digital ag the platform/ ecosystem challenge · •the power going forward lies in the combination...

April 23, 2020

Digital Ag – The Platform/ Ecosystem Challenge

Strategy&

Digital Ag – The Platform/ Ecosystem Challenge Summary

• New solutions and offerings within the field of Digital Ag/ Agri-tech entered the market and have been growing fast

• It's becoming clear that it's not enough to offer agri-solutions that focus only on traditional offerings/ value chain, i.e.

support in planning the season, planting, protecting, harvesting and selling the crop

• Farmers are demanding more, and new business models are emerging

• Differentiation is needed, including offerings around data capture & analytics, marketplaces, farm management,

financial services and education and training

• Multiple offerings are in the market, but only few platforms will survive.

• There are lessons to be learned on how to successfully grow a platform, both from B2C platforms, as well as from

newly emerging players

• Established players need to act now:

– Review your strategy, match your capabilities to offerings (potential partnerships, acquisitions)

– Consider the E2E farmer journey – identify and follow the value shift

– Deploy new technologies, establish new business models

– Learn from the best in other/ adjacent industries

– Think beyond and further down the whole agri-food value chain

2

Digital Ag – The Platform / Ecosystem

Challenge

Strategy&

• A race has started to establish

platforms and ecosystems in

agri

• All agri players upstream in

the agri-food value chain are

offering some kind of

platform/ digital ecosystem to

farmers: input companies,

machine and equipment

companies, technology

companies

• In addition, new entrants such

as independent platforms and

IT/ Cloud providers enter the

agri markets

Illustrative

Farmers are targeted by multiple stakeholders with multiple offeringsFarmers will make a choice – and only few platforms will survive

Source: Strategy&

Backbone Capabilities:

Artificial Intelligence,

Predictive Analytics,

Cloud computing, Big

Data, Research &

Information Platforms

Independent platformsOnline Market Place

Farm platform

Technology Companies

Digital Farming Software

Tractor Data

Management

Farm Management

Distributors

Data capture / analysis

Recommendations

Farm management

Machine & Equipment

data capture and

analysis

Field Analysis

Fleet Management

Predictive Analytics

combined with Farmers data

Crop management

Benchmarking

Yield & Potential Analysis

Agronomic advise

Yield & Potential Analysis

IT/ Cloud providers

CLOUD

Possible new entrants:

Amazon Web Services and

Google Insights

Digital Platforms merged with

AI, Predictive Analytics and

Field & Equipment analysis

Agriculture

Research Platform

Input companies

Machine & Equipment

Farmer

Product offering Partnership


Challenge

3

Strategy& Source: Strategy&

Approach to market

Emerging players/ Independent platforms

• Direct farmer access, value focused

• No historical farmer access/ engagement

• Approaching the market from a ‘green field perspective’ (no pre-conditions/ limitations/ analyzing and addressing the pain points for farmers along the value chain)

• Business created around data and insights. Clear focus on value potential of data

IT/ Cloud providers

• Very limited; if via adjacent B2C solutions (e.g. MS Office, Google consumer services, etc.)

• Historically with no/ limited stake in agri

• Well known by farmers from consumer product side, and/ or IT/ data side for larger farmers

• Very well equipped in managing/ handling data, however with very limited access to specific field/ agri data

Input(Chemical/ Seed)

• Direct sales to large scale farmers; multitude of technical/ agronomists in the field, interacting with farmers/ opinion makers; agronomical focus

• Approaching the market from the crop/ optimizing harvest perspective (offerings and solutions centered around that)

• Offering rather fragmented solutions

• Traditionally product/ services based companies; little savviness in data usage

Machine and equipment

• Mainly via distributor/ service; technical focus. Partly serving large farmers directly

• Offerings and solutions around machine/ equipment, both hardware sales as well as after-service solutions

• Provided access to technology early on (GPS, data from the equipment); generating data; types of local platform in the machine

Distributors

• Long-standing history with small/ mid-sized farmers, trusted relationships

• Offering the ‘traditional’ distributor services: physical market place, agronomic advice, financing, storage, logistics

• Purchase history, partly agronomic service/ field specific history

Use of data

Historical farmer access

Technology companies

• Via adjacent agri value chain players, mainly machine and equipment

• Similar to machine and equipment companies; often interlinking own solutions with machine and equipment manufacturers

