Problems with all new rural industries Little relevant (truthful) info High risk A long wait for profits

If you use conventional marketing analysis, convention economic analysis, it doesn't really apply. All the stuff that is published on entrepreneurship, new industries, innovation, and so on, is based primarily on manufactured products. Rural industries are different.

Rural differences Totally new products Small companies/large proportion of budget Slow launch/promotion

For rural industries, it is often a totally new product, whereas in manufacturing industries it is often a matter of tweaking what they have already produced to make a new product.

In rural industries, they are usually small companies, small farmers, and it occupies a great deal of their time. As well, when they land in the market place, they usually don't have very much of their stuff. They are not bunging it into every supermarket in the country and they are not giving you a free trip to Bali. So really, it is quite different from the conventional.

In the last few weeks I have had lots and lots of inquiries about new industries, and these are some of them:

Enquiries

*Argan *Avocado *Bush tucker *Cacao *Coffee *Dates *Guayule *Hemp *Jojoba *Jujube *Lemon myrtle *Longan *Moringa *Nashi fruit *Neem *Olive *Organics *Paulownia *Pine trees *Pine nuts *Sandalwood *Sunn hemp *Tea tree…

You may recognise some of those; you may be involved in some of those yourself. But if you look at that list, there are some negatives and some positives. First of all, often these things are associated with Prospecti.

New Rural Industries Prospecti Publicity Production Product(s)?

I recently was contacted by a crew in Perth who were about to release a prospectus. They had it all ready to go but they wanted me to tell them about the crop. Publicity is often bad news. You know about these things simply because you have seen some rip-off merchant has made a fortune and the thing has gone down the toilet.

Often these things are dominated by production inquiries, people ask, "How do you grow the thing?" But when we ask, "What is the product?" they say, "It grows wonderfully, it's fantastic, I'm the only one with it," etc. etc. We don't concentrate on the product.

New Rural Industries Successful niche industries Value chain partnerships Useful product(s) Market focus (Needs of the consumer)

On the positive side, most of the crops I have listed up there are actually making money for someone, somewhere, because they have established a niche industry, they have their value chain in place, all the way from the producer to the consumer, and they are doing it very quietly. They haven't gone on Landline, so they are not likely to go screwing up in a major way. They have got a useful product, and they have market focus. They know where are the people who want the thing, and they supply them.

Now the question that we have spent a lot of time looking at is what is the best bet, what is the new crop for you?

What's the best bet? experts serendipity political expediency farming systems

Well, the first thing you do, of course, is, you ask an expert. An expert is someone from a long way away with overhead transparencies. And a consultant is someone from a long way away using someone else's transparencies. But let me just share this thought with you:

There are no experts

In that vein, just let me say that:

97.3% of all statistics are made up

50% of us are below average.

The reason I say there are no experts is that every farming system is unique.

Each participant's system is unique Experience Aspirations Capabilities

Every combination of what a farmer wants to do on his property is unique. It varies in terms of experience, aspirations and capabilities and so on. That is what they're expert at, and I encourage farmers to think of themselves as being experts. It is their farming system, and someone from outside is only going to give them advice on some little aspect of something that is going to be plonked into that farming system.

New farming system: What are our dreams? How much do we know and understand? What is the purpose of the purpose of the purpose? Can we describe the physical and economic environment? Who would we like to have as interested partners? What inputs would we need, such as finance, people and information? What equipment would we like to be able to access? What outcomes would we like to see, and when?

In order to encourage people to think in terms of systems, we ask them these sorts of questions. First of all, what are our dreams? Are we in a crisis, or are we simply trying to create a better future for ourselves?

How much do we know and understand?

To learn something, it is easier if it is interesting and relevant

We have to be motivated: the producers themselves have to be motivated. How much do we understand? We have to be involved, we have to be driving it ourselves. Active rather than passive.

What is the purpose, why are we doing this? Farmers say they want to grow a new crop because it is different. We say, "What is the purpose of the purpose?" And they say they want to make shirtloads of money.

