Strategic Leadership

Many people think of leadership as "being able to get other people to do what needs to be done effectively".  Being an effective leader means more than being a good manager of people.  There are three key things that a great leader needs to be able to do.  They need to be able to set a direction that their organization needs to go in, design the organization to achieve the goals they set to move them in that direction, and nurture and build a culture that supports this direction. 

Setting Direction

Setting a new direction involves looking at the external environment and deciding what your company needs to do in order to gain a strategic advantage.  Part of being a leader is to integrate a vision of the future that allows employees to become more excited about the work they are doing.  They need to feel that what they are doing matters and that they are making a difference.  When employees feel needed they are more apt to being fully committed to the project, or work and not thinking only about compensation. Great leaders will think out of the box to come up with this strategy.  If you want your employees to become attached to your vision, you need to change the whole process, get them to like something totally new.

Designing the organization is simply implementing the new vision and strategies.  Successful leaders are actively involved in the business processes.  John Deere implements teams, systems, and other processes that will support their direction and vision. They try to make sure that the business and corporate levels are consistent in their views and directions.  If your business-level is pursuing a low-cost leader strategy and the corporate-level is trying to focus on quality, the business does not accomplish either and will not be as successful.  Everyone needs to be on the same page and in order to accomplish this a good leader will take part in everything so they can actively see the direction of their organization as a whole business.  That is why John Deere has made quality part of their culture.

Nurturing and building a good culture can be more than an effective way to avoid lawsuits and get along with the government.  Many managers see this as an effective way to implement organizational control.  An organization with a culture that expects quality work will get quality work.  If the employees and the managers are all trying to do their best there will be more pressure to do a good quality job.  Top managers and leaders will have a big impact on their company culture whether they want to or not and should be very careful about how they behave and what decisions they make.  John Deere has many different branches and divisions.  Each one of the managers in these divisions needs to push for quality and match the company expectations because that is their culture.

A successful leader will in the end, will make a profit and get the activities needed to make a profit done.  In order to do that they will need to be a good leader and a good manager.  They need to be able to instill a vision in their employees, provide them with direction, and provide a good cultural environment for them to work in in order to be a good leader.  They need to tie this into their management style to run their operation efficiently and effectively.

John Deere Business Organization

The organizational structure of a business has a great effect on how the business is run.  The organization needs to look at all of these structures and decide which one fits their business best. They should first decide if they want to have a centralized or decentralized strategy and which one would be more beneficial to them.

Divisional Organizational Structure

John Deere has chosen to be centralized and very orderly.  They are organized by eight total divisions.  These divisions include agricultural, construction, turf, forestry, financial services, power systems, parts services, and intelligent solutions.  Organizing their businesses in this manner gives each division the advantage of concentrating on the needs of their particular industry.  For example the agricultural team has recently developed a line of row tractors that enable the operator to widen or shrink the space between the wheels at the push of a button from inside the cab.  This allows for the tractors to drive down the rows of fields much easier and be adaptable to each individual farmers rows. The turf division does not need to worry about driving down rows but instead should look for ways to take pressure off the ground so that they don't leave indentations in the earth because they are usually working on soft ground.

The disadvantage of this type of business structure would have to be that it is expensive to hire duplicated personal for each division.  It can also lead to divisions not sharing ideas if they are competing against each other.  John Deere doesn't seem to have to much of a problem with this because they are organized by industries.  Forestry generally doesn't have to much to do with agriculture and vice versa.  This prevents the divisions from competing for the same customers.

Some of these divisions are there for the sole purpose of supporting the other businesses.  Financial services, power systems, parts and service, and intelligent solutions are used to create new and innovative ways to help enhance the John Deere experience and to ad value to the product.

If a business wants to compete in an increasingly competitive world they must think hard about how their business is structured to be as efficient as possible and deliver the most value possible to the customer.

Corporate Governance

1 John Deere Pl  Moline, IL 61265

Corporate governance is defined as the relationship among various participants in determining the direction and performance of corporations.  These relationships have great effect because the attitudes and actions of top management trickle down into the other levels of employees.  John Deere has many things in place to insure that the companies core values of integrity, quality, commitment, and innovation are met.

