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Personalising products and business model innovation key to driving farmer adoption of agri-tech

Agri-TechE Blog
Agri-TechE

Innovation in their business model is one of the successful strategies that vendors are using to support farmer adoption of technology, according to a new report – ‘Agtech: Breaking down the farmer adoption dilemma’ – by McKinsey & Company. However, it identifies that the entry cost and complexity of agri-tech and the difficulty in demonstrating ROI remain major obstacles to adoption. 

The study of 5,500 farmers across Asia, Europe, North America and South America provides an interesting snapshot of the industry and its appetite for innovation, and reflects many of the trends we have also observed within our ecosystem.

Future profitability major driver for investment

Integration of farm management software, AI, machine learning and precision agriculture is creating a responsive and targeted approach to agriculture. Photo credit: Small Robot Company.

The report observes that agri-tech solutions are already driving farm productivity by enabling less resource-intensive growth – and the focus for future investment is to improve their bottom lines, with plans to change purchasing or vendor strategy, reduce inputs and boost yield.

Against a background of rising input costs –  of between 80 – 250 per cent across different geographies – it observed that concerns about volatility are making farmers more open to agri-tech innovation as a way to optimise returns and minimise financial risk.

As a consequence, 81 percent of large farms (those over 5,000 acres) are looking to adopt agri-tech solutions, with 39 percent of all farmers globally planning to use one or more agri-tech product over the coming year.

The types of investment vary by geography all though globally farm management software is the top use-case; in South America remote sensing is a priority and Asia it is automation and robotics.

In Europe, the trend is to adopt solutions in combination, such as using farm management software with precision agriculture. Farmers are seeking to optimise fertiliser and pesticide usage and seedling rates, with an enthusiastic uptake of yield mapping and monitoring software and variable rate fertiliser application.

Farm management systems enable farmers to gain information from large value pools to assist their decision-making. Then precision agriculture is used to tailor application of inputs right down to plant level.

Interestingly these types of strategies have also been identified by YAGRO and Map of Ag, both speakers at the forthcoming Data Event. The FETF23 grants, just announced by the Government, are directed at increasing adoption of precision farming technologies.

Sustainability programmes provide incentive for technologies to measure, monitor and report

One-third of start-ups have a sustainability-focused value proposition, and this is set to grow in importance with end users.

About 40 percent of farmers report participation in government-sponsored sustainability programmes – ranging from Europe’s proposed Green Deal and the Canadian 2030 Emission Reduction Plan to the UK government’s Sustainable Farming Incentive.

Participation in these schemes requires technologies to support measurement, reporting and verification, so it is anticipated that regulation will accelerate adoption of these types of technology. (See technologies to support Sustainable Farming Incentive)

Big challenges to adoption 

Although the rate of agri-tech adoption varies markedly across the geographies, the report identifies a number of common obstacles:

  1. High cost of investment
  2. Unclear return on investment (ROI)
  3. Complexities in set-up
  4. Farmers’ concern over access to their data – a top barrier to use of farm-management software
  5. Lack of trust when buying online – fewer than 12 percent want to use virtual channels in isolation, with the majority wanting to talk in detail about recommendations

Opportunities to drive adoption

An issue for many early-stage companies is gaining a sufficient user-base to scale, with fewer start-ups receiving later-stage funding or going public.

To assist researchers identified four key areas where more effort is needed to help stimulate farmer buy-in:

  1. Personalising products and business models – focusing on local conditions and uniqueness of the farm operation
  2. Improving the customer journey – having real people to provide technical support when the chat bot is insufficient
  3. Renewing trust in data storage and sharing – focussing on the information that is essential to deliver quality solutions
  4. Generating actionable insights from data – ensuring integration of multiple data sources to improve decision making

Innovation also in business models 

The report also identifies that developers are innovating in their business models to overcome these barriers – moving away from one-time purchases and annual subscriptions towards usage-based models for software or renting and leasing hardware.  Muddy Machines is one of the companies adopting this strategy. 

While these initiatives will lower the cost of entry, the big challenges of demonstrating ROI in agri-tech are the number of variables and the risk of external challenges, such as extreme weather events, masking the benefits.

In conclusion 

The report is overall upbeat, concluding that – when done well – greater agri-tech adoption can lead to more inclusive and sustainable growth for farmers, consumers and investors beyond the farm gate.

Read the full report: ‘Agtech: Breaking down the farmer adoption dilemma’ by McKinsey & Company. Members are invited to join our interactive BlogChat online session on 27th March 2-3pm, where we’ll be discussing this topic in more detail. Please contact info@agri-tech-e.co.uk if you’d like to join and we will send the meeting info.