When farmers first began investing in ethanol plants several
years ago, the ghosts of past failed business ventures were looming. Most farmers rightly want to add value to what they produce, and some times in their enthusiasm the wrong business decisions can lead to disaster.
At a recent Renewable Fuels conference sponsored by USDA, nearly every speaker talked in gushing tones about the wonderous potential of biofuels. But only one speaker - John Deere CEO Bob Lane (left) — stood up to say it won't happen unless you make sound business decisions along the way.
Who better than the leader of one of the oldest farm-related businesses to tell that message. Many years ago the Prairie was a vast new frontier, and John Deere's invention — the self-scouring moldboard plow — made these fertile fields productive.
That's quite a story in itself. But the real highlight is that the young blacksmith from Grand Detour, Ill., made wise investments and business decisions to build a company that today is 169 years old and is now the world's largest farm equipment company.
Now the vast new frontier is biofuels. Will farmers and other investors make wise decisions to make those renewable fuel companies sustainable for the long haul, like Deere did?
"Laying the groundwork for growing sustainable businesses is critical to the long-term future of renewable energy in the United States and the entire world,•bCrLf says Lane. "It would indeed be a shame if the promise of renewable energy were not met because our early successes could not be sustained over time, for lack of sound business underpinnings.•bCrLf
Good business sense Businesses like Deere simply don't operate for that long without attending to three critically important constituencies: customers, employees and shareholders.
Attention to customers often means anticipating market and technological advances, reckoning the specific needs and desires of the customer — sometimes before the customer does, says Lane.
"Sustainability•requires that the business provide a high-quality product or service that fully meets the customer's needs,•bCrLf he adds, "a workplace environment that attracts the best and brightest employees and enables them to realize their potential; and, succeeding with the customers and employees, ensuring that shareholders receive attractive returns on their investment.•bCrLf
Another bubble? Lane brought up the issue because there's a nagging question that continues to surround renewable energy. Is the surging interest in renewable energy development merely another short term "bubble" in our economy? Or are we truly in the initial stages of a thriving industry that will contribute both economic and societal benefits, not only today but for many, many generations to come?
Some people believe the zeal for renewable energy — namely biofuels, wind and solar - is based solely on high world oil prices and the midwest's strong political clout. That without them, there is no sustainable business to buil.
Those question marks are bound to remain unless the renewable industry is helped along by sound public policies. Good public policy proves essention to the emergence of economic, political and social environments that enable good businesses to evolve and become sustainable, says Lane. "Renewable energy with all its benefits should be no exception,•bCrLf he adds.
Lane sees a "useful partnership•bCrLf between government and the private sector. "Public policies can provide useful "pump priming" for new, evolving industries, creating the infrastructure needed for markets to develop and businesses to grow,•bCrLf he says. "Tax and regulatory incentives can provide needed planning stability while business conditions evolve, facilitating the growth of new business ventures.
"Over time, as markets and businesses mature, the need for these incentives will recede and a transition away from these policies is appropriate.•bCrLf
Machines of the future You might ask, why is John Deere so interested in the future of renewable energy? The company already is heavily involved in developing wind power. But it is also looking ahead to the day when biofuels will be processed from cellulosic biomass.
A 2005 USDA/DOE study concludes that by 2030 more than 800 million tons per year of cellulosic biomass could be produced from crop residue and perennial crops in the U.S. And, another 120 million tons annually could be derived from forest residues.
For reference, this biomass would be more than the total amount of grain, oilseed, sugar, and hay crops harvested in the United States last year. And Deere will be interested in developing harvesting and processing machines needed for that industry.
"This clearly points to a tremendous opportunity,•bCrLf says Lane. "But, it also presents a significant challenge: how to produce, collect, transport and process such a volume of valuable energy feedstock. To meet this challenge, all of us—government, academia, and the private sector—ought to "pick up the pace" all across the system—in commercial-scale research and development, in harvesting technologies, materials transportation, conversion, and fuels distribution.•bCrLf
In other words, there's more at stake here than just producing another gallon of ethanol. There's a whole new industry a-comin'. Lane believes, like his company's founder, that the best way to participate in future business growth is by making sure businesses make wise investments and good decisions.
"If we can grow great businesses that deliver long-term, sustained performance and endure, I am confident we will meet the promise of renewable energy for our children and their children,•bCrLf he concludes.
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