They have written a few codes in order to ensure company wide compliance. One of the codes that John Deere has put into place is a Code of Ethics.  Their current code of ethics was adopted on December 3, 2003 in order to satisfy the requirements of the Sarbanes-Oxley Act of 2002.  Before this code was created, the company had a Business Conduct Guidelines document which guided the actions of employees.  In their code of ethics, John Deere addresses the issues of fair dealing, conflicts of interest, protection of company assets, confidential information, integrity and disclosures, and waivers.  They also provide a way for employees to anonymously report complaints through a hotline number, over the internet, or through the mail. After setting rules for conduct, the company gives the consequenses for violations of the code.  It is important to identify and enforce these issues throughout the entire company.  A code of ethics should be enforced and a part of the culture of an organization.  This document should not exist simply to satisfy governmental rules and regulation, but should be an expectation of those who work in the company.

Another corporate governance document that John Deere has written is the policies of their board.  The Board of Directors his held accountable and ruled by some policies that the company has put in place.  These polices are there to try and limit the power of the board and ensure that they are ethical and keep the companies interest in mind.  These policies govern five key topics of the Board.  First the policies include rules of board composition and functions.  These describe the role of the board of directors and who the board should include. Most of the policies fall under this topic.  The second topic is that of the board meetings.  This section describes when, where, and who should attend such meetings.  It also talks about how the meetings should be conducted.  The policies document then describes the committees that the board can form.   The fourth section is about how the board should be compensated for being a Board member and carrying out such duties. The fifth and final section talks about how top management should be evaluated and how they should plan for succession.

Supplier Code of Conduct

The Supplier Code of Conduct makes an attempt to ensure ethical and responsible behavior from all of the participants in the John Deere supply chain.  This is increasingly important as the world comes into a new age of a world economy.  We do not have the luxury of understanding everyone's culture.  Where something like bribery may be accepted in some countries as a good business practice, it may not be acceptable in others.  These types of things are addressed in the supplier code of conduct.

The last two documents on the John Deere website are complementary documents to the ones above.  They farther identify the companies core concepts and beliefs.  They try to spell out practices and polices in more detail so that employees and investors can better understand their culture and way of business. The Guiding Principles focuses on defining the company values, business conduct, constituencies, social responsibility, diversity, environment, and brand identity.  These are all vital to the company culture.  The last document found on the John Deere website is the code of business conduct.  This document is the largest of their corporate culture documents and includes a lot of different things. From how to treat others in the workplace and the community, to how to maintain integrity and loyalty to the company, John Deere covers all of their expectations of employees in this thirty four page document.

These documents all provide a written documentation of what these relationships should look like within John Deere's corporation.  They try to provide an ethical sound relationship between all of the employees of the company while still holding them accountable for their actions and decisions.

Diversification

Tractors

John Deere is a very diverse multinational business.  They sell everything from tractors, trucks, atv's, engines, and even gun safes and toys.  John Deere realizes that they need to try and get into emerging markets as well as keep inovating in their cash cow markets.

In2010,  John Deere divested their wind energy department "John Deere Renewables" to Exlon Enterprises.  They realized that this business was not their strong point and by divesting it they gained much more then they would have had they continued to try and make the business profitable.

John Deere focuses on internal growth.  They are constantly innovating and control or own most of

Engines

their suppliers.  They make their own parts and tools so that they rely on very few people to keep their company profitable.  

They are very concerned with global growth.  By the year 2018, John Deere has goals to reach 50 billion in their mid-cycle sales.  They also want 50% of their growth to be outside the US and Canada.  In order to reach 50billion, they realize they need to improve their profitability.  By 2014, John Deere wants to have a 12% mid-cycle margin and a 30% operating return on operating assets rate.

These are all very large goals.  John Deere focuses on internal supporting businesses to help them reach these levels of excellence.  They use their financial services, power systems, worldwide parts,

ATV's

and intelligent solutions group, to add value to their equipment and give the customer a better experience.  Having these businesses all internal also helps to promote their brand and improve in the quality they can provide because these support businesses are tailored to fit their products.  The people who work in these businesses also are very knowledgeable about the products that John Deere's customers are using and can access a lot of essential information that the customer may not know at the time.

