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Agriculture Is Fertile

Ground for Digitization
A growing world population enjoying higher-calorie
diets led to record growth for agriculture. Now, digital
agriculture has the potential to feed 1 billion additional
people worldwide.

Next-Generation Agriculture

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if combined they will challenge the agriculture industry as we know it today.5 2006–2015 2016e-2025e Poultry meat –17% 1. Figure 1 OECD and FAO predict declining growth rates and price levels Latest forecasts show severe drop in production growth… …with prices remaining flat or declining over the next 10 years Changes in 10-year CAGR (%) 2. seeds. and high-caloric foods. and fertilizers—has continued to grow.0 –40% 2. dairy. the latest forecasts by the Organisation for Economic Co-operation and Development (OECD) and the United Nation’s Food and Agriculture Organization (FAO) predict that both production growth rates and grain.5 3.3 –55% 1. However. demand for crops has been climbing for decades. technological limits.0 4. As a result.T.552 2006–2015 2023e–2025e Sources: Organisation for Economic Co-operation and Development Agricultural Outlook 2016. the agriculture input industry—farming resources such as agrochemicals. This is the second consecutive year that these longer-term forecasts have predicted a deviation from the industry’s strong growth.Converging Trends Could Disrupt the Industry Driven by a growing global population and. in particular. In this paper.870 1.4 3. Although none of these trends on its own would be disruptive.1 –52% Average 3-year world price (US$ per ton) Wheat 271 Soybean 433 Corn 180 –7% 253 1. we look at the alternative routes the industry could take amid three powerful trends: shifting patterns in demand for crops. several disruptive trends are converging. and meat prices will drop or remain flat until 2025 (see figure 1). A.9 –62% –2% +2% 424 184 1. and social and regulatory headwinds. an expanding middle class with an appetite for meat. Kearney analysis Agriculture Is Fertile Ground for Digitization 1 . Although the industry’s future looks bright overall. wheat.

A. However. the perception of meat is changing in a variety of geographies. the world consumes about 300 million tons of meat and 800 million tons of dairy products. for example. we take a closer look at each of these trends. food waste reduction has moved into the spotlight. 20 percent of 16 to 24 year olds follow a vegetarian or vegan diet. and Brazilian crop production ending up there. Finally. and canola.5% 1.0% 1. annual production increased eightfold from about 18 million to nearly 150 million tons—translating into a need for about 100 million hectares of farmland to grow energy crops such as corn. these dietary trends could put a significant portion of the industry at risk. and an increase in wealth will not drive meat consumption any higher. In this section. both in developing and developed countries. consumers are changing their eating habits as many shift from meat-based to vegetarian and vegan diets. Changes in meat consumption Each year. resulting in less demand for inputs such as seeds and fertilizers. and many regard a vegetarian diet as healthier. and soy in addition to pasturerelated feed. and 900 million sheep and goats.T.0% Global meat consumption growth 2. Figure 2 Per capita meat consumption growth is slowing 3. Kearney analysis Developments in biofuel After feed. biofuels are the second-largest customer segment for crop production with up to 20 to 30 percent of the United States.Demand Patterns Are Shifting Changes in consumption patterns indicate crop demand growth could slow down. Over the past few decades. Additionally. European Union.5% 0.0% 0. 1. To feed this livestock. corn. the crop demand for biofuel is shrinking as attention turns toward alternative fuel sources and electrification. Because about 50 to 60 percent of global crop production is dedicated to livestock feed. World Bank. sugar cane. meat consumption grew steadily. Meeting these demands requires about 300 million cows. Between 2000 and 2015. and 50 percent believe meat-free products are healthier options.5% 2. including grain. this trend has plummeted and is expected to flatten at a low rate (see figure 2). Agriculture Is Fertile Ground for Digitization 2 . In the United Kingdom.4 billion pigs. In addition. 60 billion poultry.0% 2000 2005 2010 2015 2020f 2025f Sources: Organisation for Economic Co-operation and Development. Developed countries have already reached peak consumption. the agricultural industry needs to produce up to 800 million tons of crops. In Western markets.

