WestFarm Foods is a Washington-based company
that produces dairy and other products for the consumer and
specialty markets. As CEO, I am responsible for growing the
business of WestFarm — one of Washington’s largest
privately held companies, with annual dairy and related products
sales of approximately $1.3 billion.
Like many companies interested in developing
production and service efficiencies, or expanding its product
line, WestFarm had to decide when and how to partner with
potential alliance partners, including Nestlé and White
Wave. Among our goals as we pursued alliances was to retain
our strategic focus, while understanding the strategy of potential
allies so we could comprehend the synergies resulting from
the collaboration.
Our alliance with Nestlé is a licensing
agreement that covers Nesquik and Coffee-mate for the Pacific
Northwest. Our alliance strategy focuses us on being low-cost
producers and being “sales driven” in our consumer
products implementation. Nestlé is a world-class marketing
organization that is superb in creating “consumer pull”
for its portfolio of consumer-branded products. Our alliance
with Nestlé allows them to concentrate on their strengths
and we on ours. In this case we consider ourselves the farmers
and Nestlé the poets in the consumer branded marketing
arena. We both excel at our strengths, and the synergy is
evident in the market. Blending and balancing these strengths
is one important goal when considering an alliance, since
creating win-win scenarios for all alliance members is crucial.
In our alliances with White Wave (soy beverages)
and Organic Valley (organic milk), we again capitalize on
our strengths and theirs. Due to distribution constraints
and relatively low inventory turns in both product categories,
out-of- code product was a continuing problem. Both companies
are experts at marketing their different categories, but they
were hindered by a lack of sufficient shelf life. Working
together, we resolved this issue using our manufacturing expertise
in ultra-pasteurization to extend their shelf life to be compatible
with distribution and product sales velocity. Again, we stuck
to our strategic focus of low-cost producer while they were
then free to focus on their areas of marketing expertise.
My advice for other business leaders considering
a strategic alliance is conceptually rather simple. First,
determine your corporate strategy and define who you are and
what you represent. Then in terms of execution, identify potential
strategic partners whose strengths complement yours. Here’s
the key: they need to need you as much as you need to need
them. If the arrangement isn’t mutually beneficial,
then chances are it isn’t going to work, either culturally
or in the marketplace. We went through several potential alliance
partners before we identified our latest partner.
I encourage business leaders to educate themselves
before leaping into the alliance fray. My experience with
the Executive Education program at Kellogg offered some especially
valuable insights once we were in the trenches. Prof. Ed Zajac’s
“Creating and Managing Strategic Alliances” (CMSA)
course provided rigor and structure and highlighted some key
points that my team and I might have overlooked. The discussions
and frameworks provided by the class allowed us to go forward
with confidence to make our newest venture successful.
In our approach to CMSA, we took seven senior
managers from WestFarm to the course in two different sessions.
I have found it much more effective to take teams of people
rather than just send one or two executives. If you send only
one or two, when they return to their companies, the effect
of the course may be lost because there is not a support network
for the ideas. By taking our senior management team, we not
only have everyone here on the same page for this alliance
but we are also reviewing our other alliances.
What really distinguishes Kellogg’s
alliance course is that it links theory with practice. I have
been running companies since 1983 and have found that most
executive courses tend to be highly stimulating while you
are enrolled, but prove cumbersome and impractical when you
try to incorporate the learnings in your organization.
Although most of our management has been recruited
from other large companies, there was not a large experience
base in these alliance ventures. By using the insights from
Kellogg’s Executive Education Program, we were truly
able to “level the playing field” and move forward
on our deal.