• Offering technical solutions, interfaces to machine and equip-ment manufacturers. Strong connection to M&E companies

In the past, data has been collected without clear use cases. For new players, data will be core to their business modelsEstablished players have been relying on their traditional model for a long time

New playersDigital Ag – The Platform / Ecosystem

Challenge

4

Strategy&

In the new agribusiness world, technology enables new offerings and added-value servicesThe power going forward lies in the combination and joint application of different technologies

Not Exhaustive

• Digital technologies enable the

coverage of the whole value

chain, from field to fork

• Technology is proven, and has

been in the market for many

years

• The power going forward lies in

the combination and joint

application of different

technologies, e.g. Robots/ AI/

IOT

Drones Virtual reality 3D printing Augmented reality

VR and AR allows having a pool of remote workers ready to work the fields.3

Agri-drones have revolutioni-sed farming in 6 ways:

1. Soil and field analysis

2. Planting

3. Health assessment4

4. Crop spraying

5. Crop monitoring

6. Irrigation

Brands such as McDonalds use VR for stakeholders to visit its farms without actually being there5

From 3D printed sprinklers to 3D printed machine parts, this technology is seen in many areas of the agribusiness world6

Robots Blockchain Artificial intelligence

"Robotics is changing the nature of farming.8"

- ForFarmers8

91% of consumers think it is important to know where their food comes from. Blockchain guarantees supply chain transparency9

15% – 31% increase in productivity due to precise irrigation fertilisation using IBM Watson10

Iot

27% – 75% reduction in water usage due to sensors7

1) The Economist Technology Quarterly 2016 – The Future of Agriculture. 2) PwC, India-Africa partnership in agriculture – Current and future prospects. 3) How we might use Virtual

Reality in Agriculture, Medium, 2017. 4) MIT Technology Review – Six Ways Drones are Revolutionizing Agriculture, 2016. 5) The Guardian – McDonald’s takes virtual tours of actual

supplier farms, 2016. 6) 3Dprint – 3D printing agricultural uses. 7) Financial Times – Precision farming will feed the world the green way, 2017.8) Forbes – AgTech: A Great Investment

For The Future. 9) Agriculture.com Blockchain technology will improve farmers’ ability to market and sell crops, 2018. 10) IBM Stories – IBM Watson – E&J Galio Winery.


Challenge

5

Strategy& Source: Strategy&

Illustrative

Agri Value Chain – Traditional and DigitalTechnology enables new offerings and added-value services

• It’s not enough to stay with

traditional offerings/ value

chain, i.e. from support in

planning the season, planting,

protecting, harvesting and

selling the crop

• Farmers are demanding more

• Differentiation is needed,

including offerings around

– Data capture and analytics

– Marketplaces

– Farm management

– Financial services

– Education and training

• New value pools are created/

traditional value pools are

shifting

• Opportunities for offerings for

new business models


Challenge

6

Digital offerings

Traditional offerings

Strategy&

Illustrative

The combination of traditional and digital offerings, enabled by technology, will provide new, added-value business modelsExample: combination of offerings to provide ‘outcome-based’ business models

Source: Strategy&

• Creation of a new value pool

(outcome based)

• Additional value is created

(beyond current offerings)

• Value pool is moving

downstream

• New/ innovative pricing

models are feasible

• Risk is manageable


Challenge

7

Digital offerings

Traditional offerings

Outcome

based

offering

Guidance on

what to plant, where

and when, based on

field specifics

Input delivery: 3rd party

services, timing based on data

insights

Harvesting:

3rd party services,

timing based on

data insights

Harvest

sold at initial

contracting

Field specific recommendations

based on genuine data sets

Future

selling of

harvest

Risk reduction /

management based on

insurance coverage

Overall steering /

execution of offering by

central farming cockpit

Specific

insights and

training

Strategy&

Lessons learned from B2C: Ecosystem winners excel across all life stages of an exponential growth pathEcosystem development typically follows three stages