Expecting windfall profits can be exhilarating

Well, might I suggest to you that expecting windfall profits is all very nice and terribly exciting, but my advice is always: go to the casino. The odds are better, you will know the result tomorrow, and you won't be covered in mud.

Focus on the main game

If we identify the purpose of the purpose of the purpose. If the purpose of the purpose is to make shirtloads of money, what is the purpose of the purpose of the purpose. And you will be surprised. Farmers tell me they want to pass their property on to their sons and daughters in a better condition than they got it. They want to go around the world in a catamaran, etc. etc. If we focus on the main game, we will at least figure out what on earth we are trying to do.

Fourth, can we describe the physical and economic environment? Fifth, who do we want to have as partners?

Well, might I suggest to you that those of you who think that you have got onto something that is really unique and wonderful and are not going to tell anyone about it, I suggest to you that 100% of nothing, if you are going to keep everything, is always going to be nothing. If you are going to share it with somebody else who will help you bring it to fruition, I suggest you might actually end up getting something. 20% of something is better than 100% of nothing.

What inputs would we need, such as finance, people and information, what equipment would we need, what outcomes do we want? If we think of all of those questions at once, all at once we are starting to think of it as a system, rather than in the traditional, reductionist way of "this is the solution." "Growing this particular crop is the solution to all our problems."

What outcomes do we want to see? Well, the first thing we have to ask ourselves is: what business are we actually in?

What business are we in?

I want to be successful, so, I benchmark.

In ten year's time if we had a million dollars, what would we be worth? Do we really want to work like dogs for ten years and end up with a million dollars?

Future purpose

It is very important to focus on the purpose. Once we know what it is we can then start saying what we are going to be doing. The only way we can think about it is imagine we have achieved it, ten years down the track, what is a million dollars worth? Has it been worth the trouble?

What to do? Planning Commercialisation

The main point of what I am talking about are two processes which we have developed over the years for answering people's questions about new crops. Ten points are planning, and thirteen points are commercialisation. People kept ringing me up all the time, saying, "What is the new crop of the future?" And I would say that I hadn't got a clue. And then they would always abuse me, because I am an academic and I am supposed to know all things. When we had finished being abused, we would work our way through these ten points.

10 Planning Steps Are you contented? Why are you thinking of a new rural industry? What do you enjoy doing? What is your commitment to the new industry? Is there easy access to information?

Changes in rural industries are often crisis driven

Are we contented people, are our children starving? If our children are starving, a new crop is a ridiculous thing to do, because it is a long-term, high-risk thing that nobody knows much about. Just go and look around the area. Who is making money? Let's copy them. That is the only short-term solution to this thing.

Second, why are you thinking of a new industry?

Will the change be a hobby or a business?

I suggest to you, in the new crops area in Australia, at least, there are a great many hobbyists. Now, there is nothing wrong with a hobby at all. Except, if you are going to make money from it, it shouldn't be a hobby. It shouldn't be a hobby: it has to be driven as a business and you have to make hard business decisions. There are lots of hobbyists making money, and in actual fact they are getting paid about $1 per hour for their labour. That is not a business, it is just simply, enjoyment.

What do you enjoy doing?

Will the changes drive us crazy?

Often people who usually sit in tractors think that they are going to be horticulturists and make a lot more money. Then they discover that they are not actually going to be sitting in the tractor while they are making the money. They have actually got to get out of the tractor and bend over and stand up and bend over and stand up about ten thousand times a day. Do you enjoy doing that kind of thing? The idea of putting crop people into growing some kind of rotten crustacean that wanders all over your countryside boring holes in your dams - I mean, this is just a stupid idea. If people are used to playing with plants, they play with plants. They are not used to playing with crustaceans.

What is your commitment to the new industry?

Dependency

Now this is a sore point with me. Do you expect the Government to do it all for you, fund everything? Do you expect the DPI or WA Ag to help you do this, to drive it for you? This whole dependency thing is very disappointing. We are developing a dependency amongst industry people. I believe that industry people have all the intelligence and all the capability to drive it themselves.

