Creating opportunities in uncertain times
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by Kim Deans
In agriculture we are accustomed to navigating change and uncertainty, and investing time, energy and financial resources into a crop or a livestock enterprise with no guarantee how the season or markets will be. Yet uncertainty is the most common challenge people struggle with when I am working with clients on their budgets, business plans, whole farm plans or soil restoration plans. Written plans and budgets are often resisted due to uncertainty, yet these tools provide practical benefits that have an important part to play in building our capacity to navigate uncertainty.
We operate our businesses in a world where change is speeding up and the nature of change is shifting. VUCA[1] is an acronym for Volatility, Uncertainty, Complexity and Ambiguity, and is a model that describes the external conditions impacting us. We can build our internal capacity to navigate in a VUCA world through developing Vision, Understanding, Clarity and Agility[2]. These concepts build foundations for empowering agricultural business owners to navigate uncertainty.
Vision
With increasing volatility, the nature, speed and magnitude of change is unpredictable. Connecting with our vision and clarifying our version of success provides us with an anchor to keep us oriented in a changeable environment. Our vision is a source of motivation and effectiveness because it empowers us to make decisions and see opportunities that keep us aligned with the destination we have in mind. When we can communicate our vision clearly, we are able to keep the team that supports our business heading in the same direction. If we don’t invest time to clarify what we want, someone else will. I have seen businesses flounder when there is no clear vision and where their time, energy and resources end up contributing towards creating someone else’s vision at their expense.
Understanding
Growing uncertainty and unpredictability means what worked in the past may not work in the future. An ongoing practice of pausing to observe, listen and make sense of emerging conditions deepens our understanding so we can respond adaptively instead of habitually. Knowing our numbers and our financial position are essential, as are embracing lifelong learning and continuing to grow our understanding in all areas of the business. Over 20 years of experience working with hundreds of farming businesses has taught me that the most resilient and profitable businesses that navigate uncertainty well, all prioritise understanding and managing their finances, natural resource base and people. I have seen business viability decline rapidly when any one of these three areas are neglected. Focusing our time, energy and resources on these areas of our business that are within our control is a key factor for success and for finding opportunities in uncertain times
Clarity
Agriculture is a complex system where our well-intentioned actions can and do have unintended consequences with so many interrelationships and interconnections at play between the parts of the system. Gathering information through a regular monitoring practice provides clarity that makes it possible to pick up unintended consequences, make informed decisions and keeps us focused on improving the resource base on which our business depends. When we monitor cash flow budgets, financial health indicators, soil health indicators, ecological health indicators and human wellbeing indicators we access valuable feedback loops that provide clarity of information that can highlight opportunities to improve our effectiveness. Declining soil health is an example of an unintended consequence of agricultural practices impacting huge areas of land. Imagine how much sooner we would have seen the opportunity to improve soil health if we had been monitoring soil physical health earlier. The best time to start monitoring was yesterday, the next best time is now!
Agility
Ambiguity exists in so many aspects of business and life. There are multiple ways to interpret situations, overwhelming amounts of conflicting information and plenty of different opinions that can make it difficult to make decisions. Taking a flexible approach to planning and being prepared to review and adjust our plans as we go along builds the agility that is the foundation of operating in an ambiguous environment. Agility means we make decisions based on the best information we have at the time, and we realise that not making a decision, IS a decision. When we have vision, understanding and clarity we become more agile and able to respond appropriately by knowing when we need more information, and when we need to make quick decisions with the limited information we have.
Working with clients to build financial and ecological literacy I get to see these four factors at play regularly. When we connect with a clear vision for success, we work together aligned in the same direction, and the process is more successful as a result. A thorough understanding of the financial position, financial health indicators, soil health and personal values and beliefs leads to clearer decision making. Clarity continues to grow through monitoring and gathering information to keep things on track. Vision, understanding and clarity build solid foundations for being agile and responsive as circumstances change.
We can’t outsource these business foundations to anyone outside of our business, they must be built internally. With a solid foundation of vision, understanding and clarity we improve the support we can access from our business advisory team to support our agility. Our agronomist knows the gross margins for our crops, but they don’t usually know our business overheads, financial commitments or living expenses. The crops and livestock we produce must generate enough income to cover these as well and every business is structured differently. We may be getting advice from those supplying farm inputs but are they monitoring conditions on the ground such as soil physical health to keep an eye out for unintended consequences? The quality and timeliness of financial advice we can receive from our accountant also improves markedly when we bring an improved understanding of cash flow, profitability, financial health indicators and a long-term plan to the conversation.
Consider this checklist to identify areas for action:
We have a clear vision for our business
We have defined what success looks like for us
We understand and monitor our financial position
We understand and monitor key financial health indicators
We understand and monitor soil health indicators
We prioritise our people and their wellbeing
We use a planning process that works for our business
I work with clients who are ready to turn challenges like these into opportunities. Send an email to arrange a time for a chat if you would like to find out more about how we can work together to build the foundations for creating opportunities in your business.
[1] https://www.vuca-world.org/where-does-the-term-vuca-come-from/
[2] https://www.mindtools.com/asnydwg/managing-in-a-vuca-world