“Delamere Vineyard is a small, integrated winemaking business in Tasmania, specializing in pinot noir (red) and chardonnay (white) wines. Richard Richardson, Delamere’s owner and winemaker, manages and operates the vineyard and winery largely alone. His products have won praise and awards in the past, but Richardson strives continuously to improve. Delamere competes in the high-priced segment, in which quality is paramount. Richardson is well equipped as a winemaker–with a Ph.D. in agricultural chemistry and 15 years’ experience.” (Harvard Business School, 2000) Winemaking is a very exclusive, yet competitive business that requires great care and understanding of customer demands.
Richard Richardson, winemaker at Delamere Vineyard, is facing a change in his production of wine with uncertainty because of his ongoing desire to improve quality and sales. He has relied on his scientific knowledge to steer his company and now would like to move forward and improve his quality of wine and increase profit. Richardson is in the process of upgrading his production process to produce a better quality product based on customer satisfaction and wine critics, and needs to make a decision on how he will implement this.
Richard Richardson is facing challenges for the new direction of his company. He needs to make some decisions as to his innovative way of wine production to enhance the quality and increase his profit and sales. Richardson needs to improve customer satisfaction for his pinot noir and chardonnay wines. Richardson has to improve his marketing and advertising for the vineyard to increase sales and profit. Richardson needs to find a niche in the wine industry and set his wine apart from the other vineyards. Richardson has been making mediocre wine for the past 15 years and desires to set his company apart by increasing the quality and production of his wine to boost profit and sales. “At the establishment of his vineyard, Richardson had drawn inspiration from his scientific training and the advice and example of others who preceded him” (Harvard Business School, 2000).
Richardson needs to focus on the process of developing quality wine with the purpose of meeting a large percentage of customer satisfaction without sacrificing capital or increase costs in production over a long period of time. Since Richardson is fixated on two types of winemaking, he needs to focus on the ways to improve quality and control outcome to maintain consistency throughout the years. Customers are quick to notice subtle changes in wine quality and are apt to err on the side of caution when deciding on future purchases. Wholesalers are the wineries main source of sales and they “sought consistent quality at a moderate price, and favored wines that would have wide appeal by being made in a recognizable and popular style” (Harvard Business School, 2000). Richardson is very emotionally attached to his business and takes the entire role of decision making upon himself. Richardson needs to consider insight into new trends in winemaking and procedures that have worked in the past with other vineyards. Delamere Vineyards should be a family business built on the constant goal of improving production, distribution, sales and quality.
Delamere Vineyard is currently producing pinot noir and chardonnay wines at varying qualities to satisfy the demands of the consumers. Richardson has been working on his wine selection and vineyard for 15 years and is now in search of improvement of for quality of wine. Scientific knowledge has allowed him to start and continue his business of wine making with little knowledge of the process most winemakers go through to produce a quality and enjoyable wine selections. Richardson, while his process so far has yielded positive results, is in need of reevaluating his production process and possibly the distribution process to increase his business.
Richardson bears the entire responsibility of decision making for the company. “While instinct coupled with analysis may make a powerful decision-making combination, beware intuition’s pitfalls. Often, your gut is just plain wrong – because it’s subject to biases” (HBR, 2001). Decisions that involve where a company’s future is headed and changes in operations must be made with a clear head, and the long time notion of three heads are better than one should come into play. Richardson admits that sales is dependent on the quality of the wine. The process of winemaking is difficult to specifically characterize and replicate for consistency.
Richardson has pinpointed some areas in his business where improvement can be made to set his wine apart from the competition while increasing productivity and sales. His first option involves “consideration to amend winemaking procedures to eliminate the possibility of oxidation as the wine matured. Excessive contact with oxygen, along with other chemicals, induced compounds called aldehydes, which could create a distinct and unpleasant flaw in the wine’s taste, unforgettable bitter aroma somewhat akin to stale oil, along with an unattractive browning of the color” (Delamere Vineyard, 2000). This option leads to a constant output of good quality wine. This process will allow Richardson to attract a large amount of customers through both mail order and wholesalers due to the fact that this process can produce the same type of wine product every year. Customers tend to feel at ease purchasing wine from distributors who have produced the same product on a constant basis and feel comfortable with the level of quality.
Sulfur Dioxide (SO2) is the “wonder drug” to combat oxidation in the winemaking process. Considering the fact that most winemakers tend to agree that the introduction of sulfur dioxide (SO2) is the failsafe solution to preventing oxidation, the decision to incorporate some level of sulfur dioxide should be definitely considered and implemented. Richardson claims that he presently includes a small amount of sulfur dioxide into his winemaking process and it debating his new approach; continue his current process, increase his SO2 or spend time and money and waste some of his product to develop the correct scientific method for the incorporation of sulfur dioxide. Logic and reasoning would conclude that Richardson should stick with industry standards when it comes to the level of sulfur dioxide to add to the winemaking process since it has been proven time and again with success. He is dissatisfied with his current wine production, and therefore, he should not even consider the approach of “doing nothing” when it comes to preventing oxidation in his wine.
The long term benefits of spending time perfecting the process of how much sulfur dioxide to add to the mix could be beneficial to Delamere Vineyard. Richardson has the ultimate goal of setting his wine apart from other manufacturers while keeping the small family business image. He is already well versed and educated in science and would not need to enlist in outside help to spend time perfecting his process. Sticking with the status quo on the mixture will likely ensure consistency in the short run, but prove to be a common type of wine in the industry. “Over the years, various management studies have found that executives routinely rely on their intuitions to solve complex problems when logical methods (such as a cost-benefit analysis) simply won’t do. In fact, the consensus is that they higher up on the corporate ladder people climb, the more they’ll need well-honed business instincts. In other words, intuition is one of the X factors separating the men from the boys” (HBR, 2001).
