Creative Destruction: Growing Your Cattle Business By Dismantling It

Editorial By Boone Carter 

Originally published in The Ketch Pen



Ranches like people tend to be organizations of habit, many of which are more than a hundred years old.

While they are what has created a culture where integrity and perseverance are hallmark characteristics, our habits can also keep us from responding to the changes that occur in the market place, blinding us to potential opportunities which would make us more competitive.

At a nutrition conference hosted by Montana State in 2013, I listened to Dr. Clay Mathis, Director of the King Ranch Institute for Ranch Management talk about an economic term called creative destruction.

Since then I have been thinking about how that process applies to the cattle business. Creative destruction is a term coined by Joseph Schumpeter in 1942. It describes the natural process that occurs when new technology or knowledge destroys the current business model in the process of creating a new and more efficient business model.

The railroad replaced the freight wagon, and in large part, the long haul truck has replaced the railroad, although the railroad has more recently recreated itself to be more relevant in today’s market. At each change of the guard businesses are destroyed, and occupations become obsolete, while at the same time new businesses are created and new job opportunities along with them.

Change in agriculture has been no less dramatic. Who would have predicted video auctions or branded beef programs 50 years ago?

Think of the effect those innovations have had on the industry. Like the freight industry, the cattle industry will continue to exist, but it may not exist in the same way or places as it has in the past. As Dr. Mathis pointed out, each business has the opportunity to change with the industry or to become obsolete.  

Dr. Mathis suggested that at least every 6-8 years each cattle producer should figuratively destroy their business.

Meaning they should take it apart one enterprise at a time and examine each practice within that enterprise to determine if it is still relevant to the current business climate. In doing so, producers can identify opportunities to become more efficient, cut costs, or increase revenue. One potential stumbling block for some producers may be a lack of records. Often cattlemen are experts at husbandry, but aren’t naturally inclined toward book work, but as the saying goes you can’t manage what you don’t measure. If that is the case your first resolution can be to keep more accurate records!

One opportunity for many operations to start with is their winter feeding strategy.

In most operations, feed makes up their biggest expense. It’s true that most producers have already purchased feed for this winter, but while those receipts are still findable, perhaps now is a good time to make plans for next year using this year’s numbers as a starting place.

One caution is to not limit yourself to current equipment or resources.  Try to expand your thought process to as many possibilities as you can and then evaluate each on their own merits. If the payoff in labor savings or ability to utilize less costly feed is there, it might make sense to purchase equipment or build facilities.

While I hope each of us can carry the Christmas spirit with us throughout the year, I hope we can also take the opportunity to practice a little creative destruction in the New Year so that we arrive at next Christmas in a better position to stay competitive in the coming years.