By focusing on internal development, John Deere can capture the value created by their own innovative activities without having to "share the wealth" with their competitors.  They are large enough to use their financial and global leverage to finance their research and to continue to provide supporting businesses to add value to their main product lines. 

Sustainable Competitive Advantage

Having a sustainable competitive advantage is very important to staying ahead of the competition and gaining the most business possible.  There are many things that a company can do to gain a competitive advantage.  Two ways firms can do this is by becoming  an overall cost leader or by differentiating from the rest of the companies in their market.

John Deere has a very obvious business strategy.  They focus on differentiating from their competition.  The focus at John Deere is on the quality of the machine and the quality of the service they give their customers.

JD's first product. 1837

Another way to differentiate your company from competitors is by patenting your inventions and ideas making your company the only one to have these solutions.  John Deere is constantly looking to gain a competitive advantage through patents and trademarks.  In December of 2012, they were named as a top 100 global innovator according to marketwatch.com.  The criteria for being on this list included four main areas.  They were, overall patent volume, patent grant success rate, global reach of the portfolio, and patent influence as evidenced by citations.  This shows how concerned John Deere is to finding new and better ways for people to work the land and make a difference.

 By looking at the company through the lens of Porters Five Forces, we can gain a better understanding of their business plan and how they plan to deal with threats to their business and how they plan to keep customers from going to a different dealer.

The more bargaining power you have with your suppliers, the cheaper you can get good products.  John Deere has good bargaining power with their suppliers because of their economies of scale.  They are such a large company that it would be very hard for one of their suppliers to quit producing for John Deere because it would take out such a huge chunk out of their sales.

The more  bargaining power you have with your suppliers have over them the harder it is to make a profit.  John Deere's commitment to quality and innovation makes it hard for their customers to bargain for a lower price.  John Deere customers expect a higher price because they know the quality of service and equipment they are going to get with their purchase.  This in turn gives customers low bargaining power.

Rivalry among existing competitors is something that every company is going to have to deal with at all times, although it might be more pressing for some than others.  John Deere has many competitors such as Case IH, New Holland, and Cat.  These companies all compete with John Deere at different levels, but none have the global or market selection that John Deere has.  This give John Deere a competitive advantage when it comes to their overall business because they do not have to rely on one market to be favorable to make a profit. Where Case IH is focused on Agriculture, John Deere has many supporting businesses such as construction, forestry, and lawn care.

The threat of new entrants is not very great for this industry because it takes so much capital and so many assets to get started competing with these big companies.  It would take a whole new invention to compete or government intervention to get a company started and even then they would have to compete with the vast amount of relationships and captial that John Deere has.

There are not many different substitutes for a tractor or plow.  The only decision you have to make after you decide you need one, is which one to buy, John Deere, or one of their other competitors. It would be very difficult to turn 80 acres of land today with a hoe.  With today's methods, consumers need to do a lot of work in a small amount of time to be successful and John Deere's products help them to be much more efficient then they could ever be with a hoe or spade.

Retaining Human Capital

Good service can make all the difference.

In an industry where service can add so much to the value of your product, it is very important to keep good quality employees on your staff with the experience, relationships, and know how to get the job done right.

There are several ways to keep good employees with your company.  A firm can either use incentives or make an attempt to force the employees to stay through legal course.  Using incentives is preferred but sometime it can be necessary to use legal force.  Above these things is the environment of the workforce.

Identifying with an organization's mission and values is very important to retaining human capital.  People who identify with the mission and the values of the organization are more likely to "fall in love" with the organization, so to speak.  They will want to do whats best for the company because they like working there and feel that they are making a difference.  John Deere is a company that influences its workers very early on.  By building a lasting relationship with people from the time they ride with their fathers or grandfathers in the tractor, John Deere makes sure that they build customer loyalty.  People identify with the brand of John Deere and want to work for the company at a very early age.

Part of enjoying work is feeling challenged and stimulated.  Studies show that this helps overall job satisfaction with employees. John Deere keeps its employees challenged by allowing for promotion and an open work environment.  At the dealerships that I have been to, the workplace is a very open environment.  It is easy for employees to talk to managers and they feel like the managers are just another employee.

