The Tomato Plant Problem
One of the
classic management dilemmas is the presence of business opportunities that
outstrip available resources. A manager in such a situation can be compared to a
farmer who has 20 acres of tomato plants and enough water for only 10 acres. The
problem is insidious and eventually pervades even the largest, most profitable
SPROUTING TOMATO PLANTS
plants start sprouting when you’re flush with profit and cash; new technologies
beckon; ideas compete; development projects proliferate. And management
rationalizes that the most profitable path to the future includes parallel,
competitive developments that will provide “future choices.” Under this
scenario, tomato plants sprout like weeds and water floods the fields to nourish
Parkinson’s Law eventually and inevitably comes into play: Any project
eventually grows to consume and then exceed the resources available to support
it. The tomato plant problem hits smaller, entrepreneurial firms particularly
hard. Human nature often drives the entrepreneur to race frantically around the
field, sprinkling a little water here and there, trying to keep all the plants
alive. Then, as the frustration and anxiety grow, all 20 acres of plants begin
to wither and die. And the company is left hanging.
is this: If you have 20 acres of tomatoes and only 10 acres of water supply, you
must either get more water or plow under 10 of the 20 acres of plants. “But
those tomato plants are assets!” you say. And that is precisely the point. To
restore the balance and focus of the business, you’ll have to get rid of assets.
It’s a hard thing to do.
GETTING MORE WATER
of course, all kinds of ways to go after more resources, at a price. Going into
debt is one of the common methods for underwriting opportunity and borrowing
more water. But you must have a plan for repaying the debt and interest or
you’re simply deferring the problem to a later date. Debt deepens the bet and
the burden and those plants had better yield big tomatoes or you’re in trouble.
equity is another common way to go after more water. But when you sell a piece
of your enterprise to investors, expect your investors to be closely involved in
the approval, control, and implementation of your business plans.
Increasingly, companies are turning to “strategic partnerships” as alternative
sources of capital to leverage scarce resources. A well-matched partnership can
fill product gaps, produce sales force synergy, and help both partners to
compete more effectively.
these tactics take precious time while the tomato plants continue to wither.
Like most things, your timing and structure can make the difference between
winning or losing your company.
GETTING OUT THE PLOW
courage to get out the tractor and start plowing under assets. It’s hard to turn
down the next product acquisition or the two page advertising spreads that look
terrific or the massive direct mail campaign plans. It’s even harder to stop
doing something that has already become a tradition, or to kill off a product
that is marginal. But it’s axiomatic that 20 percent of your product line
probably accounts for 80 percent of your profit, and something has to go.
usually several ways you can save:
• Review the last
6-12 months of sales and chop or reduce the promotion for marginal products.
non-revenue-producing activities and overhead.
• Track/measure the
yields from marketing campaigns and weed out the ones that deliver marginal
• Contract for
temporary, project-oriented, professional personnel to delay or avoid hiring
• Cross-train your
employees in multiple jobs so that you can more readily respond to peak load
needs in various parts of the business.
• Stop pouring
additional money into products that are not positive profit contributors.
develop alternate scenarios to try to anticipate any possible outcome. Plan
three cases: a best case, a most probable case, and a worst case. When you
plan ahead like this, you will be forced to examine your assumptions more
crucial to begin planning when you first realize that you don’t have enough
water and before it has become a crisis. You’ll probably come up with a hybrid
plan that involves both getting more water on the one hand, and plowing under
some plants. You may actually discover that you’ve improved your profitability
by making these hard decisions.