30 percent of cereal products. and MISFIT Juicery are selling “cosmetically challenged” products—the one in five fruits and vegetables that don’t match grocery stores’ aesthetic standards—for about 70 percent of standard supermarket prices. which focuses on the competition between cultivating food products versus energy crops. which significantly reduces food waste from Agriculture Is Fertile Ground for Digitization 3 . A. the biofuel industry has experienced a sharp decline in growth rates (see figure 3). Now.3 billion tons of food that is lost or wasted globally every year are gaining momentum (see figure 4 on page 4). 20 percent of dairy products. A huge portion of growth has been driven by government subsidies aimed at sharpening the focus on alternative fuels to reduce reliance on foreign oil as crude oil prices hit record highs of more than $100 per barrel. private companies are creating business models to lower food losses. and 20 percent of meat. huge amounts of food are wasted: 45 percent of fruit and vegetables. companies such as Plated and Blue Apron in the United States. Further. In the United States.Figure 3 Biofuel production growth is in sharp decline 70% Global biofuel production growth 60% 50% 40% 30% 20% 10% 0% 2000 2005 2010 2015 2020f 2025f Sources: Organisation for Economic Co-operation and Development.T. Kearney analysis However. 35 percent of fish and seafood. In addition to government regulatory adjustments. the move to electric vehicles in the medium to long term will lead to a significant reduction in (bio) fuel demand. initiatives to bring down the roughly 1. the profitability of biofuel will continue to dwindle despite government subsidies. and all future food production forecasts revised accordingly (see sidebar: Leading the Way in Food Waste Reduction on page 4). Efforts to reduce food waste Lastly. with crude oil priced at about $40 to $50 per barrel. and Hello Fresh in Germany are selling and delivering food boxes with the exact amount of ingredients required for one meal. More importantly. In almost every food category. social headwinds are turning against biofuels as more people question the logic of biofuels in the ongoing “plate versus tank” discussion. In addition to these economic factors. Reducing this waste could have a huge impact on global agriculture—with today's population fed with 20 percent less agriculture production. start-ups such as Imperfect. for example. Fruitcycle. Gousto in the United Kingdom. World Bank.

such as sugar and salt. will be abandoned. High-Input Agriculture Reaches Agronomical Limits The negative impact of intense agriculture—for example. France passed a pioneering food waste bill that bans supermarkets larger than 400 square meters from throwing away or destroying unsold food. In the United States.Figure 4 More than a billion tons of food are lost or wasted every year Per capita food losses and waste (kg per year) Consumer Production to retailing 350 300 250 200 150 100 50 0 Europe North America and Oceania Industrialized Asia Subsaharan Africa North Africa. It is not our intention to recount the numerous arguments for and against each side. expiration dates for foods that cannot expire.000 or two years’ imprisonment. Leading the Way in Food Waste Reduction France is a good example of a country focused on reducing food waste. However. and economic angles. All these innovative companies are seeing triple-digit growth as they eat up the market share of captive retailers. Kearney analysis oversized packages. Failure to do so could result in fines of more than $80. and lack of crop rotation along with lack of time for soil recreation become more frequent. and politics. In 2015. agriculture. legislation has been introduced to establish national labeling standards for quality and safety dates of food and beverages to cut food waste in half by 2030. falling biodiversity and soil fertility levels and higher resistance—is a hot topic in science. we will touch on these aspects briefly. West. ethical.T. and is continually analyzed from scientific. Fertility and yield potential are in danger because of the increase in resistant pathogens that cannot be tackled with current agrochemical products. Leftovers must be donated to charities or turned into animal feed or compost. A. This law is expected to reduce food waste by seven million tons per year. and Central Asia South and Southeast Asia Latin America Sources: Food and Agriculture Organization of the United Nations. In the future. double-cropping. cropping systems and agriculture technologies are reaching their efficacy limits. As monoculture farming. And Germany has changed its expiration date laws to enforce sustainability. the media. to complement the perspective on trends and developments affecting the traditional industry. Agriculture Is Fertile Ground for Digitization 4 .

