What corporate leaders can learn from innovating in agriculture
In agriculture, like so many other industries, climate change, regulation, and technological changes affect market players in different and sometimes unexpected ways. Here, we look at how one technology — meant to boost efficiency and lower input costs for farmers — failed to take root in the market. And while this article focuses on agriculture, it has lessons for all entrepreneurs.
By 2050, experts expect we’ll have to feed two billion more people than we do today. But it isn’t just additional mouths to feed that will drive higher demand. As countries become richer, people demand more energy-intensive foods (meats, proteins) that take more land to produce. Combined, those two factors mean we need to increase crop production between 60 and 100% by 2050, according to this report.
At the same time, climate change and extreme weather events result in lower yields. One study found that each degree Celsius increase in global mean temperature means a reduction in global yields of wheat by 6%, rice by 3%, maize by 7% and soybeans by 3%.
Farmers face rising costs for inputs — seeds, fertilizer, fuel, and machines — while prices for their crops stagnate or decrease. Even with smaller margins, public pressures for more sustainable farming are increasing while increasingly strict regulations limit where, how, and to whom goods can be sold.
This all results in a global agricultural system that is increasingly strained.
The pressures on the agricultural system aren’t new. And they aren’t a surprise. So why haven’t we fixed them yet?
It turns out that companies have been working on innovating agriculture for a long time. Let’s take one example. Over the past three decades, precision farming has sought to increase yields, lower input costs, and encourage more sustainable farming practices by using less fertilizer.
Precision farming starts with the understanding that a plot of land doesn’t have heterogeneous soil — the soil on one part of the farm might be rich in nitrogen, while the soil in another part might lack potassium. Precision farming addresses that by mapping out the distinct needs within a farm. That information is used to calculate the needs of the soil. Smart tractors then distribute the ideal amount of pesticides to each area of a farm. In theory, this leads to higher crop yields while using less fertilizer.
For one, the technology is too expensive compared to the increase in yields. With downward pressure on crop prices, investing in new technologies that will break even in years or decades isn’t a winning sales pitch.
Beyond that, the technology hasn’t been built to work on every tractor. Some tractors aren’t even smart enough to work with the new technology. Different standards for farm equipment mean there’s a lack of interoperability. This slows innovation and the ability of customers to adopt the new technology.
And finally, the technology can be confusing or intimidating. Farmers who know their land might not see the need to invest in a system that tells them what they think they already know.
When we wanted to know why more companies hadn’t incorporated precision farming into their business models, we charted every stakeholder involved, from tractor manufacturers to fertilizer companies to the farmer.
An entrepreneur’s goal shouldn’t be to convince the market that you have a great product. Your goal is to understand what the market needs. This requires understanding the market.
With precision farming, it went the other way around. The technology was looking to solve a problem, but it wasn’t properly solving the problem for market participants. Instead, some companies saw precision farming as a risk to their core business while others tweaked their business models to include an element of it. But the market never fully embraced it.
“One of the things you know, if you’re an entrepreneur, is that you don’t lead with the technology. What you lead with is whatever the customer is going to need or want. The digital part is just the toll that helps you do that,” Harvard Professor, Linda Hill , told us for our book Fight Back Now.
In the end, there was simply not enough demand or coordination between players to make technology adoption easy.
To adequately solve for the strains facing our global agriculture system, we need entrepreneurs who both thoroughly understand the market and get real feedback on products/services meant to improve it. This is how we can break the barriers that stagnate industries.
Start with investigating what’s happening now — not what you think might happen in a few years. When we wanted to understand what was happening in precision farming, we talked with farmers, agricultural experts, fertilizer companies, farm management systems, tractor manufacturers and more. We mapped out the constraints for each player.
Then we looked at how the industry was changing. We looked at both global challenges — those we listed up top — and regional challenges. We looked at how technology was changing and what regulation meant for different players.
Next, we moved onto solutions. For example, with precision farming, we looked at how each market participant viewed it. We looked at their role in value creation. We sought to understand how the solution impacted their operations.
And finally, we considered the motivations for each market player. We looked at their strategy — would partnering with another company benefit them or be seen as a threat to their market position? How would they react to changes in business models, regulations, or demand?
Now that we have an idea of what’s causing a problem, we can start creating solutions.
Entrepreneurs should validate their hypothesis by talking to key stakeholders. With precision farming, we interviewed tractor OEMs, farmers, agricultural software developers, agricultural researchers, and politicians. We conducted telephone interviews, reached out to experts over LinkedIn, emailed industry associations, and even drove out to farms.
Then we evaluate all that data. Our goal is to identify what the market needs, not to convince the market that we are right.
“The only way to ensure you make what customers need is to engage with them continuously and respond fast, so you build what they want while they still want it,” Felix Staeritz and Sven Jungmann wrote in our FightBack Now book.
Agriculture is under increasing pressure, but it’s not the only industry with these problems. Climate change, regulatory advances, societal pressures, and technology advances affect market players differently — it’s an entrepreneur’s job to understand these forces and work with the market to bring new solutions.