[EDITOR’S NOTE: This Conversation Series Extra with John Deere Consumer & Commercial Worldwide Equipment Division President John Jenkins was presented as a supplement to a then forthcoming article in the April 2001 issue of Lawn & Landscape magazine. That article is now available online here: Conversation Series: John Jenkins, John Deere. Here Jenkins discusses Deere’s recent push into the commercial landscape equipment market following acquisitions of Great Dane Power Equipment and McGinnis Farms within the span of one month.]
Bob West: Tell me about your career at John Deere.
John Jenkins: I’ve been at Deere for 34 years. I came up through the financial area, so I was the controller at three of our factories and then group controller for the engine division. From there, I went into strategic planning and spent time with acquisitions and business development. I came back as vice president and comptroller of the company. My next job was as president of John Deere Health Care. After that, I helped coordinate our SAP installation and then moved into this job.
BW: Based on these two acquisitions, it seems that your goal is to be more than just involved in the green industry, though.
JJ: I think that’s right. The reason for our acquisitions, especially in service-related businesses, is that we want to be sure that we know the business and how to operate in it. By buying a top company, it brings with it people who have knowledge in that part of the business. We can teach them the John Deere experience, and they can teach us how to better interface.
The green industry, though, fits with our financial group as well as our equipment offerings. There’s a lot of synergy in leasing, renting and selling equipment to landscapers, putting irrigation equipment in golf courses, and our finance division is already financing equipment for a number of contractors. This is an opportunity for it to broaden that touch.
BW: What is it about financing that makes it so attractive?
JJ: I think it parlays with the lease or rent business, which is big business to be in. You need a financial arm that is going to be able to raise the capital and support leasing or rentals, and the dealer organization, although it is very strong, needs a partner. That’s where our credit operation came into being.
The other thing, which I make no secret about, is that the equipment business is about a $15-billion industry. The green industry is about $100 billion in size, and the segments that we’re working with now comprise $60 billion of that hundred. So, instead of participating in just $15 billion, we’re participating in $60 billion. We’re not going to get all of that, obviously, but I’d like to expect that we’ll get a respectable market share.
BW: Dave Werning (the new president of McGinnis Farms) made an interesting comment that the more John Deere looked at acquiring a distribution company the more attractive it became. Why is that?
JJ: This is a logistics business, and what a lot of e-commerce companies are having trouble doing is getting product efficiently to the customer. With our dealer organizations and our existing logistics knowledge, and now with the McGinnis play, which is also a logistics model, I think we can do that and we can do that regularly, better and cheaper than most of the competition. And the McGinnis model is a pretty good model that moves product efficiently from all of these individual sources to holding lots that rapidly turn over and are deployed at sites. We have the advantage of moving 100 contractors’ needs all at once, vs. a contractor who has to move his own need once. That’s why we think this can be a very successful business.
BW: What has been driving the trend toward consolidation and expansion among other nursery and irrigation distributors?
JJ: I think the good economy has had a lot to do with it, but the other thing is that landscaping is the single investment you can make as a homeowner or commercial owner and nearly or more than recover the investment you made, assuming you did it right. Curb appeal has a high value in home resale as it does in business development, which should keep this industry strong.
The average homeowners don’t have the ability to pick up a riding tractor and move it. Unless you happen to live right by the dealer, the dealer has always had to transport equipment back and forth. All Ready to Mow says is that we’ll put the items most likely to fail in the trailer. Instead of picking up the machine, taking it to the shop and delivering it, we can afford the time to send a technician to fix it, and everyone’s happy. I think dealers, finally, are starting to appreciate the fact that service is a big part of this business. If we’re going to do what I want, which is to become technologically advanced in terms of machines and product innovations, they’ll need to become more service oriented.
| Deere & Co. Growth Plan Discussed |
MOLINE, Ill. - John Deere is aggressively pursuing strategies that are intended to take growth and profitability to a new level over the course of the decade, the company's chairman and CEO said March 22, 2001. "Our aim is to do nothing less than double and double again the value we deliver to customers, employees and investors," CEO Robert Lane told security analysts and investors at a meeting hosted by the company in New York. In moving ahead, Deere will build on its recent successes, he said. "Running smart affirms our commitment to staying out front in the development of new technology, smart solutions, and advanced products, including intelligent machines," Lane said. In this regard, the company plans to introduce more than 100 new products in 2001, headlined by the new John Deere SST (spin-steer technology) lawn tractor - the first residential-mowing product with a zero-turn radius that is guided by a steering wheel. Through its operating plan, Deere is targeting net sales and revenues of $40 billion by the end of the decade and a market capitalization of $50 billion. Selective acquisitions will play an "important, supporting role" in achieving such growth, Lane said. He described the recent purchases of Timberjack Group and McGinnis Farms as having a "natural tie to our existing customer base and to our core equipment and service competencies." Overall, the company has made nearly two dozen acquisitions since 1995. |
BW: Explain to me how a John Deere dealer differs from other manufacturer’s dealers.
JJ: Nearly all of our dealers are dedicated to the John Deere brand. Now, there may be some hand-held equipment that is competitive in our dealerships, but by-and-large, the primary make they sell is John Deere. So their technicians are trained and know how to fix and service our products. That’s something that gets increasingly difficult when you’ve got multi-brand technicians who then have to know how to fix all of those different brands.
I know there are a lot of similarities, but there are also a lot of differences. We learned this on the consumer side of things through our relationship with Home Depot. We set up the equipment for their stores. We do this because we decrease the errors in assembly by about 10 fold when you have one of their employees set up the equipment vs. someone who really knows the machines.
BW: John Deere obviously has a strong relationship with Home Depot. Does Home Depot have a position serving the commercial landscape customer in the future?
JJ: I’m sure they’re servicing some of them today, but I don’t see this business that we’re in fitting with what they do. The customer that we’re serving buys products of a different spec than Home Depot’s customers. These people are buying professional equipment, and most of our Home Depot product line is the first entry users.
If there was a move afoot for them to pursue this market, however, I think we could undoubtedly help them and they could undoubtedly help us. That’s what partnerships are made out of.
BW: John Deere has expressed an interest in creating the world’s first national distribution network. Why do you want to accomplish this?
JJ: Actually, it’s in response to what McGinnis has been telling us the customers are demanding of it, as their customer base is moving and opening new locations, and some of those are in areas where McGinnis doesn’t have a lot of coverage. I think what you’ll see is that this business is going through more of a consolidation, and I think that you’ll see bigger and better participants as you have in any other business. If you’re into installing commercial landscapes and you’ve got Home Depot as a client, they’re putting up a new store every day so you better be able to move with them.
BW: One of Deere’s big initiatives came out of your office, and it’s the 6 by 6, or the goal to reach $6 billion in annual sales by 2006. Why did you put such a concentrated effort into growing the company so much?
JJ: If we’re going to bring new technology to the business, as I mentioned earlier, we need to do that in an affordable fashion. It’s expensive to design additional intelligence into the equipment. We need to expand the base of products so that the consumer continues to get better products at high value price, and one way to do that by growing.
The only thing that we have to watch is growing at a pace that outdistances either our dealers’ capabilities to support or our own capabilities to support. People look at 6 by 6 and say, ‘Gosh, that’s doubling your business in seven years.’ But if you look at our sales history over the last seven years, we grew at about 15 percent, which is exactly what we need to do again.
BW: What are you key goals for this division of John Deere in the next 12 months?
JJ: Again, I want to see our division complete the upgrade of our Ready to Mow fleet and make sure we’ve got the right amount of dealers in areas with customer concentrations. I want to complete and integrate the green industry with our supply sources so that the customer can have one face to deal with.