The other thing about commitment, we should only gamble what we can afford to lose.

Is there easy access to information? Information is in the middle of a sort of gradation from media reports to wisdom. I was fortunate enough to be mentored in new crops. I was mentored by two men, Dr. Lennox Davidson and Mr Ian Wood. And they are both dead. They are dead because they were old. There is very little wisdom. Wisdom is more useful and it is very rare. Media reports are of no use to you at all, simply because they are general things. They relate to somebody somewhere else, in some other country. They are not related to your specific farming situation.

Decision making with insufficient info

The difficulty with information, and it is like in all business: decision making with insufficient information. We will never have enough information to make our decisions. In new crops, it is even more difficult.

10 Planning Steps What is the targeted product? What is the product's marketability? Is it easy to produce? Are others also involved? Can you work with others?

Point six, what is the targeted product?

You will never hit a target unless you aim at it.

You will never hit a target unless you aim at it. The Bush tucker industry say they are developing Bush tucker. You say, "What is the product?" And they say, "Well, we are developing Acronychia, or something." And you say, "Well, what species?" And they say, "Well, any of them. There are six of them or twelve of them or whatever." You say, "What is your product?" They say, "Oh, we can make 2000 different products from this thing." You will never actually focus on the target unless you actually aim at it.

Marketing satisfies consumer needs

Marketing is not selling. If you want to make money from something like a crop, you actually have to sell the product to customers who are busting their gut to get hold of it.

Quality is the consumer's description of what they want

You think you have got a quality product. It is only a quality product if it is exactly what the consumer wants. It is not the quality in your eyes that counts, but the quality in the eyes of the consumer who is sitting out there waiting to pay you lots of money for it.

New Rural Industries Novelty has market advantage only if and when it is truly unique.

Somebody mentioned this point yesterday. Novelty is all very nice, and people will pay lots of money for novelty because it is unique and nobody else has got it. But you can't multiply what you have got by anything, because as soon as you bring another one down, it is no longer unique, no one will buy it on the basis of uniqueness. They will only buy it if they need it.

Unique at first: High demand Irrelevant 'Pyramid Selling'

This is a problem in all new crops. This concept of pyramid selling, this whole thing about uniqueness. It is complete garbage.

Why produce something nobody needs?

Why produce something nobody needs?
Number eight. Is it easy to produce?

Production dominates producer's minds

If you talk to primary producers, they are very good at what they do: that is why they are called primary producers. They are obsessed with production. They are not obsessed with marketing because they are called primary producers.

Why? Curiosity Achievement Producers

Why are they obsessed with production? Apart from the fact that that is what they know well, it is curiosity, new crops. I like to do the same. I like to rush out and grow all sorts of things, and I also like to show the fact that I have achieved it. So how do I do that? I just grow paddocks full of the stuff. That is the only way I can show it. A little marketing report that is ten pages with a spiral binding is of no use to anybody. I can't show off with that, can't even wallpaper a whole wall with that.

Changes need expertise in: Production Marketing Business

I would suggest to you that nobody in Australia is expert in all those things. That is my claim, my reason for saying that we have to work with others, we can't do it all ourselves.

Value/demand/supply chain: Producer Processor/packager Transporter Wholesaler/packager Retailer Consumer

Who do we work with? Well, if we are going to get it to market, we have to have a value/supply market chain or whatever you want to call it, that has all of those people working together. Now, farmers will tell you that all these ratbags in the middle rip them off all the time, take ten percent for doing nothing. But the fact remains, if you deliver a product to the consumer at the time and the place and the quality they want, they will pay for it, and that is the job of all of these people. If you, as the producer, can go and do it for yourself, and drive to 150 shops all around Australia, by all means, do it. But all of these folks on this list are adding value, so that by the end of the chain, something happens. Money enters, and all of a sudden, people get paid.

Can you work with other people?

What is the industry's major resource?

13 Commercialisation Steps Choosing the new rural industry? Acknowledging the risk is high Agreeing to respect intellectual property Assessing marketing potential Assessing production potential (in theory)*

Choosing the new rural industry. You have got to choose it yourself. don't let an academic tell you what you ought to be doing. You have got to be motivated.