Incentives are also very important for keeping employees happy.  Whether that is in the form of money, time off, or benefits, it is very important to satisfy the employees needs outside of work in so that they can be as productive as possible when they are at work.  If an employee needs time off because of issues in their personal life, the company needs to work very hard to accommodate that persons needs.  These things are sometimes more important to workers than money is and can be a reason for them leaving a firm. 

Value-Chain Analysis

2013 6125R Tractor

There are many things that give a tractor value.  The work that it does, the quality of work that is done by the tractor, and the durability of that tractor all contribute to its value.  In order for a company to create value with its products, the company needs to look at what the consumers need and how they can make these needs come to reality as efficiently as possible without sacrificing quality.  Doing a value-chain analysis will help a firm to understand its primary goals and needs of its business.  This way they can better serve their customers and in turn give their products more value. 

According to Michael Porter and his book Competitive Advantage, there are five primary activities.  John Deere needs to work hard on their inbound logistics, operations, outbound logistics, marketing and sales, and service.  All of these attributes contribute to the efficiency of the firm and in turn the value that the customer receives in the final product.

John Deere needs to be very efficient in its primary activities.  There are many ways that they can achieve this efficiency. When looking at the inbound logistics of John Deere's manufacturing places, it is easy to see how important this primary activity is.  They need to be able to assemble machinery quickly and get it out to the consumer.  They also need to avoid confusion to insure that everything is built with quality.  they can do this through making sure they have distribution facilities strategically located to cut down on shipping time, warehouse layouts and designs need to be efficient, etc.

Their operations, or the building of the machines also needs to be efficient strategically designed to cut down on costs, time, and confusion. Implementing technology can be a big help but they also need to keep their workers in mind as they grow in size and revenue.

Outbound logistics are very important to the customer.  Efficiency is important in this section of business also.  Having an efficient shipping process ensures the product is delivered in a timely fashion and without damages.  They can also cut down on costs by having good communication and shipping multiple things at once.  John Deere's gold key member program allows their customers a chance to come see their operations and outbound logistics activities.  The customer can come and see the last pieces being put on the equipment and then drive the machine out of the production line themselves.  This gives them something more than a machine but an experience.

Marketing, sales, and service are very important.  Without sales the company would not make a profit and ultimately, this is what drives business.  John Deere needs to make sure they are serving the customers needs in the correct region.  In other words they should not be selling a combine in the middle of Chicago.  Servicing a machine in this industry is one of the most important features of picking a brand.  In order for John Deere to be successful, they need to be able to quickly respond to breakdowns and customer emergencies.  They need to make sure that they know what they are talking about.  This makes ongoing training vital to the service industry. 

There are also support activities.  According to Porter there are four support activities important for gaining a competitive advantage over a firms competition.  These include procurement, technology development, human resource management, and general administration.  These actions support the primary activities and help in innovation to stay ahead of the competition.

John Deere has very expensive consumable items and assets.  It takes a lot to put machinery together including space, tools, machinery, and the best parts.  John Deer needs to make sure they have good relationships with their suppliers.  Having these good relationships helps them to be more efficient in the production of their product.

The Tango E5 mows on its own

In order to stay ahead of the competition, John Deere has concentrated on innovation and research and development.  They need to keep up with the technology as this section of business is growing at an extremely fast pace.  From GPS to automatic sensors, the machinery industry is becoming an increasingly technologically advanced place.

Human resource management is important for firms of all types.  Keeping the best employees in your business is important to success.  People are the ingredient that makes a business succeed.  Having a good relationship with your employees and the organizations that directly impact your employees is very important to keeping and drawing these quality workers.  Having good reward and incentive programs can greatly help motivate employees.

General administration is important to firms because they are the ones who set the tone for the business. They need to have good relationships with various stakeholder groups and need to be good at goal setting and evaluation.  Administration needs to be able to communicate well with all the parts of the business in order to set good goals and help the business succeed.

John Deere needs to continue doing value-chain analysis to better understand how they are doing and improve their efficiencies to keep a competitive advantage in their industries.