John Deere’s Strategies for Success

Introduction

The John Deere Company is one of the most amazing success stories in the annals of business history. Entrepreneurs all over the world will learn much from studying their business principles and strategies. The company started from the humble shop of a blacksmith and in the 21st century became a global enterprise (Macmillan, 2003). John Deere exemplified courage, integrity, and a passion for excellence. His success is not only due to his abilities but also by his leadership skills because even if he was no longer at the helm of the company his successors were continued his legacy.

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Objectives of the Study 

The purpose of this study is to understand the evolution of a small company and how it emerged as one of the most profitable business organizations in the United States and even the world. The John Deere Company brand is well-known in America and even beyond its borders. The most important thing to remember is that this company was built from scratch. Therefore, in the following review of related literature, the proponent of this study must pay careful attention to management principles and business strategies employed by John Deere in hopes of understanding the secret to his success. Finally, the proponent of this study will have to find out if the same principles can be adapted to entrepreneurial start-ups and even by medium-sized companies that are still finding ways to improve their service as well as increase their revenue.

Background

The John Deere Company started as a blacksmith shop. The idea of creating farm tools and plows originated in the fertile mind of John Deere while working as a blacksmith. He had a passion for his job but at the same time was passionate to help people and provide them with quality products. His desire to innovate and his business skills allowed him to lay the foundation of the Business Empire. To his credit, he was able to transfer his abilities as well as his commitment to manufacturing the best product possible to his successors and they are also part of the reason for the astounding success of this global conglomerate.

Literature Review

The company was founded by John Deere. He was born on 7 February 1804 in Rutland, Vermont. He was of English stock, his parents came to America, to the colonies, and decided to stay after the revolutionary war of 1776 (Leffingwell, 2006). Just like any proper-bred Englishman, his parents wanted for him to finish school at Middlebury College but he quickly lost interest in books and exams so he decided to become an apprentice instead (Leffingwell, 2006). He was apprenticed to a blacksmith. It is important to point out that blacksmiths were not only paid to make shoe horses; they are also the community inventor and fabricators rolled into one (Leffingwell, 2006). This early experience in his youth prepared him for the challenges ahead. He would use his skills and experiences acquired in this shop to bring together ideas and observations that would lead him to develop farm implements.

He wanted to stay in Vermont but when an economic slump hit the area he had no choice but to move. He decided to head Midwest and then finally settled in Detour, Illinois. There was no time to waste, so he immediately established his business, and in a mere 48 hours after his arrival, he was ready to accept customers (MIT, 1997). While working in the area, he observed that the farmers were having an especially difficult time when it came to their farm tools, especially those related to tilling the ground. Without a doubt, the soil was perfect for farming but they were having a hard time preparing it in a cost-efficient manner. John Deere discovered that the soil easily sticks to whatever they use to plow the ground before the planting season.

The farmers had to continually clean their farm implements to remove the soil or else they could not resume working. It was a time-consuming process and it was also very frustrating.

The farmers, especially those who are not from the area, understood that soil in the Midwest is thicker and tackier (MIT, 1997). While others were resigned to their fate, John Deere did not give up hope. As mentioned earlier, blacksmiths are not only good with shoe horses but they are also expected to be the local fabricators and if need be the local inventor. In his capacity as a blacksmith, Mr. Deere continued to think of ways how to solve the problem until he remembered his experience working on a farm where he saw a sawmill blade continuously made clean by the back and forth motion of the device.

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Deere’s ingenuity kicked in and he saw in his mind a model, a prototype that will become popular as the self-polishing cast steel plow (MIT, 1997). The usual farming technique requires the farmer to use cast-iron plowshares and to push this plowshare implement through the soil. This is how to break the fallow ground. For his invention, he used a broken sawmill as the major component to create an innovative solution to the tacky soil. The sawmill blade will break the soil but the rotating motion of the device ensures that it will be cleaned up by other components of the new steel plow (MIT, 1997). Orders began pouring in and the rest, as they say, was history.