scrutiny is rising in Asia. Since 1950. activists burned down GMO mustard fields in India. Kearney analysis Social Acceptance Waning for High-Input Farming In addition to new patterns of demand and agronomical limits.T. amides 2000 2005 2010 2015 Dinitroanilines Sources: International Survey of Herbicide Resistant Weeds. farmers seem to be increasingly losing the battle against resistant pests.Although market leaders make big investments to develop new methods. and regulatory approvals for new substances are becoming much harder to obtain. the number of resistant species has skyrocketed (see figure 5). for example. In the seed industry. secondary standards are driving down the use of agrochemicals. Because manufacturers are not likely to create different packaging for one state. Another factor indicating that high-input agriculture has reached its limits is vanishing soil fertility as a result of biodegradation. Genetically modified organisms (GMOs) are under greater scrutiny. and Mars have announced they will label all products made using GMOs. US farmers lost 7 percent of their crops to pests. the Agriculture Is Fertile Ground for Digitization 5 . A. In the 1940s. Figure 5 Superweeds are on the rise Number of resistant species 140 120 100 80 60 40 20 0 1970 1975 1980 1985 1990 1995 Acetolactate synthase inhibitor (including imazethapyr) Glyphosate Triazines (including atrazine) Ureas. Beyond the Western hemisphere. Kellogg’s. labeling will become effective virtually nationwide. General Mills and Chipotle are just two examples of food producers abandoning the use of GMO ingredients in blockbuster products. Vermont has ratified a law on labeling products that contain genetically engineered ingredients to make it easier for consumers to identify and avoid GMO products. and some consumer companies are even turning against GMOs. the industry’s reputation is changing in regard to high-input farming. Intensive monoculture farming and soil compacting along with intense use of chemicals are changing the soil composition and disrupting the balance of microorganisms. leading to long-term field damage and yield losses. ConAgra Foods. Many NGOs are mobilizing public opinion about GMOs. Traditional inputs are facing headwinds from regulators and from society. Earlier this year. In fact. More companies and nongovernmental organizations (NGOs) are questioning the use of GMOs and agrochemicals. now they are losing 13–15 percent.

Similarly. they put a safety margin in place to avoid the negative effects of a breach of residue limits. indicating production without any chemically synthesized fertilizers or pesticides Marks & Spencer Aims to offer pesticide residue-free vegetables and salads. a sustainable wheat program that achieved a 20 percent reduction in pesticide use compared with France’s national average BILLA Established a pesticide reduction program in collaboration with Global 2000. The expanding number of producers and retailers limiting the use of agrochemicals reflects the expectation that fewer consumers will accept agrochemical residues in their foods. test results are published online daily Pesticides abandoned Pesticide usage significantly reduced Source: A. More food producers and retailers are responding to society’s concerns about agrochemicals in foods by following secondary standards such as individual pesticide residue thresholds. even if they meet legal thresholds. Regarding the use of agrochemicals.T. Germany’s recent glyphosate scandal. This will have an impact on regulatory decisions. Several major fast-moving consumer goods companies are drastically limiting or even discontinuing the use of agrochemicals in the production of their products (see figure 6). to be 75 percent pesticide residue-free by 2015 and 100 percent pesticide residue-free by 2020 Unilever Grows tea without using pesticides at its own estates and works with suppliers and farmers to minimize their pesticide use EDEKA Lists only food products with residue levels 30 percent below European Union standards. which are 20 to 50 percent below legal requirements. meaning that approvals and registration Figure 6 Top companies are limiting agrochemicals in their products Fast-moving consumer goods producers Grocery retail and wholesale HiPP Prominently features a HiPP Bio seal on its products and website. threshold of EDEKA private-label products is 50 percent below legal standards Mondelēz Established Harmony. an independent Austrian environmental organization. in which several brewers faced widespread negative media attention as a result of residue levels in beer far above those of drinking water thresholds. the public is largely unaware of the progress that has been made to reduce the amount used per hectare in the past few decades as a result of technological advancements. In doing so. which has set up a heavily marketed pesticide reduction program with Global 2000. Kearney analysis Agriculture Is Fertile Ground for Digitization 6 . Many major supermarket chains limit agrochemical residue levels in their products below a certain percentage of legally allowed levels. grocery retailers are establishing secondary standards. can be seen as a warning. suppliers not meeting standards are delisted.consequences of pushback against GMOs are severe—seeds with GMO traits and GMO-based herbicide-tolerant crop systems deliver higher margins than conventional seeds. A prime example is Austria’s leading retail chain BILLA.

