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Ag News

The trunk technique- driving business into the future

  • By: "Prime" Ag News
  • Mar 08, 2018

By Robert Herrmann -

Agriculture is in a fortunate position, it produces a non-discretionary consumer product, that is the need for food sits at the very top of the consumer spending decisions. This is good, but this fact alone cannot be relied upon to sustain our farms. Complacency in industry or business is not justified and we should look to learn from other sectors for methods to drive growth.

“Rio Tinto runs 400 big trucks across the Pilbara, with 80 of these trucks driverless. Since 2008 each of these trucks has operated for 700 hours more per year (compared to the traditional driver operated trucks), and at a 15% lower unit cost and without a recordable injury”, according to The Financial Review’s Mathew Stevens.

Who would have ever made a bet in the Marble Bar pub 20 years ago that the big rig driver could be replaced? Improbable as it seemed, with tonnes of ore to be mined over the next 100 years or more, and with the expected profit to be generated, why would Rio Tinto even focus on robot truck drivers? Surely, the more important issues then were how much can we mine, and how quickly can we get it to the Chinese steel mills? And when the booms come with strong demand and high prices shouldn’t we just concentrate on banking the boom profits?

Rio Tinto were applying a management method called the “Trunk Technique”. This accepts that change must occur in business (and industries), but rather than focus on picking the “left field” or “black swan” event that will impact, the concentration is on building a strong framework.

"You can’t predict, you can prepare.” — Howard Marks

So, are we able to apply this information to agriculture production? The driving force for driverless trucks is the pursuit of constant improvement, continually introducing innovation to improve efficiency which will build a stronger more sustainable business.

Build a strong trunk and branches, this will ensure that when challenges and head winds come, you will have a strong business to firstly withstand the challenge and then to grow new branches and leaves on.

“The farther back you can look, the farther forward you are likely to see.” Winston Churchill

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The long-term decline in “real” commodity prices is unlikely to revert; can we reasonably expect that shoppers will go to their stores of the future and offer to pay an increased price?

If we accept this premise, continued improvement is essential and therefore building a strong “trunk” is a non-negotiable to future proof the farm business.

“Predicting rain doesn’t count. Building arks does.” — Warren Buffett

Agriculture will not be exempted from the need to seek out new ideas and embrace opportunities. Like Rio Tinto, agriculture too has the need to address labour, both cost and availability into the future.

Like Rio, it must also introduce technologies that improve efficiencies, increase productivity and reduce unit costs.

The good news is if the focus is on “Trunk Technology”, not only will the business survive when the cold winds blow during the tough times, new growth will burst through and flourish in the business when the spring bloom of good seasons or buoyant commodity prices arrive.

Focusing on “Trunk Technology” also means we don’t have to find the “magic bullet” or the “next big thing” for future sustainability – a far riskier approach to the future than building business resilience.

Setting in place a plan to build “Trunk Technology” means the business will be able to survive any of the challenges that emerge, including bad seasons or low prices.

There is another exciting angle to this concept. A business built on the “Trunk Technology” model will always be in the best position to take full advantage of future opportunities, whether “left field” or not!

Incidentally, the challenge for Rio is where to redeploy the existing workforce. In the future, unconventional miners could operate their entire operations out of the cloud, eliminating much of the traditional expense of mining.