Building a Business

It is one thing to be an inventor it is quite another to be a good businessman. The first one to develop an idea into a workable prototype is not the one who can bring the product to the next level, either to market it well or package it correctly so that people will patronize it. In the case of John Deere, he was able to capitalize on his early success and able to sell a substantial number of self-polishing cast steel plows (Magee, 2005). Aside from that John Deere was not afraid to make tough decisions, a distinct characteristic of a good business leader.

The reason why he is in Detour, Illinois was that he was looking for the best place for his business. When it appeared that a major railway will not go through Detour, John Deere immediately left town to establish his plow factory somewhere else where it would be more cost-efficient to do so (Leffingwell, 2006). There is no time to rest on previous success, this seems to be the mindset of John Deere as he uprooted his family and business and dared to find a suitable location to improve on what he has done so far.

After settling in another place, John Deere partnered with Robert Tate and this partnership increased the capability of the enterprise. In the past, the company was only able to manufacture and sell farm implements that can be manually operated. With Robert Tate’s expertise, the company is now able to utilize the power of the steam engine (Leffingwell, 2006). This is another aspect of John Deere’s success, he believes in constant innovation. It is a trait that rubbed off to other associates of the company.

The innovative streak of the John Deere Company did not stop with the steam engine; they began designing different farm implements and other useful machinery that were created to make farm life much easier. The brand name with the deer on it stamped their class, and quality to the first-ever cotton harvester, the first hay bale ejector, and the first power steering for tractors (TIME.com, 1963). They were very successful with their other products but it was only when they decided to focus on tractors that the John Deere brand started to become a household name in America.

It was not a walk in the park for the company. When they decided to go head-to-head with other tractor manufacturing companies, the market was not favorable because it was 1916 and the world was at war (Leffingwell, 2006). But a couple of years later the armistice was signed in Europe and more business began to open up for the company. They were able to get into the tractor business by purchasing the company that produced the Waterloo boy Model N. Adversity struck again because a few years after World War I, sales began to plummet for the Waterloo tractor (Sanders, 2001). If this was not enough the Ford Company slashed prices for its more compact tractors (Sander, 2001). The John Deere Company was forced to innovate. Fortunately, the spirit of innovation that guided the founder was still with the organization even after he was gone.

The company began to redesign the Waterloo boy in earnest. By the early 1920s, they were able to complete a lighter more compact version and it will be known by many generations of farmers as the Model D. (Sanders, 2001). It was a very efficient machine and able to deliver on its promise of being powerful, economical, and easy to maintain as well as a guaranteed long life to boot. As a result, “The D was produced continuously for thirty years, the longest production run of one model ever (Sanders, 2001). This product established John Deere as one of the more serious players in the industry.

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As they say, success breeds more success. The Model D started it all but it was not only the company that benefited from the sale of the said tractors. The whole nation was transformed from a people that grow their food to a country that produced food in surplus, able to supply urban centers that needed to feed hungry workers, especially those who are into white-collar jobs and no longer living in rural areas. There was, therefore, increased pressure for farmers to be more efficient in farming at the same time more land needed to be cultivated, and more farm tools and machinery are needed.

As a result, the United States became a world leader when it comes to food production. It did not take long before the U.S. began exporting food products overseas. A few decades after the introduction of the Model D, American farmers enjoyed unprecedented levels of efficiency and productivity. In 1962, alone, cash farm income in the United States was $37.5 billion (TIME.com, 1963). It was a good time to be a farmer in America and John Deere was encouraged to expand its horizon. For instance, in the 1950s, John Deere increased its influence and its profitability by going into chemicals (TIME.com, 1963). A few years later it entered the industrial equipment field with an industrial tractor that performs various tasks from stacking logs to burying telephone cable (TIME.com, 1963).