Instead of betting on cheap mass production and the increasing use of input materials. continuing current trends. forwardlooking business models will need to meet a multitude of requirements. 2016 is on track to be a record year for agrochemicals M&A. the relative amount of chemicals used for crop production will further decline. rather than making decisive efforts to redefine their business models. a recent wave of takeover bids has kicked off a merger endgame. big agrochemical and seed companies are pursuing large M&A deals. the European Union’s Regulation 1107/2009 introduced stricter rules for putting plant-protection products on the market by applying strict hazard-based cut-off criteria for approval. This significantly increased the industry standards for commercializing products. which focuses on selling input materials in bulk and providing more inputs for higher production in high-intensity cropping systems. should be given due strategic consideration. However. and ChemChina’s acquisition of Syngenta. For example. With the announced merger aspiration of Dow Chemical and DuPont. In this environment. mycotoxin levels and protein content). they endanger the current business model. where growers must get a “prescription” from local authorities before using any agrochemicals.of crop-protection products will be much harder to obtain. with the top six companies accounting for about two-thirds of market share. it is as high as 80 percent. Another example of tighter regulations can be found in California. Mergers Fuel the Quest for Size In addition to restructuring. Agriculture Is Fertile Ground for Digitization 7 . which is likely to reduce the big six to four. few are making decisive efforts to redefine their business models. Despite this consolidation. Because of public scrutiny and tighter regulations. Coping with the New Normal The agriculture input industry faces several developments that challenge the decades-old industry trend of continuous growth. Each development on its own is not disruptive. the global agrochemicals and seeds markets have roughly doubled to about $60 billion and $40 billion respectively. Over the past 10 years. such as defined produce per hectare at defined quality levels (for example. In agrochemicals. As a result. agricultural input suppliers are focused on cutting operational costs and reviewing their R&D assets and portfolios to reduce R&D spending. Bayer’s announced takeover of Monsanto. The fact that the European Commission only granted a temporary prolongation of glyphosate’s regulatory approval shows how quickly public scrutiny can turn into legal regulation. Agricultural suppliers are largely focused on cutting operational costs and R&D spend. services to keep fields pathogen-free or to guarantee certain crop-production results on a given piece of land. but when combined.

