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January 6, 2017 << back >>


Digitization: Opportunity and Challenge for Agricultural Suppliers

Digitization – a positive issue for many farmers, as a new Bitkom study shows. What do farmers who are ready to digitize their farm and their production processes need? Answering this question correctly determines an agricultural supplier’s success or failure. A recent study by A.T. Kearney provides valuable insights into this topic.

According to a survey published by the German digital association Bitkom, 66 percent of farmers say that digitization opens up new possibilities for them. But there are still obstacles to overcome before use of digitization can become widespread in the agricultural field. Those surveyed named the high costs of investment in technology and unanswered questions in IT security and data safety as their primary concerns. The study “Agriculture is fertile ground for digitization,” recently published by global management consulting firm A.T. Kearney, seems to provide the answer to these questions by revealing how suppliers of digital farming solutions can meet concerns and develop long-term sustainable concepts.

Agriculture is ready for intense digitization

Even though the majority of farmers interviewed still have their concerns, many benefits are obvious. Precision farming increases yields while simultaneously saving resources. Technologies such as automation, decision support systems, and agricultural robots make a farmer’s daily chores much easier. The Internet of Things and smart sensors provide valuable information about soil moisture, nutrient levels, product temperature in storage, and the status of farming equipment. These digital farming solutions are not merely dreams of the future, they are ready for action now. From a technological point of view, and compared to other industries, agriculture is therefore more than ready for digitization. However, because of the concerns mentioned above, agricultural suppliers must not only provide technical solutions but also become advisers and partners for farmers who are working toward a digitized farm.

Creating a roadmap for digital service offerings

Until now, digital farming solutions have never been a one-stop shop for farmers. In fact, there are a number of fragmented single solutions for individual problems on the market. What sounds good at first can in fact be very confusing and discouraging for a target group that is not yet that enthusiastic. The solution to this problem is quite simple. For example, we can offer all-inclusive digital platforms that provide end-to-end services for growers. A platform of this kind provides all of the necessary services at a glance – from selecting crops and optimizing seeding and fertilizer rates to agrochemical and growth-regulated schedules with automated application based on plants’ actual needs and ideal harvest predictions. By using such platforms, the A.T. Kearney study forecasts many benefits including a yield increase of up to 30 percent for major broad-acre crops.

Creating such a platform is a real technological challenge, comparable to the development of a self-driving car, and entails high costs and risks. On the bright side, such a product doesn’t have to come from only one player, but can be broken down into smaller pieces. However, there is still the challenge of creating a roadmap and orchestrating the development activities, which requires fusing the participants’ agronomical expertise with digital skills that might be new to them. This necessitates a willingness to establish competencies beyond the traditional business model.

Disruptive business models

However, if agricultural suppliers are willing to take these risks and work together, they might achieve two important things. They will not only be able to prepare agriculture as a whole for digitization, but will also be able to digitize their own business models and prepare themselves for the requirements of an increasingly digital future. Digitization is a game changer; companies that don’t adapt may no longer be competitive on the market. That’s why a service offer like the holistic digital platform mentioned above makes it possible to provide growers with contractual caretaking services. These enable major industry players to access and make decisions about comprehensive crop protection, seed cultivars, traits, fertilizer, and growth regulator inputs. By packaging all of these single parts into one offer, digitization helps the industry establish comprehensive solutions in a much smarter way than what traditional marketing and sales force efforts can offer. In addition, a service platform model of this However, if agricultural suppliers are willing to take these risks and work together, they might achieve two important things. They will not only be able to prepare agriculture as a whole for digitization, but will also be able to digitize their own business models and prepare themselves for the requirements of an increasingly digital future. Digitization is a game changer; companies that don’t adapt may no longer be competitive on the market. That’s why a service offer like the holistic digital platform mentioned above makes it possible to provide growers with contractual caretaking services. These enable major industry players to access and make decisions about comprehensive crop protection, seed cultivars, traits, fertilizer, and growth regulator inputs. By packaging all of these single parts into one offer, digitization helps the industry establish comprehensive solutions in a much smarter way than what traditional marketing and sales force efforts can offer. In addition, a service platform model of this kind would enable suppliers to commercialize their expertise and build customer loyalty instead of just selling products. And this shift – from product-centered offers to service-centered ones – is what drives a large part of digitization.

Speed matters

So what does this mean for the players in the digital value chain? Probably the most important message to take from the survey is that suppliers must act fast. In the digital world, large platforms attract more users, who in turn accelerate the expansion of the platform, kicking off a cycle of growth. Being the first creates an advantage as the first platform to gain relevant size is likely to define the standards and significantly shape the future market. This means that, in Digital Farming, the first company to develop an appealing platform will increase its chances of capturing this first-mover advantage.