Richardson is more likely to trust his scientific knowledge and experiment with possible scenarios to advance his understanding of the winemaking process to guide him towards perfection. Richardson’s second possible project involves finding a way to deepen the color of his red wine. Richardson is convinced that his main market Australians would be more likely to purchase his wine if it had a fuller red hue. Richardson identified that other manufacturers succeeded in darkening their wine by providing a longer maceration before and following fermentation and introducing higher temperatures during fermentation.
The dilemma was that Richardson was already performing these tasks with his current wine, which meant his only option would be to transition from his currently fermentation process to a more sophisticated one. This process would cost the vineyard $30,000 to purchase and at least 10% of product with no real assurance that it will be successful. The cost-benefit of this approach will lead to Richardson risks capital that he doesn’t have available to waste to hopefully produce a product that has a hue preferred by his customers. Managers “apply factual research to historical precedent that’s so widely accepted in an organization that it’s no longer challenged.
Things deemed to be common knowledge are often the result of inferences made by the ‘primal’ mind – they’re a product of evolution, and so tend to be governed by emotions and instinct” (Harvard Management Update, 2002). Richardson has conflicting views on his long-term goals for his vineyard. On one spectrum he is focused and passionate about improving the quality and consistency of his wine and winemaking process to increase sales and profit. Richardson would also like to accomplish this in his small family owned business with almost the entire operating burden placed solely on himself.
On the other hand, Richardson has mentioned the potential long-term growth benefits of quality improvements to his vineyard. Richardson has not made note to how his family owned vineyard would continue to operate should they increase production and sales of their product. Investing time and money into growing the company would require increased staff and land to store the wine barrels before sales and distribution. Richardson needs to weigh his options and focus on his own long term personal goals in addition to the organization. Does he want to be working for the next 30 years? Employing in outside sources of help will bring a fresh perspective to Richardson’s winemaking approach.
Richardson’s third possible improvement is to determine the best mix of whole bunches, stalks, and de-stemmed grapes to include in his crush to speed up and automate production. When Richardson was evaluating this option, red flags were popping up at every point. Initially, he specified that is option did not solve any foreseeable problem with his winemaking process; therefore if there is no problem a solution cannot be developed. Second, this type of fermentation would require more space in his winery and limit his ability to control the entire winemaking process. Since most of his potential projects focused on more control in the development of wine, this idea actually contradicts Richardson’s problem with his vineyard.
“The ability of managers to solve problems and make decisions rationally has long been assumed to be one of the valuable products of experience on the job. But close observation of their actually practices has shown that even veteran managers are likely to be very unsystematic when dealing with problems and decisions. And their hit-or-miss methods often produce decisions based on erroneous conclusions, which means that the decisions must also be wrong” (HBR, 1965). Any option that would increase his cost while not ensuring a definite increase in profit would be making a decision which would hinder the ability to prosper in the future. The small chance that altering the mix of grapes would result in a more complex and aromatic wine does not outweigh the potential result that the wine could rapidly turn to vinegar spoiling his entire vintage.
“Winemaking is capital intensive, in terms of both investment and working capital. Startup costs for even a small vineyard and winery were heavy, relative to anticipated cash flow” (Harvard Business School, 2000). Richardson needs to consider enlisting outside help experienced in the business of winemaking who can lend some insight into new trends in winemaking and procedures that have worked in the past with other vineyards. The ability to bounce ideas off other people who have knowledge in winemaking will allow Richardson to make future decisions without bias. He currently relies on intuition, past experience in his vineyard, and his scientific background to produce his wine.
Richardson needs to incorporate a full-time staff that can use his ideas and industry standards to not only improve the quality of wine, but improve the manufacturing process which can develop his company as well. Richardson will not be able to run his family business as a one man shop when his sales double. Richardson would also benefit from removing his cognitive blinders in his company and investigate other vineyards that have been experiencing the same type of situations.
Usually businesses experience the same types of problems in manufacturing and distribution, and learning from other companies mistakes will allow managers to make reasonable decisions with minimal risk. Richardson should prioritize his projects and develop a time line for completion based on the risk assessment. The idea of eliminating the oxidation in the mine is an option that will provide the least amount of financial loss. Richardson would be smart to start his project with industry standards for the introduction of sulfur dioxide while also taking time to use his scientific knowledge to find the perfect mixture for future vineyard growth and quality development of the pinot noir. Richardson would be foolish to entertain the idea of spending $30,000 which is almost half of his net income on a rotofermenter. The outcome would only generate a 10% increase in price and the cost-benefit/long-term benefit is nonexistent.
In decision making, managers can take on the six thinking hats to solve the problem. The “black hat” in decision making allows “participants to identity hazards, risks, and other negative connotations. This is critical thinking, looking for problems and mismatches” (Six Thinking Hats, 2010). His “black hat” decision making skills should see that a 10% increase over a period of 1 year would only yield $25,000 if it succeeds. Richardson’s third project idea of switching to whole bunch fermentation will cost him too much in wine product spoilage, take away valuable winery space that could be used for extra wine barrels and produce no guaranteed profit if successful. This idea would be beneficial if Richardson would commit to long-term goals of increased staff, especially in the managerial capacity. This would also allow him to focus on perfecting his winemaking process while someone else could focus on day-to-day operations.
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