However. decision support systems. selling seeds and crop protection are highly heterogeneous. sensing. When size and superior products can be converted either into pricing power toward customers. with R&D and marketing and sales being the major sources. in the digital age. and big data analytics have all been introduced successfully. the merger is a unique chance to gain access to the governmentally restricted Chinese market. In terms of mindset. However. Digital: A Smart Alternative? The benefits of pursuing a strategy other than M&A are vague. and the status of farming equipment. or into cross-selling synergies. Integrating regional sales forces may also help create leaner cost structures. However. one question remains: Can the high synergy expectations be realized and do they justify the high premiums on already high share prices? In the end. Precision farming is delivering a wealth of value. robotics. For Syngenta. The Internet of Things and smart sensors are giving some farmers valuable information. Bayer follows a similar rationale. integrating seed and crop protection sales forces into one organization is challenging and will only work for specific farmer segments. scope. allowing for higher margins. a strategy that focuses on becoming the market leader in progressive and disrupting technologies is worth considering along with strategies that pursue size and market leadership positions using yesterday’s technologies. building on a natural fit of its crop protection capabilities and Monsanto’s leading position in seeds. For example. are striving to become a leading one-stop shop for farmers by merging DuPont’s seeds business with Dow’s chemicals capabilities.For many senior executives. merging R&D pipelines and operations to avoid redundant activities can be a huge motivator. including soil moisture. and all crop-protection measures so that companies can offer growers an all-inclusive solution. artificial intelligence. while offering attractive opportunities. Royal Dutch Shell is using “data-driven oilfields” to bring Agriculture Is Fertile Ground for Digitization 8 . This use of big data. for example. and approach. the temperature of produce in storage. such as guarantee seekers with high brand loyalty or business executives seeking sophisticated solutions that drive optimal profits. which significantly increase market share. these top-line synergies do not come free. putting the merged company in the pole position to drive the modernization of Chinese agrochemicals and seed supply by pushing Syngenta’s innovative products into the market. from a technology viewpoint. nutrient levels. the outlook can be rosy. As a result. agriculture is ready for intense digitization. Overall. and agricultural robots are rapidly being adopted. The pending merger of ChemChina and Syngenta reveals a third rationale: top-line growth through market expansion. especially as seed sales and crop protection sales are two entirely different animals. Self-driving equipment connects with satellite imagery to apply fertilizer automatically and relay nutrient information to a farmer’s mobile computer. traits. In other industries. does come with challenges. it depends on the synergies that actually come with portfolio completeness. Aspects of the digital age reached agriculture long ago. such as the question of who owns the data. Another deal rationale is cost synergies. Because the costs of discovering and developing new crop protection products have almost doubled in the past 20 years to triple-digit millions. the dominant rationale behind such mega deals is rounding out portfolios to cover seeds. Dow and DuPont. and technologies such as automation. and investing in new technologies is no sure shot.

Trimble. In agriculture. For example. Shell. The data is then compared with thousands of other locations around the world to help the company’s geologists make more accurate recommendations about where to drill. Kearney analysis Agriculture Is Fertile Ground for Digitization 9 . uses smart sensors and fiber optic cables to take more than a million readings. Planetary Resources. Figure 7 Innovative technologies are at work in niche markets Horticulture robots Decision support Wall-YE 1000 France Autonomous grape pruning Energid United States Citrus fruit harvesting Agrobot SW 6010 Spain Strawberry harvesting • Upfront decision on crops and variety based on maximum economic benefit • Optimized timing of operations based on crop demand and environment constraints such as weather • Overall optimized treatment regimes Reduce manual labor to optimize costs Improve agronomic decision to maximize yield Digital agriculture Sensing and phenotyping • In-field surveillance systems based on cameras and infrared • Drone-based spectroscopy and imaging • Satellite imaging and biomass control Instill transparency to optimize treatments Precision and variable rate application • Variable seeding rates • Fertilizer and pesticide application based on real need Use smart application of inputs to optimize the cost-to-benefit ratio Source: A.down the cost of drilling. oil companies monitor the earth’s seismic waves. satellite imaging (Google. digitization is thus far taking place mainly in confined application fields with small tech start-ups developing innovative technologies. however. and Mavrx). Monsanto's Climate Corporation digital platform covers only 30 to 40 million hectares—about 2 percent of the world’s crop land. and ITK). Delair-Tech. PrecisionHawk. including drone-based surveillance systems (HoneyComb. and CubeSats). The acreage covered by these offerings is still small. and robotics (see figure 7). decision support (Farmers Business Network. which typically involves using probes to take thousands of readings. When looking for new drilling sites.T.

