The twentieth century ushered in a massive increase in farming efficiency. In 1900, more than 38% of the U.S. workforce was allocated to farming. By 1990, that share had decreased to a mere 2.6%. By contrast, the U.S. population increased by 144% over the same time period, meaning the economy generated significantly more food with significantly less labor.
Much of these increases resulted from improvements in equipment, irrigation, and crop engineering. This innovation has been incredibly lucrative, leading to billions in revenue and massive corporate players, such as Monsanto.
No matter the previous success, times are bringing change to the agriculture industry. Soon enough, building a product line around seeds and chemicals designed to facilitate those seeds’ growth will no longer lead the way for the market.
This is the direct result of two main variables: the natural, upward progression of technology and consumer choice.
Technology has moved far enough forward that one of the next targets for digital transformation is the farm. At the same time, consumer choice has shifted over the last few decades. The trends have shown an increased preference for organic and natural foods, away from the decades-old norm of mass produced, genetically modified products.
In other words, connective digital technology will power the next step in agriculture.
A key problem for companies that have traditionally led the agriculture industry, companies like Monsanto and DuPont is that they can’t really change their stripes. Public perceptions and century-old practices won’t quite allow for overnight transformation. Instead, these companies will need to look elsewhere, as Monsanto has started executing with its acquisition of The Climate Corporation.
With the threat of consumer choice shifting demand and technological innovation becoming more accessible by the day, there isn’t much room left for the agriculture companies to maneuver.
In the same way it led the way for technological change during the twentieth century, the agriculture should become the backbone of digital change in the twenty-first century. Before long, the farm will transform and become connected, creating a sort of Internet of Farm Things (or some catchier version of that). If the established agriculture companies don’t lead the charge, a clever startup or tech giant like Google will.
As it stands, the industry makes good margins because of its intellectual property. Each time a proprietary seed is planted by a farmer, the company that owns the IP earns revenue, making the seed design a very lucrative venture.
However, the next frontier for innovating and making better margins is to apply a new business model, the platform. Much as Apple and Google made billions in revenue from their respective app marketplaces, agriculture companies can do the same thing.
With the increased connectivity provided new sensors and the ensuing dataflow, a large agricultural company can open that data to innovation via an API and create a new market for software development. The goal would be to create a store selling apps designed to optimize crop production using all kinds of data inputs, such as climate, soil conditions, or even pest impact.
The solution for owning the future of agriculture is for a company to create this development platform and open it to external innovators. Whoever controls the platform makes revenue anytime the marketplace generates a transaction, all for low marginal cost and increasing platform loyalty.
While the status quo is quite lucrative, it still has significant marginal costs, even at scale. The platform can usher in a new phase for the market where digital leaders with near-zero marginal costs can result in one or two winners. These winners will likely be among the first movers in the market.
The operating system for the Internet of Farm Things will come to dominate the market and can provide a critical component in the farms of tomorrow. In the IoFT, farmers will be able to easily customize their farm’s operations to match external conditions using third-party apps that control everything from irrigation to sunlight exposure. Integrating artificial intelligence will also introduce further optimization and automation for growing crops.
By means of this platform, farmers using apps developed by third parties will be able to increase production and minimize losses. The increases in efficiency can dramatically move the market toward being accessible to more consumers. With a platform fueling the innovation, organic, sustainable food could become as affordable as GMOs.
By Drew Moffitt