Bioenergy PROFITS Principles: Testing and Revising, and PetroAlgae

A TIME TO SOW AND A TIME TO REAP

Your company is an organic, living enterprise.  It grows as you grow.

It will also shrink and wither if not tended to.

Though simple in concept, most entrepreneurs struggle with Testing and Revising their business strategies and plans.  Generally, this is one best practice that may is easier for Fortune 100 company executives who may have experienced humbling lessons with profit and revenue losses.  These large companies also assign employees specifically to review their ongoing and important projects.  Quarterly strategic and operational review are best practice norms.  The following strategies offer some actions to help you test and revise your strategic plans:

• Discover all perspectives
• Set up governance and advisory boards
• Know where you’re going
• Challenge your plans
• Lead with stakeholders in mind

Once again, we look to PetroAlgae as an example of a company that tests and revises its strategy when it learns information and perspectives.

Discover all perspectives

Debriefing projects, research and interactions that do not coincide with expectations and results, provide lots of new information.  Even when well-planned strategies do come to fruition, leaders are wise to incorporate new information to create a better plan.

Customers are especially helpful in this arena.  As users of our products and services, they have a knack for helping us fine-tune our offerings.  Their unique perspective sometimes gives us pause….Why didn’t we think of that?

Benchmarking best practices of companies within your industry and of customer’s industries also offer useful information.

PetroAlgae started its foray into the biofuels arena through its leadership’s concern for our nation’s economy.  Dr. John Scott refers to the “green recovery” as PetroAlgae’s response to climate change and a solution to the global energy crisis.

Though initially focused almost exclusively on developing its technology and investing in research and development, over time, PetroAlgae’s focus has somewhat shifted.  Research and development is still as critical as ever, with continuous routine feedback mechanisms in place.  One shift, for example, is that the company leadership now works more closely with the Obama Administration and Congress, taking an active role with its green recovery solutions and the government renewable energy space.  PetroAlgae’s leadership recently appointed new staff to focus on government relations.  Positive stakeholder feedback validates this decision is correct.

Many companies cannot hire staff as needs arise.  A common solution is for companies to create governance and advisory boards for obtaining outside perspectives.

Set up governance and advisory boards

Governance boards and advisory teams, with membership outside your company provide a reality check.  With your own laser focus on your business, it is useful to gain feedback from the outside looking in.  This avoids the serious dilemma of ‘group think.’

A ‘group think’ mentality may develop within a company for many reasons. Sometimes people may minimize conflict and reach consensus without critically testing, analyzing, and evaluating ideas. Individual creativity, uniqueness, and independent thinking can be lost in the pursuit of group cohesiveness.  No one may want to play ‘devil’s advocate’ as a way of questioning alternatives to solutions.  This is usually because group consensus is comfortable for most people.  This can be a dangerous situation when taken to an extreme.

PetroAlgae’s Board of Directors and Senior Management Team are responsible for supervision of the overall affairs of the Company. The Board currently comprises of individuals who serve annual terms. These four Directors (at a minimum) attend the Annual Meeting of Stockholders and provide feedback for all aspects of the company.  PetroAlgae is also governed through the use of corporate guidance documents such as a Code of Conduct and an Insider Trader Policy.

With these mechanisms in place, PetroAlgae can stay focused on where they are headed.

Know where you’re going

As discussed in the previous Bioenergy PROFITS Principles column, PetroAlgae and Integration: A Windfall With Nothing Added, when you clarify your goals, you remain focused.  You increase your attention to what matters and avoid distraction.  This sometimes means that projects tempting you in the short term may not be appropriate because these projects will interfere with your attention to mission critical projects.  Many times, especially in a down economy, this is easier said than done.  After all, revenue is revenue.

Successful companies have these challenges also.  The challenge for a successful company is to avoid the rationalization that they can afford to take on a tangential project that may open other areas for revenue and profit.  You are the best judge for how far your company can stretch its attention.

PetroAlgae and other profitable companies ‘stick to their knitting’. This is a phrase that means, doing what you do best.  If you do expand into areas that are not core to your business, test, revise and monitor results often.  If you notice things going astray, take action early.

PetroAlgae focuses on its goal of commercialization.  Investments and projects must meet this criteria.  It makes good sense.  Once you know where you’re going and you have criteria for whether a project meets these conditions, you can attend to your business purpose. The next step is to challenge your plans.

Challenge your plans

Let’s go back to our role play, when asked during an earlier discussion, the PROFITS Principles Obtain Vital Information: Accumulate Information and Influence Stakeholders, to imagine that you own a biorefinery.  You live in Thayer County, Nebraska with access to many neighboring cornfields.  You have strong relationships with the local farmers.  Southern rust that produce large spores are affecting corn harvests locally.  The high anticipated humidity threatens to increase the problem.  Last week, you attended a conference about switchgrass and other macro crops.  It is unlikely that you would decide to incorporate switchgrass into your technology processes without considering the price, yields, where it is plentiful, etc. Though this is an obvious example, sometimes a project appears profitable and we don’t investigate it as carefully in terms of feasible timeframes, project financing and energy required.

A company’s talent for creativity and change are usually considered important assets.  Only you can decide when adjusting your technology and/or processes for greater efficiencies takes priority over innovation.  The balancing act is one of a business’s greatest challenges.

PetroAlgae leadership does challenge their plans.  New initiatives need to fit with their existing focus on commercialization.  Current projects need to have sufficient attention.  Leaders of the company consider how their projects influence their stakeholders.

Lead with stakeholders in mind

Smart leaders know that every stakeholder matters.  Stakeholders include customers, investors, employees, community, and government – all that your business interfaces and interacts with.  Each stakeholder requires needs to be met, values to uphold and perspectives to consider.  And every stakeholder can influence others about whether to buy your products and services.  This directly impacts your profitability and/or your company’s growth potential.

Company leaders know that excellence is in the details.  This aspect of testing and revising presents the greatest challenge.  It requires digging into the financial statements, the operational efficiency, and the sales milestones.  This takes time and a coordinated effort of everyone in the company.  Each person provides documentation to support how well the strategy is working or not working. This goes beyond opinions.

The leaders at PetroAlgae monitor many variables when growing micro crops.  For each feedstock there is data relating to and correlating with these variables.   In addition to their technological processes, PetroAlgae leaders monitor their government and media relationships.  They view their company from the perspective of their scientists, their community and their industry.

The leadership sets the tone and the value the entire company places on testing and revising.  This is one PROFITS Principle that you won’t want to overlook,

In Summary

Life can interfere.  We’ve all been there.  Three years ago the economy favored ethanol producers.  Companies scrambled to purchase greater capacity.  Now plants are idle.  Prior to that, internet and cable companies invested millions, some even billions of dollars to lay transatlantic cable, which now is a commodity.  It’s not all bad.  Business is flatter and global companies proliferate.  Yet no company wants to be the victim of their own lack of awareness or of market unpredictability.  The PROFITS Principle, Obtain Vital Information can help you tackle the abundance of data and how to interpret the data. Yet only you can devise the contingent alternatives when unanticipated events present formidable obstacles.

Today’s topic, Test and Revise, is one of the seven Bioenergy PROFITS Principles.  This series highlights proven principles to running your business more effectively (from the newly released book, Run Your Business Like a Fortune 100: 7 Principles for Boosting PROFITS, by Rosalie Lober, Ph.D.) and illustrates key points of the successful company, PetroAlgae, specializing in advanced technologies to produce oil and animal feed from algae.

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