Acknowledge the risk is high. This is high risk stuff we are talking about. Three, make sure you actually own the thing. If you pinch something from somebody, a method or a piece of germplasm, or something, if you are successful I guarantee they will appear out of the woodwork and say, "Thank you very much." The Bush tucker industry is going to be stuffed if they don't come to grips with this very soon. Some of them are, but most of them aren't.

Assessing marketing potential. This is what I have been talking about. I will make a couple of remarks in a minute about doing our own marketing research, door marketing program. Assessing marketing potential in theory: does the thing grow? Grow it in the garden. Use Climex software to see where it grows in the world and where are the equivalent climates in this country.

13 Commercialisation Steps Form a group? Resources, plans, expectations, profits Problem monitoring Economic benchmarks Reviewing

Form a group, work out your resources, plans, expectations and profits, what are you going to do with the profits, etc.

Monitor problems. Who is the person with the little knapsack who is going to run around and put out all the little spot fires that cause trouble between people as soon as they appear.

We have economic benchmarks. The whole concept of this is, we can't predict the future. We can't predict the economic future: we actually have to be involved in it. You can only work out these things by being practically involved. We are suggesting that people simply get involved, but they do their homework first, and they monitor it as they go. They have economic benchmarks. As soon as the money you have to spend has been spent -- end of story, thank you very much. People just continue on forever with something that is never going to actually go.

Number ten, reviewing. Where are we, what are we doing, who are we, what do we think we have done -- "this is all rubbish, let's stop," etc.

13 Commercialisation Steps Marketing trials? Processing, packaging trials, etc. Production trials (randomised, replicated regional trials)

The last three points are trials. Marketing trials: we have to grow some stuff, to produce some product, to take to potential markets and say, do you like my product? Do you like my packaging, my label, and so on.

Processing and packaging trials. Thirteen, randomised replicated trials all over the countryside. What do we do at the moment? Someone says, "We have to grow industrial hemp"; we have trials all over the country, for goodness sake, costing a fortune. Nobody can tell me what the product is. Nobody can tell me where it is going to be processed, how it is going to be processed. There are lots of imaginings out there. But they don't know what their product is and what the economics will be.

So, we developed a thing called Do Our Own Marketing Research, which came out of the First Australian New Crops Conference in 1996. People simply said, "This is what we want a hand with. What are the concepts of marketing?"

These are the sorts of questions that we address. We don’t tell anybody anything because we don’t know. We encourage people to feel that they can find these things out for themselves. To approach people, to make 12 phone calls to 12 agents. The first 11 will say, “Go away, you horrible little person, I don’t want anything to do with you. " The twelfth person will come up with something that is useful.

At the end of DOOR Marketing there is this. SWOT (Strength-Weakness-Opportunity-Threat). This is based on strategic market management, which is the only process we have found, so far, that seems to fit the situation we are in with new industries in the rural sector. These are the factors that have come up over the 25 or 30 courses we have run so far. You see some of them are blacked out simply because, for example, if you have a problem with competition internally, you really have a problem. You know, why are you doing it? Competition is an external.

Ninety percent of the people who have done the course kill off their new crop. They kill it off because it is not viable. It is not viable because there are at least 5 fatals here (Customer demand threat, Current market price threat, Expected returns, weakness, Industry trends threat, Production factors threat) If you identify these threats, why are you doing it? If you identify a weakness in terms of returns, it is not a business, but a hobby: don't complain if you do your dough.

A lot of this stuff is on our web site. Last week this site cracked 2000 visitors in a single day. It is averaging 1300 per day at the moment. There is lots of interest in this sort of stuff.

I just want to share some new words with you: new crops - new words. This is a word from Gary Jolliffe from Colorado.

Following on Gary's example, we have created some new words:

If there is lots of constification around the country, you end up with:

Another new crop word is

I would like to share one more new word with you in the new crops area. I am not going to define it, but you can work out whatever it is to you:

Thank you very much.

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