In both cases. Technologically. traits. Of Google’s total R&D spend of about $50 billion over the past 10 years. and application services specifically for each acre under service. allowing access to vast portions of the most intensively used global crop land and disrupting today’s business models (see figure 8 on page 11). Lessons learned on one field will automatically be transferred to growers farming in similar conditions. climate conditions. In addition. Managing such a platform to provide contractual caretaking services to growers would enable the industry majors to access and make decisions about comprehensive crop protection. All data gathered throughout the crop cycle will be compared with that of other growers who farm in similar environmental conditions. development of its self-driving car came at a low double-digit billion-dollar investment. seed cultivar. such as electric vehicles with battery technology or photovoltaic panels in energy production. …a digital service offering will be a game changer. Our analyses show that the yield increase could reach 20 to 30 percent for major broad-acre crops. and growth regulator inputs. which is then processed by an artificial intelligence system that translates the information into specific actions to be performed autonomously by the hardware. It's likely that a comprehensive digital farming platform could be achieved with an investment of $15 billion to $20 billion—comparable to the premiums offered in the latest takeover bids.The logical next step is bundling technologies to create all-inclusive digital platforms. As a result. which requires fusing established players' agronomical expertise with digital expertise that lies outside their circle and necessitates a willingness to establish competencies beyond the traditional business. and optimizing fertilizer application rates to agrochemical and growth-regulator regimes with automated application based on plants’ actual needs and harvesting at the ideal time. Participating farmers have an opportunity to become yield champions–scaling up globally in major broad acre and horticulture crops to provide food for 1 billion additional people. The investment does not necessarily have to come from one player. such a service platform model would enable the industry majors to Agriculture Is Fertile Ground for Digitization 10 . sensing devices capture real-time information. These platforms will be able to provide end-to-end services for growers—from selecting crops. recommendations. optimizing planting times and seeding rates. This is the approximate price range for bringing new and disruptive technologies to market. fertilizer. allowing access to vast portions of global crop land and disrupting business models. and overall global productivity dramatically increases. The larger challenge is creating a roadmap and orchestrating development activities. Establishing such a digital service offering will be a game changer. based on soil quality. By packaging all these inputs into one offering comprising products. digitization helps the industry establish comprehensive solutions in a way that is much smarter than what traditional marketing and sales force efforts can offer. such a platform is comparable to an autonomous car. spreads in yield and productivity that originate from poor to mediocre agronomical decisions of low-yield growers will be diminished. it can be broken down into smaller pieces. and pathogen pressure.

one emerging game changer is technology that can improve food safety by tracking food from farm to table or by detecting pathogens and allergens before they reach consumers.T. Assuming the end state of any digital transformation is platform-based service models. Similar developments have already taken place in other industries as business models shifted from product sales to all-encompassing solutions and comprehensive applications for the customer by a service provider (see sidebar: Growing Products into Comprehensive Services on page 12). connectivity. In the world’s most significant agricultural markets. in particular. Capturing Value with New Business Models Digitization will fuel this shift from products to services. can be maintained Agriculture Is Fertile Ground for Digitization 11 . Kearney analysis commercialize their know-how and build customer loyalty instead of only selling products. scale and access to data matters: getting the maximum share of crop land under service is crucial for success. and analytics Soil Field characteristics Source: A. the question is how to set up business models that maximize value. digital service models can be used to service large portions of land. Implementing state-of-the-art technologies effectively and rapidly can be a major step toward capturing a large portion of market share. Staying ahead of the competition will require new ways of thinking. Large and medium-size farms.Figure 8 Digitization transforms business models of agriculture input suppliers Traditional farm input model Digital platform-based farm input model Multiple companies provide dedicated input products Farmers get connected. For example. resulting in more opportunities to capture value. As in all platform-based business models. Digitization has the power to quickly destroy well-established business models. benefit-based solutions (recommendation plus product) Fertilizer Seed Fertilizer Agrochemicals Seed Farmer makes decisions and applies inputs Agrochemicals Optimal yield Weather Crop yield depends on grower’s capabilities Data.