The original Waterloo Boy factory needed an upgrade because the company already reached its capacity even as early as the 1970s (Beemer & Peterson, 1999). On the other hand, sales were expected to pick up. So in 1975, the company made final plans to go into modernizing the old tractor factory (Beemer & Peterson, 1999). In 1979, the ultra-modern tractor assembly operation started and in 1981 it became fully operational (Beemer & Peterson, 1999). In one complex, the floor space was 48.2 acres and this was just one of the many such plants that the company kept in operation throughout the world (Beemer & Peterson, 1999). They were one of the first to use a state-of-the-art computerized system. Beforehand, it will require two and a half working days to finish a tractor; with the introduction of the computer system, it only requires 9 hours and 30 minutes to complete one (Beemer & Peterson, 1999). The company has grown tremendously since the time of the founder but they will not rest on their laurels and they are still in pursuit to improve the operations of the company.

They are constantly on the lookout for opportunities to expand their business as well as to add more to the value of the company. Since dependence on fossil fuel is a major issue in the 21st century, the John Deere Company was able to participate in the discussion while at the same time positioning themselves to make money while attempting to help the U.S. economy. They were trying to hit two birds with one stone by encouraging the U.S. government to support and finance a comprehensive drive to increase ethanol production (Borgman, 2007). Their motivation for doing so is very obvious. The raw materials for ethanol are taken from agricultural products such as sugars, starches, vegetable oil, and animal fat (Borgman, 2007). This is just another ingenious way of making money but at the same time increasing the perception that the company is not only about money but also about corporate social responsibility

Into the Future

Still, the company was profitable but not everyone was happy. It was an organization built to serve the farming industry and as many are aware there is a boom-bust cycle when it comes to agriculture (Magee, 2005). This prompted analysts to conclude that, “…the company’s business results have not always been as great as its products” (Magee, 2005). This can be explained more clearly by the fact that ownership of John Deere stock has been a roller coaster ride for many, up and down in a cyclical nature (Magee, 2005). For sure this was taken from an investor point of view because John Deere products have always given value for money. Still, every stakeholder in the company must benefit and this includes the investors.

This problem caught the eye of former CEO Bob Lane, while he was still a finance officer back in 1997 (Magee, 2005). His solution was to increase shareholder value by implementing a Global Performance Management System. This strategy will make John Deere a global company that is light on its feet and having assets that produce wider margins (Magee, 2005). The CEO together with his trusted lieutenants created a system that will encourage employees to think like an inventor, a customer, and an investor rolled into one (Magee, 2005). If they will think like an inventor then they will think of a way to solve customer problems and deliver products to them using the most appropriate technology and producing it using the most efficient means possible. By thinking like a customer they would find what customers are looking for and then create products that they need. Finally, by thinking like an investor they will do their best to eliminate waste and to create an operational flow that is lean and mean, thus reducing overhead cost (Magee, 2005). It was not surprising to find out that the company was able to achieve all of the above.

One of the fruits of the program is a new kind of lawnmower – the John Deere X595 (Fonda, 2004). Observers said that if there is a Ferrari among lawn mowers, then this could be the one (Fonda, 2004). The X595 boasts of a “high-torque” machine that redefines the meaning of power tools and handy machines. This lawnmower can easily clear up a sizeable lawn; it also has power steering, automatic transmission, a CD player, and a cup holder (Fonda, 2004). The most astounding description of the X95 is the price, which comes to $17,000.00; that is not cheap.

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In the early phase of the 21st century, the John Deere Company is poised to improve even further. It is now a multi-billion dollar enterprise, a far cry from its humble beginnings. It is the leading manufacturer of agricultural equipment. The John Deere Company is the leader when it comes to the production of lawn and garden tractors, mowers, golf course equipment, and other outdoor equipment, in North America (John Deere, 2009). Aside from that, the company is also the leading manufacturer of forestry equipment. If this is not enough the John Deere Company is also one of the largest equipment finance companies in the United States and manages a portfolio of nearly $23 billion (John Deere, 2009). The purpose of this venture is to help customers acquire expensive equipment without having to be burdened by additional costs.

