The integration of Global Positioning Systems (GPS) with agricultural machinery catalyzed the digitization of farms in the early 2000s, enabling farmers to visualize yield variation within their fields. Since then, the definition of digital ag has evolved to include features beyond just basic yield mapping, such as variable rate prescriptions, irrigation guidance, seed variety benchmarks, and pest outbreak alerts. Decision support features abound, but the present state of the industry is fragmented. Most developers are start-ups who provide one aspect of decision support, and their solutions work in silos alienated from the rest of farm operations.
A few industry leaders have attempted to combine precision ag technologies and create comprehensive platforms that can integrate farm operations. For example, Monsanto and Bayer have each acquired individual precision ag developers over the last few years with the goal of absorbing them into broader digital ag platforms. However, even large corporations like Monsanto and Bayer are struggling to develop promising strategies to benefit from digitization of agriculture. The figure below maps Bayer’s and Monsanto’s external relationships in the precision ag space.
Our analysis of Monsanto and Bayer reveals that both companies’ precision ag strategies are piecemeal; they acquire silo-ed technologies rather than build a comprehensive system.
There is one major problem with this piecemeal strategy; it puts product development before value proposition. For example, Monsanto has been building its precision ag service since 2012, beginning with the acquisition of Precision Planting and followed shortly by the acquisition of the Climate Corporation in 2013. At that time, the Climate Corporation announced that its solution increased farmer profit by $100 per acre in corn. Since then, Monsanto has added companies to its platform one-by-one, by acquiring VitalFields, SupraSensor, and Solum. However, in a January 2017 announcement, the Climate Corporation announced that implementing its variable rate nitrogen prescriptions increased farmer profit by just $4 per acre – a significant decrease from its 2013 claims. Monsanto has been bringing in additional precision ag developers to make its platform more comprehensive, but the company may have been adding additional capabilities that actually increased the cost of the service without adding to farmer value.
If a piecemeal strategy is detracting from the core value proposition, this is not the best approach to building a precision ag platform. In order to succeed in this space, companies should prioritize quantifying value over product development. Companies likely to succeed in precision ag will start by identifying inefficiencies in agricultural operations and develop concepts that can remediate those inefficiencies. Companies should begin to build products only after quantifying the value a farmer will receive. For example, start-up company WISRAN is developing a solution to improve farm worker productivity and agricultural machinery logistics. WISRAN first identified that improving simple logistic inefficiencies (for example, having the correct number of trucks on a field to transport product) can increase farmer profit by 10% to 30%, or approximately $7 to $20 per acre. Only after identifying what value it could create, WISRAN began to develop a targeted product aimed at addressing that need. The company is now focusing on developing the most valuable parts of its technology first, and will not waste time and funding developing extraneous technologies that do not contribute value. Major agribusinesses like Monsanto could then incorporate WISRAN’s technology into their platforms, and would know that by doing so, their customers will see greater value.
As the precision ag industry matures, major agribusinesses will continue to acquire promising developers and combine offerings. However, the value platforms bring to farms through increased profitability will be the differentiating factor of success. When building a platform, agribusinesses should be cautious of flashy precision ag technologies that cannot quantify the value they bring to farmers, as value proposition should be the first step of technology development in this space. More broadly, businesses across all industries should heed the message to prioritize value proposition before product development to build a successful service.
For more information contact Laura Lee at Laura.Lee@luxresearchinc.com