What’s more, internal feedback has been positive. Although Scala’s programme has reduced the overall annual planning process by a few weeks he has tightened up the planning process with a range of small measures, such as cutting down on the amount of data required to draw up plans, observes Hermann Stern, the CEO of Zurich-based consultancy Obermatt, who profiled Scala’s work in his recent book Market-oriented Value Management (Wiley VCH, 2007). More important, however, is the “outside in” perspective Scala has brought to planning, quantifying the strategy and defining what the market expects. “And now the aim is to beat competitors, not the budget,” he says. “Most companies I know don’t do that.”
As Stern sees it, resistance from the lower ranks often derails attempts to set top-down targets in the way that Scala has at Syngenta. But as a former treasurer, Scala’s experience in competing against external benchmarks is where he “derives his authority,” notes Stern. “Managers might protest, but have little choice when he points out that the competition is able to achieve those results.”
On the Horizon
One thing that Scala is hoping that the planning revamp will do is downgrade the role of the annual budget in developing strategy — “it really should just be the numeric expression of the strategy,” he says. That, he hopes, ought to help managers plan over longer-term horizons, “five, ten, 15 years ahead.”
At the moment, however, many of Syngenta’s managers — and investors — can’t help but focus on the short term. As a Citigroup report notes, 2006 sales were flat across the group, and “with a bit of artistic licence on the financing line [of its accounts]” — it chides — “Syngenta hit consensus EPS numbers for a very challenging year.”
Why challenging? One reason was a disastrous attempt in the early part of 2006 to integrate IT for three of its main seed brands in the US, leaving orders coming in from farmers unfilled. As there is a window of opportunity of just a few weeks when farmers order their seeds, Syngenta missed out on a lot of business, as much as $50m, according to Citigroup’s estimates. It also watched its market share in the US drop from 14% to 12%. Syngenta managers “turned it around, but they lost a lot of market share — and credibility,” says Andrew Benson, a Citigroup analyst. “They’ve had to fight back for it.”
So far this year, the planting season in the US has gone more smoothly. Now what’s needed, says Syngenta’s investor community, is a big ramp up in topline growth. More new products and business lines, joint ventures, acquisitions and perhaps even a merger with one of its rivals are all in play — and all, no doubt, being run through Scala’s new value model. “It involves making tough choices so that we really focus on the value propositions of the future, not just the value propositions today,” Scala concludes. After all, investors expect nothing less.
Cream of the Crop: What’s All the Fuss About Corn?
The turning point in the history of zea mays, the tropical grass native to Central America that we now know as corn, “can be dated with some precision” to a day in 1947 when a huge munitions plant in Alabama switched over to making chemical fertiliser, writes Michael Pollan in The Omnivore’s Dilemma (Bloomsbury, 2006). It was just after the second world war, he notes, that the US government found itself with a surplus of ammonium nitrate, the principal ingredient for making bombs, which also happens to be a good source of nitrogen for plants. Thanks to that, and the bioengeering developed over recent years by companies such as Syngenta, we owe the rise of corn, and it’s colonisation — as Pollan puts it — of the modern daily diet.
Nowhere is the mass production of corn more evident than in the US, which grows more than half of the world’s output. Thanks to new, more robust types of corn seed, farms there are producing at least 20% more corn on 25% fewer acres than some 80 years ago, when hybrid, or inbred, corn was introduced.
It’s this market — “our most important crop in our largest country,” as Syngenta COO John Atkin calls it — that will be getting a lot of attention at the $8 billion agchem company over the next few years.
The Swiss company currently trails seed giant Monsanto in the US, but by replenishing its portfolio of proprietary genetically engineered corn “traits,” it’s aiming to capture a bigger piece of the market, increasing proprietary corn traits’ contribution to gross profit to more than 50% in 2011, from 5% in 2006. One of its most widely anticipated product launches is scheduled for 2008, when it unveils a genetically modified corn that will increase ethanol yields.