Prassack Advisors Quarterly Newsletter> Industry Insights > Summer 2016 > Featured Insights
Agriculture must shift its focus from developing new products and instead try to create value for the customer.
Farmers are practical people. They stick with the techniques and products that work. While this makes sense at the individual level, agriculture as an industry must step up its game. Innovation is needed to meet the needs of a rapidly growing world population. Slow-and-steady is not enough when there will be one billion more mouths to feed within 14 years.
The problem with innovation in agriculture today is that industry applies the same tried-and-true approach that individual farmers use. That is, innovation is often seen through the lens of traditional research and development. All effort is focused on creating new products that become incrementally better with each generation. With little outside-the-box thinking, the differences between products can blur.
It is easy to see how this could happen. Each agriculture company keeps a close eye on what competitors are doing, and all focus on doing “what works.” The result of everyone taking the same path is that they all end up in the same place. In other industries, this happens when products become refined to the point that they are “white goods”—durable items like refrigerators and washing machines where companies focus on branding or distribution to gain market share from competitors. This is what one-dimensional innovation looks like.
To do better than this in agriculture, we can draw inspiration from industries that have learned that innovation and optimization can be applied to any business process, not just to product development. Multi-dimensional innovation is the most powerful source of competitive advantage.
Think of it this way. A company has just invented a phenomenal gadget through its product R&D efforts. If the marketing efforts are lax, nobody will know about it, and it will be a flop. Similarly, if distribution channels are poor, sales will falter. The most successful companies strive for innovation in every business process because they see how it gives them the edge that they need to succeed.
Companies like Amazon.com win customer loyalty with extremely generous return policies. This is what brought customers to come back to the website, more than the sales of gadgets like e-readers and tablets. When an online retailer focuses on developing a uniquely positive customer experience, customers notice. They respond well to innovation that provides a better experience. Customers value this so highly that the e-commerce giant is now profitable.
In the retail and high-tech industries, the most successful players seek out underserved markets and fight for a competitive advantage by optimizing every part of their business.
What lesson can agriculture draw from what others are doing? Multi-dimensional innovation pays off. Agriculture must shift its focus from developing new products and instead try to create value for the customer. This can come in the form of service—ensuring growers have an easy time understanding what product will work best for them in their fields, but there are many more dimensions to explore. Giving tailored product recommendations ensures the best possible experience.
UPS began using data analytics to change the routes its drivers take so that, for example, left turns are minimized. Since the path optimization affects 55,000 drivers, the logistics improvements add up quickly, saving the company $300 million through a 10 million gallon a year reduction in gasoline usage. It also meant customers received their packages more reliably.
Logistics innovation is just as important in agriculture as it is for a package delivery company. Farmers know that timing is often everything. A technology that improves the ability to know when to plant, harvest and deliver to market can enhance profitability significantly. For seed companies that grow hundreds of thousands of plants around the world in the breeding process, knowing when, where and how many plants to run in a trial is as important to agriculture as knowing when not to turn left is for a package delivery van.
Apple has been the king of marketing innovation, ever since the company’s famous 1984 Super Bowl commercial announced the first Macintosh computer. Apple sells more than just high-tech consumer products, it sells an image. People willingly pay a premium just to be seen with the latest—even if that means buying a $17,000 gold-plated Apple Watch that offers no extra functionality or benefit beyond exclusivity. Of course, the lower-end product benefits from its association with the unrealistically priced products. Apple customers can customize their watch to fit their needs. Apple’s success comes from not doing what customers ask them to do, but from knowing what their customers will want, even before the customers themselves know it.
Agriculture can draw inspiration from this by tailoring products to the needs of customers, rather than simply offering products and hoping that they like them, agricultural innovation can harness data sources to learn what customers will need for the next harvest and make sure that they have it before they even know that they need it.
These are just a few examples of what agriculture can do to improve as an industry. Multi-dimensional innovation, innovating not just at the product level but also in marketing, logistics, customer service and every other business process is what will allow agriculture to reach new heights in productivity while also delivering a much greater value to customers.
Joseph Byrum is Senior R&D and Strategic Marketing Executive in Life Sciences – Global Product Development, Innovation and Delivery at Syngenta.