Humility has a bottom-line benefit for biggest in business
Steve Sasson invented the first digital camera in 1975 as an employee of Kodak. He said of it: "My prototype was big as a toaster, but the technical people loved it."
But it was filmless photography, so management's reaction was, "That's cute - but don't tell anyone about it" (The New York Times, 5.2.2008).
In a similar vein, former Blockbuster CEO John Antioco turned down the opportunity to buy Netflix for $US50million ($NZ74million) in 2015, describing Netflix as a "very small niche business". Netflix is now worth $US350billion .
Most of us live with regrets about opportunities missed, it's part of life, but not many of us get the opportunity to make such high-profile blunders!
We do have our own local version of an opportunity missed. Back in 2000, Dunedin businessman Howard Patterson formed a company with scientist and business partner Dr Corran McLachlan, "A2 Corporation", renamed "The a2 Milk Company" in 2014.
The company was formed on the back of Dr McLachlan's discovery that of the two beta casein proteins cows produce, A1 and A2, the A1 version is harder for people to digest. Their vision was that milk could be differentiated into a more-healthy product if it was "free" of A1 beta casein.
Doing this was relatively simple given an appropriate genetic test, willing farmers, time and resources. They had those on their side, but what they didn't bank on was the ire of the then Dairy Board and later Fonterra.
Fonterra's position at the time was that the research had not been conclusive as the studies showed only a correlation between A1 milk and health risks, not a cause and effect. The A2 protagonists argued that Fonterra's A1 products should come with a health warning. The argument ended up in the High Court.
A2 Corporation then suffered from the untimely deaths of both its founders in a short space of time (in 2003). Following that, they limped along, going close to insolvency. Their launch of fresh milk products through the supermarket and food service channels in Australia proved to be a turning point.
The a2 Milk Company is still nominally a New Zealand company, dual-listed on the New Zealand and Australian stock exchanges, but the majority of shares are held outside of New Zealand. The company broke the $10billion valuation mark this year.
Large international player, Nestle is now competing with their own A2 products and earlier this year Fonterra jumped ship, announcing a deal with The a2 Milk Company to supply A2 milk. According to Fonterra's global director of food service, Grant Watson, "For me it's about choice. A1 milk is fantastic. A2 milk is fantastic". Sounds like a dollar each way to me.
Who is to say what might have happened if the people with the original vision were still alive - scratch beneath the surface and there is still tension on both sides. It's probably fair to say that there are some within the New Zealand dairy industry who would turn back time if they could.
There are a lot of people climbing into Fonterra right now. Environmental concerns, their questionable investment into Beingmate, the Danone write-down and inflated corporate salaries regularly hit the headlines.
A stealth-like erosion of their milk supply with the entry of local competitors, combined with incoming nitrogen caps for farmers and overseas competitors ramping up supply suggest bumps, if not blocks, in the road ahead.
There is no doubt that Fonterra has the smarts to survive and prosper, but do they have the culture? Some years ago, they made a horribly arrogant decision to extend their payment terms to 90 days (from what is considered standard New Zealand practice of paying on the 20th of the following month), essentially shafting the 4000 SMEs they deal with. Recently they reversed this policy - a hopeful sign that some humility and sense of the community they serve has returned.
Whatever you think about Fonterra and the dairy industry in New Zealand, their long-term success is important for our country.
Fonterra is to the New Zealand economy what the United States of America is to the world economy - "when the US economy sneezes, the rest of the world catches a cold".
Let's hope the A2 story serves as a reminder of the need for open-mindedness and humility, no matter your size and let's hope that a shift in culture paves the road ahead.