Business Development vs. The Geek Squad

When I started at Hagar, one of my first challenges was to help figure out what to do with our floundering nutrition company (Hagar Soya Co., Limited).

HSL was one of Hagar’s first social enterprises.  Pierre Tami, Hagar founder, started the business in the mid-1990’s when few other income-generating opportunities existed for women exiting our shelters.  Women produced fresh, healthy soy milk each morning and sold it in clean, slick vendor carts during the day.  The humble business was a great success, even during uncertain times with various factions fighting for control of the country.  More importantly, the nutritious products were a hit with children and adults alike, serving as a self-sustaining business that could help improve general nutrition in the country.

As Cambodia’s economy grew and sales rose, HSL formalized its operations and worked with various stakeholders and investors to develop a metro-level production facility (10,000-100,000 liters capacity/day).  For a long-time, it was Cambodia’s only ISO-9001 certified facility, and represented one of the few successful large-scale non-garment manufacturing operations in the country.  In addition to a range of fortified soy milk products, HSL produced foods and beverages for distribution by major aid groups to individuals with severe malnutrition.  (I loved this aspect of Soya, as aid groups in developing countries tend to import such emergency food products from companies in developed countries due to lack of local capacity)

At its peak Hagar Soya employed over 100 individuals, mainly from Hagar’s shelter and partner non-profits, and achieved over $700,000 in annual sales.

Unfortunately, food and beverage manufacturing is both extremely difficult to manage and a competitive market (“high volume, low margin” as I was told many times).  Despite strong brand awareness, HSL struggled to curb wastage in its manufacturing processes and develop consistent distribution channels.

The nail in the coffin was moving its manufacturing facilities to a long-vacant former-Nestle factory.  In retrospect, it was like inheriting a Ferrari without the engine.  It was a perfect fit for our aseptic manufacturing processes, but required a significant investment to renovate.  With the collapse of markets in 2008, no investor was willing to invest in beverage manufacturing in Cambodia.  In early 2009, we went through the numbers and the business had very little hope of remaining self-sustaining in its current form.

I clearly remember visiting the general manager at the time in his offices to deliver the news that the Board of Directors was strongly considering closing or selling the business.  He had a 25+ year background in sales and F&B manufacturing in New Zealand’s dairy industry, and had poured his soul (and own money) into keeping the business afloat.  I was a young guy with comparatively little practical experience, but was pretty good with excel and writing business plans.

He asked a rhetorical question that shook me: “Are you in business development or the geek squad?”

He then went on to say (and this is more or less paraphrased since it is 2 years ago):

“Because, you see, the geek squad sits in a dark room somewhere far from the business working on spreadsheets and writing long plans.  They hand these to the manager (or, if they are good, work with him on it), and then go away.  The plan assumes things are static, which they never are, so it is quickly obsolete.  More importantly, the plan does tell you how to really run the business.  That’s because business comes from understanding its people and investing in their growth.  The plan might make you a bit smarter, but the real work comes from your everyday management of developing your employees – understanding them, coaching them, putting them in a position to succeed for themselves and the business.  That takes time and isn’t reflected in some spreadsheet or formulas or assumptions.  You can write a business plan that says in five years we will achieve this productivity level and export internationally, but the work, the real work to get there is in everyday management and the resources available now, human or otherwise.  A business developer understands that and works day-by-day.”

In retrospect, this all seems pretty fundamental.  But at the time it struck quite a cord with me.  In college and during brief consulting stints, building a business seems like building a house out of Legos: put all the blocks together and there you have it.  Obviously, it’s quite a bit more complicated that that.

Although the HSL business model had some fundamental flaws, there was an excellent manager there planting little seeds that were finally starting to grow.  We could have spent lots of time writing a grandiose plan, but it still didn’t change the fact that the real work was being done in the trenches under his management.  He saw the potential, both social and financial, that evaded any business plan.

I now realize the value of both the geek squad and business developers (and how the interaction between the two can be more mutually-beneficial).  At the time, we were both on different wavelengths: I was looking at how to take the current pieces and fit it into the original plan (large scale production), while he was looking at how to just keep moving ahead bit by bit and build upon each small success.  The answer lay more in the middle.

In the end, Hagar ended up transferring the business in whole (assets, branding and employees) to the general manager.  We lacked the resources to support it adequately and had identified the hospitality industry as our best fit socially and financially (which is where our primary social enterprise investments are today).

He continues to run the soy milk business to this day as a social enterprise and partner of Hagar.  Instead of starting with a big intricate plan, he is going back to the small model that served HSL well in its early days and growing it slowly along with the individuals in his core team. Every time we talk, I am always excited to hear about the new doors opening for the business, including a new fortified rice porridge (bobor) supplement designed to provide essential nutrients that babies and young children often do not receive from regular bobor.

Though we worked together only briefly and I was often in the position of conveying bad news, I consider myself lucky to have learned many valuable lessons from him during this pretty rocky time for the company.  I am extremely glad that, in the end, the company was able to start from a clean slate and is growing under his management.

If you’re in Phnom Penh, make sure to pick up fresh organic soy milk, spirulina, and other nutrition products from So! Nutritious – available in just about any mini mart (Smile, Caltex, Sokimex) and now Lucky Supermarket.  Alternatively, email the GM Graham Taylor – graham dot taylor 55 AT gmail dot com


~ by responsiblenomad on January 26, 2011.

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