In fact. This evolution is reflected in Netafim’s new mission statement. Ecolab also ensures certain levels of quality and makes sure milk is free of contaminants. such as a pathogen-free field or a yield-increase warranty. When first introduced. either directly by the industry or via service contractors. provides individual training. Since then. having the service provider guarantee an output. then a company worth $200 million selling irrigation hardware. and safeguarding results by taking responsibility and risk away from users. this is no longer the major value generator. by the late 1990s. using sensors to make irrigation and fertilizer application more efficient. users did not pay for the system. such as sensors and variable-rate spreaders and sprayers. many large farms are already using equipment that is digital farming-enabled. Additionally. are willing to use digitization to increase profits but do not have the financial capabilities to acquire the necessary equipment. However. Although the company integrated its own detergents in this solution. and evaluates milking procedures to identify improvement opportunities. and operation service. Agriculture Is Fertile Ground for Digitization 12 . audits the entire milking system. including quality standards. Ecolab grew substantially. many midsized grower-owned farms. This service will be perceived as even more attractive when it includes risk sharing—for example. including hardware. achieving a higher yield. Ecolab began as a chemical company that manufactured cleaners and detergents.” with digital offerings. introduced electronic control technology. providing the opportunity to access and supply an additional 300 to 500 million hectares of crop land. While its original differentiating characteristics were primarily product quality and cost effectiveness. By redefining its business model. incorporating its original products into services for industries such as dairy and food and beverages. convenience. which account for 15 to 30 percent of crop land. In the 1990s. more than 600 million hectares of crop land could potentially be maintained with digital offerings. Smallholder farmers in developing countries offer another value cluster for digitized services. The company used to sell products for cleaning cow udders. which changed from “making the best drip irrigation equipment for customers” to “helping the world grow more with less. Altogether. but for the service of improving crop yield. the company offers year-round udder health management. installation. The company gathers data from growers around the world to determine optimal decisions. Netafim has quadrupled its sales to more than $800 million and captured 30 percent market share by shifting its business model toward an integrated end-toend system. in agricultural power markets. on pathogen pressure and optimal treatments) will enable these farmers to significantly increase their yields. does remote quality monitoring. Very basic mobile and app-based recommendation delivery (for example. Such large farms account for 50 to 80 percent of crop land in major markets and are generally willing to use technology to increase yields for greater profits (see figure 9 on page 13).Growing Products into Comprehensive Services Founded in 1923. With this risk-sharing model. Ecolab had become an integrated service provider. This shift also happened in Ecolab’s agriculture business. Netafim. These farmers can be targeted with all-inclusive service offerings from contractors that cooperate exclusively with industry partners and offer risk sharing with guaranteed results and warranties. Now. Another example of using technology to shift business models from products to comprehensive services in the agriculture industry is Netafim. an Israeli drip and microirrigation product company. Netafim created a winwin situation for themselves and growers. Ecolab shifted its focus toward more distinguishing features. and farmers improve their risk-return calculus.