Findings and Analysis

The first thing that stands out in the history of the company is the character and business acumen of the founder – John Deere. Notice the time he spent diligently as an apprentice to a blacksmith. He probably enjoyed his work there but more importantly, he used his time to learn all that he could so when he was barely an adult he could be hired as a skilled blacksmith. Another interesting facet of his character is the ability to use time efficiently. Notice the time when he had to leave Vermont; when he settled in Detour, Illinois, he did not waste time and in just two days able to jump-start his business there.

The second trait that an entrepreneur should have is insight. John Deere demonstrated that he has this ability. It was John Deere’s insight that allowed him to see the solution to their problematic soil. If not for his self-polishing steel plowshares Midwest farmers would never have experienced the efficiency and the productivity of high-tech farming. Deere desired to help and serve that allowed him to create cutting-edge tools that revolutionized U.S. agriculture.

The next most important characteristic is the spirit of innovation with the founder. Moreover, this ability was inherited by the successors and ensuring an unbroken line of leaders that will do whatever they have to do to succeed. The rationale behind the innovative streak was explained by the founder himself when he said that, “If we don’t improve our product, somebody else will” (MIT, 1997). One of the most amazing things that he did was to think outside of the box. For instance, John Deere did not believe that his business should make only goods on order. Instead, he preached the idea of mass-production at a time when America was not yet the world’s superpower and hence the leader in industrialization. He also perfected marketing strategies that benefited them in the long run such as taking his products on sales tour (MIT, 1997). He was like Henry Ford and many were inspired by his example.

John Deere was not afraid to make changes. He was not afraid to go where there was no trail. He was a trailblazer and decided to do things his way. His courage and perseverance paid off. The only thing that is hard to document is how he was able to transfer his knowledge and his passion for innovation to his successors. This is so desirable and yet it is hard to study how it works. Surely, by merely reading books on leadership a CEO will not be able to learn the art and science of mentoring and the transfer of knowledge to others.

It is also important to point out that the company was not afraid to try new things. First, it embraced the idea of mass production, and then it took that idea to the next level by building new factories especially those that use computerized systems. These new technologies tremendously improved their operational flow and in the long run, this did not only mean efficiency but also a reduction in costs. If they can deliver their products on time then this could also mean an increase in customer satisfaction, increasing the value of the company even further.

Aside from technical advancements, the business side of the company was improved when new leadership took the helm and they were not satisfied with just being profitable. CEOs like Bob Lane were not simply happy in having a good company, he wanted to build a great company. His use of a system that can monitor their global operations was the key. His method of training his employees and making them a part of the company boosted morale and allowed everyone to contribute.

Conclusion

John Deere changed the lives of millions of Americans by designing agricultural implements and tractors that resulted in a significant rise in farm income. The secret to his success is courage, a good business sense, and the spirit of innovation. He wanted to improve his products and he was dedicated to selling the very best products to his customers. He was not afraid to make changes and he was not afraid to be the trailblazer. He was perfectly happy if others choose to follow him because he was not contented to merely follow others. As a result, the John Deere Company is a global enterprise, its influence not only confined in North America but widespread all over the world.

References

  1. Beemer, R. & C. Peterson. (1999). Inside John Deere: A Factory History. WI: MBI Publishing Company.
  2. Borgman, D. (2007). Agriculture, bio fuels and striving for greater energy independence.
  3. Fonda, D. (2004). “Splendor in the Grass.” Time Magazine Archive.
  4. John Deere. (2009). “John Deere in Brief.”
  5. Leffingwell, R. (2006). John Deere. MN: Voyageur Press.
  6. Macmillan, D. (2003). The Little Book of John Deere. MN: Voyageur Press.
  7. Magee, D. (2005). The John Deere Way. New Jersey: Wiley & Sons, Inc.
  8. MIT School of Engineering. (1997). “John Deere: Self-Polishing Cast Steel Plow.”
  9. Sander, R. (2001). Ultimate John Deere Way. MN: Voyageur Press.
  10. Time.com. (1963). “Green, Yellow & Gold.” Time Magazine Archives.
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