Kellogg World Alumni Magazine, Summer 2002Kellogg School of Management
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  John Mueller
John Mueller, CEO WestFarm Foods
Theory & Practice
The “farmers and poets” build an alliance
By John Mueller, CEO WestFarm Foods

"Theory & Practice" is a new Kellogg World feature that explores various business strategies from the perspectives of both the classroom and the shop floor.

WestFarm Foods is a Washington-based company that produces dairy and other products for the consumer and specialty markets. As CEO, I am responsible for growing the business of WestFarm — one of Washington’s largest privately held companies, with annual dairy and related products sales of approximately $1.3 billion.

Like many companies interested in developing production and service efficiencies, or expanding its product line, WestFarm had to decide when and how to partner with potential alliance partners, including Nestlé and White Wave. Among our goals as we pursued alliances was to retain our strategic focus, while understanding the strategy of potential allies so we could comprehend the synergies resulting from the collaboration.

Our alliance with Nestlé is a licensing agreement that covers Nesquik and Coffee-mate for the Pacific Northwest. Our alliance strategy focuses us on being low-cost producers and being “sales driven” in our consumer products implementation. Nestlé is a world-class marketing organization that is superb in creating “consumer pull” for its portfolio of consumer-branded products. Our alliance with Nestlé allows them to concentrate on their strengths and we on ours. In this case we consider ourselves the farmers and Nestlé the poets in the consumer branded marketing arena. We both excel at our strengths, and the synergy is evident in the market. Blending and balancing these strengths is one important goal when considering an alliance, since creating win-win scenarios for all alliance members is crucial.

In our alliances with White Wave (soy beverages) and Organic Valley (organic milk), we again capitalize on our strengths and theirs. Due to distribution constraints and relatively low inventory turns in both product categories, out-of- code product was a continuing problem. Both companies are experts at marketing their different categories, but they were hindered by a lack of sufficient shelf life. Working together, we resolved this issue using our manufacturing expertise in ultra-pasteurization to extend their shelf life to be compatible with distribution and product sales velocity. Again, we stuck to our strategic focus of low-cost producer while they were then free to focus on their areas of marketing expertise.

My advice for other business leaders considering a strategic alliance is conceptually rather simple. First, determine your corporate strategy and define who you are and what you represent. Then in terms of execution, identify potential strategic partners whose strengths complement yours. Here’s the key: they need to need you as much as you need to need them. If the arrangement isn’t mutually beneficial, then chances are it isn’t going to work, either culturally or in the marketplace. We went through several potential alliance partners before we identified our latest partner.

I encourage business leaders to educate themselves before leaping into the alliance fray. My experience with the Executive Education program at Kellogg offered some especially valuable insights once we were in the trenches. Prof. Ed Zajac’s “Creating and Managing Strategic Alliances” (CMSA) course provided rigor and structure and highlighted some key points that my team and I might have overlooked. The discussions and frameworks provided by the class allowed us to go forward with confidence to make our newest venture successful.

In our approach to CMSA, we took seven senior managers from WestFarm to the course in two different sessions. I have found it much more effective to take teams of people rather than just send one or two executives. If you send only one or two, when they return to their companies, the effect of the course may be lost because there is not a support network for the ideas. By taking our senior management team, we not only have everyone here on the same page for this alliance but we are also reviewing our other alliances.

What really distinguishes Kellogg’s alliance course is that it links theory with practice. I have been running companies since 1983 and have found that most executive courses tend to be highly stimulating while you are enrolled, but prove cumbersome and impractical when you try to incorporate the learnings in your organization.

Although most of our management has been recruited from other large companies, there was not a large experience base in these alliance ventures. By using the insights from Kellogg’s Executive Education Program, we were truly able to “level the playing field” and move forward on our deal.

©2002 Kellogg School of Management, Northwestern University