Lincer, vice
president of sales and marketing at
Florida’s Natural, this is nothing new.
As manufacturers of a retail product,
Florida’s Natural has always faced a
challenging environment.
Florida’s Natural has constantly
revised and adapted its marketing
strategy in an attempt to gain and keep
customers. The acquisition of the
Tropicana brand by Pepsi and Minute
Maid by Coke was a “wake-up call” to
the co-op. Suddenly, the relatively
small co-op had to figure out how to
compete with the deep pockets of the
two giant soft-drink companies.
The mid-1990s brought increased
retail consolidation and the co-op
worked hard to maintain shrinking
shelf space. Sales representation and
suppliers have also dwindled in the
past 20 years and the farmer’s return
on the retail food dollar has also
declined sharply.
Florida’s Natural decided to take
advantage of its unique grower-owned
status, a distinction that companies
such as Pepsi and Coca-Cola can’t
claim. In 1987, it launched the co-op’s
first branded premium product: Fresh
‘n’ Natural orange juice.
The “grove to the glass” promise of
Florida’s Natural is what Lincer
believes has made the company so successful
that grocery stores want to
carry its product. He also suggested
that if co-ops work together, all would
benefit from a stronger position in the
market, a theme repeated by many of
the conference presenters.
Most important innovation
resources are internal
“Innovation happens because you
intend it to,” Chris Peterson said.
“How are you going to innovate?”
Co-ops need to be prepared for
innovation. Innovation can occur in
products and services, processes and
technology, competencies and markets.
Echoing the
same sentiments
as Florida
Natural’s Lincer,
Peterson
reminded co-op
representatives
at the conference
that “the
really important
innovation
resources are internal.”
If no resources go into innovation,
nothing will come out. He recommended
that cooperatives seek advice
on innovation from universities,
research & development firms, government
agencies, trade organizations and
consultants.
Cooperative leadership can make or
break the business. Mike Toelle and
Jim Rainey know this firsthand. Toelle,
board chairman of CHS Inc., outlined
the co-op’s board priorities: professionalism,
oversight, vision, accountability
and commitment to communication.
Although the traditional director
roles and responsibilities will
always be there, he argued that board
members need additional skills and
knowledge to “stay the course” in
today’s business environment. “21st
century leadership requires cultivating
a visionary, innovative and entrepreneurial
mindset,” Toelle said.
According to Toelle, the CHS board
is always “in the process of learning.”
Being a board member with CHS cultivates
a desire to gain knowledge and
skills both in business and professional
development. The CHS board hears
presentations from outside experts four
or five times each year on topics such
as energy, health care and grain markets,
among others.
Other professional development
opportunities for board members
include international exchanges and
trips to Washington, D.C. In addition
to in-house training, board members
are required to attend external development
workshops and conferences
three or four times annually.
Jim Rainey, who has served on a
number of boards throughout his
career, retired in 1991 as CEO for
Farmland Industries. He said he had
learned many lessons over the years on
how co-op leadership can be improved,
but perhaps the most challenging issue
is achieving and maintaining an effective
board-management relationship.
Evaluation of management essential
Rainey provided a list of what he
considers 13 basic management disciplines,
but he chose to focus on just
three: accountability in management;
strategic management and planning;
and management of change.
He said evaluation of management
is essential to maintaining integrity
while also promoting constructive criticism
and improvement in management
techniques during a board’s term.
Audit committees are another way to
evaluate management and provide
feedback on improvements and
changes.
The management of change is perhaps
the most important element in
co-op leadership, according to Rainey,
and also the most difficult to achieve.
Managing change means less surprises
and a greater sense of trust among
members, employees and management.
“It is imperative that management
and the board become fully committed
to recognition that survival will depend
upon proactive change, Rainey said.
Strategic management planning
should consist of a “timeline action
plan” that separates short- and longterm
goals, Rainey advised. An objective
third party can help the co-op
construct such a plan. The goals then
need to be communicated to members
and employees to help maintain trust
and to gain additional perspectives on
the viability of the plan. The action
plan should be reassessed annually in
order to make adjustments and additions.
David Barton, director of the
Arthur Capper Cooperative Center at
Kansas State University, closed the session
by offering six keys to a successful
board: (1) bring the right people
together; (2) set high objectives and
have an ambitious vision; (3) educate
the board on how to work together; (4)
set policy at the board level; (5)
understanding is more
important than speed
— the board
needs to get the decision right; (6)
slow is fast and fast is slow in relationships.
If you take the time, you
will achieve more effective relationships.
Co-ops play important role
in presidential swing states
Jean-Mari Peltier, president and
CEO of the National Council of
Farmer Cooperatives, reminded the
group that co-op leaders should also
maintain a dialogue with their local
and national policy makers. She presented
some data on the 2004 presidential
election electoral map to
illustrate how the “toss-up states” in
the election were states with strong
co-op roots, bringing co-ops to the
attention of both candidates.
Many upcoming changes in the
House and Senate will also be influential
in deciding how agriculture
and co-ops are treated in laws
Congress will act on in coming years.
Peltier suggested coalitions, education
and grassroots activism as tools to
combat the lack of knowledge on the
overall benefits of co-ops for the economy.
“We must all hang together…or
assuredly we shall all hang separately!”
Peltier said, using the words of
Benjamin Franklin to stress the need
for cooperation among co-ops to
ensure their future success.
William Nelson, president of CHS
Foundation and The Co-op
Foundation, wrapped up the conference
by encouraging co-op leaders to
“take the conference lessons with
you,” and not end their discussions
when the meeting adjourned. He
stressed the merits of bringing new
ideas and perspectives to co-op boards
from academics, industry, foundations
and co-op councils. “Co-ops should
be learning organizations,” Nelson
counseled, “with dynamic processes
leading to constant
innovation and
revitalization.”
