Digital Transformation , Strategy — 08.03.2018

Four Urgent Challenges Facing Tech Innovation in Agriculture

Christian Beck, Executive Partner, Growth Strategy & Design

Ag and innovation may not be two terms that you associate together…unless you’re in the ag space and therefore know that innovation has always been part of agriculture. Historically, farming is a very innovative field, just not necessarily in the digital realm. In fact, one of the earliest academic studies on innovation was done on Iowa farmers and how they adopted hybrid corn seeds (from Everett Rogers’ seminal work, Diffusion of Innovation).

A few months ago, I had the opportunity to attend the Indiana Agbiosciences Innovation Summit and learned a bit more about what is going on in the AgTech space. What I found was a group that is not only very aware of the need for innovation in this space—from climate extremes to figuring how to feed 10 billion people— but the need to innovate is a “need” in the very truest sense of the word. The biggest message of the day really focused on the challenge that Agbiosciences has going forward in meeting these critical challenges.

In this article, I will share four key challenges that AgBiosciences will have to overcome in order to adopt technological innovation.

1. In agriculture, innovation takes longer to prove out.

In tech, lean models of development and entrepreneurial mindsets have been paramount. But in AgTech, innovation is often tied to the hardware or machinery doing the work. It’s not as easy to iterate on machines and food sources as it is on a cloud-hosted web app.

Additionally, agriculture often has seasonal cycles that prevent iterating year-round. The results of tests may take months to realize; this is not exactly a great environment to fail fast and often.

Lastly, many challenges are systemic and play by different rules. Agriculture spans different governmental districts which may have different rules. Being able to adapt is hampered by confusing, complex and often competing regulations.

Going Forward
Iterative development models will have to be modified to account for growing seasons. Additionally, leaders in this space will have to take just as much inspiration from hardware production since most innovation will have a physical product involved (think more FitBit and less Salesforce).

2. Scaling innovation is uniquely challenging.

All technology works within ecosystems whether they are social, political, environmental or technological. The environmental ecosystems that agricultural innovation must work within are highly connected and interdependent. Food scarcity could be a problem with distribution, socioeconomics, or climate changes. There is no one best way to approach such a complex problem and optimizing for one side of the equation has ramifications for the rest.

Even with these highly complex environmental ecosystems, agriculture and its related fields do not have the scale of potential customers and users available that you see in SaaS. Even in B2B SaaS software, there are opportunities to gain traction amidst millions of users. In agriculture, the numbers are much lower and much less connected. A typical B2B product can gain hundreds of users with an enterprise client. In agriculture, a large-scale farm might yield tens of users. This makes scaling a much different challenge than we are accustomed to seeing in SaaS.

Going forward
We will need to create newer revenue and user acquisition models to account for the lower-density user base in the agricultural industry. Viral marketing won’t have the same economies of scale that other industries benefit from.

3. Funding still lags the broader tech industry.

Again, because the industries are geographically and conceptually outside areas flush with funding, this remains a challenge for upstart innovation programs. Thankfully, the federal and many state governments are providing grants to push innovation forward. More VC firms in the midwest are also starting to focus in the agriculture vertical.

Another challenge is that the options beyond growth are limited. Agricultural startups can still go public but building interest is much more challenging. Acquisitions are still a viable strategy, but the number of potential buyers is much smaller. This leaves agricultural startups in a tough position; unlike typical tech startups, they will have to find profitability sooner than most.

Going Forward
Agbiosciences will continue to need more creative investment solutions to provide the longer-term R&D support that traditional VC firms find hard to accommodate. Corporate innovation labs such as Dow Agroscience’s and accelerators like Thrive will have to, well, continue to thrive.

4. Communicating utility to a broader market.

The AgTech industry will continue to find marketing and messaging a key to growth. Investors, consumers, citizens, and policy-makers need better translations between the highly scientific and technical world of agriculture and biosciences into real-world value and utility. In the tech world, this mirrors a similar phase we saw in the early ‘90s with the Internet evolving out of the hands of engineers only and into the hands of those who could create real-world use cases. In the ‘80s, you couldn’t understand the internet without understanding TCP/IP and HTTP, but by the ‘90s, you only had to memorize your AOL password to understand what value the internet brought (we see a similar need in blockchain today but that’s for another article entirely).

Perceptions can easily derail the industry. A few documentaries can create massive animosity against practices like factory farming or conglomerates like Monsanto. Socially-influenced trends like the movement against GMOs or toward organic produce can have massive impact on the industry. The reality and science behind these concepts is much more complex than what is publicly understood through consumer movements. In a field that is largely driven by science, consumer-focused messaging and user-centered design will have a tremendous benefit.

Going Forward
Marketing and user-centered design approaches need to become a core part of Agbiosciences startups from the beginning. And, quite simply, marketing budgets have to increase no matter whether the audience is policy-makers, end-consumers, or potential buyers. This will make it easier for those inside the AgTech space to connect with their audience and will allow the general public to better understand the tremendous impact agricultural innovation can have on their daily lives.

Agbiosciences is at a critical juncture and the midwest will likely be the breeding ground for innovation over the next 100 years. I’m thankful for organizations like AgriNovus that are bringing this to light in Indiana and remain optimistic that the tech industry will rise to the challenges facing Agbiosciences. I’m excited to see how it evolves and believe the next Silicon Valley might look more like a farm than an office park.