Source: Strategy&

• A large number of initial

ecosystem players won’t make

it to the end

• The ability to shift gears with a

distinct play in each growth

phase separates the winners

from the losers

• Ultimate goal is to ‘lock-in

users’ into a specific platform/

ecosystemRise Dominate

• Cheap capital from strategic investors

• Bold move on early acquisitions

• Best talent and “mysterious” brand / vision

• Selective partnering to close capability

gaps

• Subsidized prices to push user base build-up

• Superior, global product availability

• Vibrant developer community to boost supply and

ecosystem experience

• User lock-in/ continuous product

improvement

• Multi-app/ product approach to balance

risk

• Direct end user channel to control value

flows

• Effective patent strategy & regulatory

resilience

E.g. “Stay stealth with laser-focus”

E.g. “Lock-in users, absorb competition”

Time

Survive Rise Dominate

Pen

etr

ati

on

/ M

ark

et

sh

are # of companies

Su

ccess

facto

rs

Survival


Challenge

8

Strategy&

E.g. “Stay stealth with laser-focus”

E.g. “Lock-in users, absorb competition”

Company C

Company D

Company E, F

Company G, H

Company I, J

Company K

Company A

Company B

Others

Agri Ecosystems/ Platforms – Where do companies stand?In comparison to B2C, the ecosystem race in Agri is still in the beginning

Source: Strategy& analysis; Evaluation based on – among others - current platform offerings/ partnerships, estimated customer base and subscriptions, new business

models/ offerings, selected market interviews; please note that the ranking is indicative and not to scale

• Broad customer (farmer) base, and subscription to the specific platform

• Integrated offerings: broad offerings, integration of 3rd parties, still ‘out of one hand’

• Easy to handle for farmer (intuitive), integration of existing data (open API)

• Innovative business models (while price/ value relation fits)

Indicative - Not to scale

Time

Pen

etr

ati

on

/ M

ark

et

sh

are

Selected

success

factors

• In comparison to B2C, the

ecosystem race in Agri is still

beginning

• Some companies had a good

start, building a platform for

advancing in the future

• However, the race is still too

close to call, and additional

offerings, buildup of capabilities

can change the picture quickly

• IT/ cloud providers are not

decided on how to position

themselves yet

Survive Rise Dominate


Challenge

9

Strategy&

Focus of current agri ecosystems

Extension of future agri ecosystems

Inputs

Distribution/

Retail

Consumer

Trading/

Distribution

Processing

Production

Seeds Chemicals Fertilizer Machine Land/ Water/ Energy

Labor

Agriculture

Food Manufacturing and Processing

Meal kits and fresh produce

Wholesale/ Retail

Restaurants/ Hospitality

Online delivery

Consumer

Domestic Use and TransportCommodity Trading and Transport

Ag

ri

eco

syste

ms

Fo

od

eco

syste

ms

Future outlook: Will emerging platforms enable disruption also downstream, covering the whole ‚Field to Fork‘ chain?Which players will drive disruption alongside the whole agri-food value chain?

Harvested goods

characteristics –

optimize processing

Traceability

Nutritional requests;

healthy food

Timing of harvest;

supply chain integration

with processors

Forecast (quality/

quantity),

• Current Agri Ecosystems are focused on the upper part of the Agri-Food value chain

• There are additional opportunities for deployment of digital/ value-add offerings down the value chain

• Other players down the agri-food value chain, such as CG/ Food companies, are also establishing ecosystems, such as Nestle, etc.

• These ecosystems are starting from ‘the other end’ – targeting mainly interaction with/ added-value for consumers

• Evolving agri ecosystems need to consider the whole agri-food value chain, and become broader than they are today


Challenge

10

Strategy&

Key takeaways

1. Potential for value generation is huge

2. Established companies are still characterized by their traditional thinking/ heritage. Think like ‘start-ups’

3. Disruption is coming from two sides

– New players, already in the market

– IT/ Cloud providers, not yet present

4. Learn from successful B2C ecosystems on how to establish a dominant platform

5. Target a broad customer (farmer) base, and subscribe to the specific platform

6. Understand the E2E customer journey of the farmers, as well as pain points currently not served

7. Complete your offerings and capabilities, by partnerships/ M&A. Don’t hesitate to invest heavily/ take the big step

8. Establish new business models, follow the shift of value pool. But there needs to be a clear value proposition for the farmer (price/ value relation)

9. Constantly differentiate yourselves from the rest; however, expand gradually and build around your core

10. Don’t stop at the current ecosystem reach: think beyond and further down the whole agri-food value chain


Challenge

11

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digital ag the platform/ ecosystem challenge · •the power going forward lies in the combination...

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