Food and Agriculture Organization of the United Nations. Agriculture Is Fertile Ground for Digitization 13 . The rationale is simple. LinkedIn overtook other professional networks for the same reason. Ultimately.Figure 9 Large farms have at least half of the crop land in major markets Distribution of agriculture land per farm size (million hectares) Part-commercial family farms and small farms Medium-size farms Large professional farms Total Less than 20 hectares 20 to 100 hectares More than 100 hectares (More than 200 in United States) European Union 174 34 52 87 Brazil 330 18 53 259 United States 370 7 67 296 Sources: Organisation for Economic Co-operation and Development. For example. the first company to develop an appealing platform and business model will tremendously increase its chances to capitalize on economies of scale by capturing this firstmover advantage and gaining a foothold to establish a monopoly. Kearney analysis In this case. users from other social media platforms such as Myspace switched to benefit from the possibility of connecting with more people.T. A. Being first and fast does create an advantage as the first platform to gain relevant size is likely to define the standards and significantly shape the future market. Size and Speed Matter Digital disruptions in other industries disclose patterns and success factors for today’s digital world. kicking off a virtuous cycle of accelerated growth. and created a monopoly as the world’s largest business network. commercialization for the industry would need to be achieved via product pricing rather than all-inclusive offerings. In digital farming. pathogen-free plants. which in turn accelerates the growth of the platform. software and app developers focus on the largest market potential. when Facebook reached a critical mass. Today. including German platform Xing. Operating systems on computers and smartphones share these characteristics: As soon as one system dominates. input providers and distributors have at least partial access to growers and can influence their buying decisions. increasing the content and attractiveness of the leading platform and further fueling its growth. it becomes a monopolistic ecosystem. a fee-per-hectare service offering focused on comprehensive technological solutions to keep plants healthy and fields free of pathogens will disrupt today’s productcentered value-capture models (see figure 10 on page 14). In the future model. Large platforms attract more users. platform operators will be the sole decision makers as they are the ones ensuring the outcome: healthy.

comparisons with what other growers have done in similar situations. and pathogen pressure as well as planned field operations such as crop-protection treatment schemes from all devices (computers. Engage with growers by giving them access to field data. Link the ideal products to decisions such as fertilizer blends and agrochemicals for optimal efficacy and tank mix feasibility to ensure ideal outcomes for each field and each treatment. and the option to overrule the platform (in exchange for abandoning warranties) to put growers back in the driver’s seat until they establish trust and have positive experiences with the system. Kearney analysis Instead of merely reacting to this development. and mobile devices at all times). including plant health. equipment terminals. proactive agriculture companies can lead the way by creating win-win situations in line with a digital strategy and operating model.T.Figure 10 Service providers offer comprehensive farming solutions Traditional value chain Digital platform-based value chain Seed Fertilizer Seed Farm retail and distribution Fertilizer Grower Agrochemicals Agrochemicals Information (such as weather and soil analytics) Information (such as weather and soil analytics) Input flow Agronomic advisory Digital platform for all-inclusive crop management Grower (recommendation and application) Recommendation flow Source: A. Rewriting the Industry Story The automotive industry has proven that size alone will not prepare companies for what is to come. Disruptive trends developed from small and new-to-the-industry firms and Silicon Valley Agriculture Is Fertile Ground for Digitization 14 . nutrition status. Provide clear rationale for recommendations and decisions. • Manage the user experience. The rewards will include some powerful advantages: • Interact with and serve customers at all touch points. • Gain access to new direct-to-consumer sales channels.

Agriculture Is Fertile Ground for Digitization 15 . Düsseldorf christopher. leading-edge technologies.subei@atkearney. Düsseldorf carsten. Düsseldorf benjamin.donnan@atkearney.gerhardt@atkearney. partner.com Christopher Tuot.com David Donnan.tuot@atkearney. Unlike car manufacturers. Alexander Bruns.com Benjamin Subei. consultant. and global reach to customers. rather than taking a back seat. Now is the time to focus on digital agriculture and lay the groundwork to feed 1 billion additional people worldwide. they can still act from a position of strength to drive the digital revolution. Big agriculture incumbents have yet to make decisive moves toward digitization. Agriculture’s top firms have everything they need: vast agronomical know-how.tech giants—think electric cars and autonomous driving—quickly turned out to be game changers that forced the incumbent car companies to rethink their business strategies. Authors Carsten Gerhardt. and Lennart Krüger for their contributions. Chicago dave.com The authors thank Franziska Neumann. consultant. partner.

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