By Lourival Monaco
It is important to understand what innovation is: “a new idea or method, or the use of new ideas and methods,” according to Cambridge Dictionary. Going a little deeper, it is possible to say that an innovation system is a coherent set of interdependent processes and structures that dictates how a company searches for novel problems and solutions, synthesizes ideas into business concepts and product designs, and selects which projects get funded.
Innovation focus is often on a new or improved product, targeting an increased market share.
Innovation is not a synonym to “disruption.”
Business disruption happens when an existing industry faces a challenger that offers far greater value to the customer in a way that existing firms cannot compete with directly, which is detailed in The Digital Transformation Playbook, by David L. Rogers. Disruption displaces an existing market, industry, or technology and produces something new and more efficient and worthwhile. In the current state of the agribusiness sector, we are looking for disruptive innovations. This means more than just applying technologies to make farming more productive; it involves rethinking the system we currently have and redesigning it to be more efficient, more sustainable and more interesting for all involved stakeholders.
“In the current state of the agribusiness sector, we are looking for disruptive innovations. This means more than just applying technologies to make farming more productive; it involves rethinking the system we currently have and redesigning it to be more efficient, more sustainable and more interesting for all involved stakeholders.”
Considering how digital technologies are flourishing, it is impossible to imagine any disruptive innovations that don’t involve digital technologies. Due to many factors such as cost reduction and knowledge advances and diffusion, these technologies are more present than ever in our world, including the business side of thing. In 2015, The McKinsey Global Institute released its Industry Digitization Index. Agriculture stands out in this index as being far behind in the digital revolution. The food industry, identified in the study within the basic goods manufacturing and retail trade sectors, indicates a bit more advancement in digitization, but has substantial room for improvement, according to the report. Much was done since then and a great evolution has been observed, but there is still much to be done.
Why The Agri-Food System Is Ripe For Digital Innovation
The agri-food system is ripe for expanded use of digital innovations, due to several aspects, such as:
- Its large size and complexity, with many stakeholders;
- Its large inefficiencies (unsustainable use of land and water, and significant food loss and waste); and
- Asymmetric access to technologies, knowledge, information, and markets (the vast majority of the 1.2 billion people worldwide not being covered by a broadband-capable network live in rural areas)
The list of technological/digital developments that are allowing such disruptive innovations in the agricultural sector is enormous and very dynamic, since new things and uses are being discovered every day. Some good examples are:
- Advances in data collection technologies (in situ and remote sensors)
- Adoption of precision agriculture machinery (digitization and datafication of agriculture)
- Advances in data processing (artificial intelligence, internet of things, cloud computation and increased computing power)
- Advances in encryption, data protection and data sharing technologies, and institutions for data sharing (confidential computing and multi-party computation, synthetic data release and advances in data visualization software)
- Advances in institutions for data sharing (reducing Information gaps, information asymmetries, administrative costs (transaction costs) and incentive non-alignment)
- Distributed ledger technologies (DLTs) and smart contracts (improving product traceability and integrity, contract certainty, proof/verification of geographic origin, and compliance with sanitary and phytosanitary requirements)
- Food-sensing technologies
- Digitally enabled marketplaces for agricultural products (e-platforms)
- E-extension services
- The digitization of transactions and payments, and data analytics (credit access and use)
What is truly amazing is that these technologies are allowing for great advancement in many areas of the agricultural sector, which are where these disruptive innovations are coming from. Some of these advancements are:
- Improving the use of capital, including machinery and equipment, increasing its technical and allocative efficiency
- Reducing the costs of linking sellers and buyers
- Reducing inequalities in access to information, knowledge, technologies, and markets
- Helping farmers make more precise decisions on resource management and efficiency and risk mitigation by providing, processing and analyzing an increasing amount of data faster
- Enhanced monitoring and evaluation of outcomes in agriculture
- Facilitating the acquisition of skills and knowledge needed for agricultural production, improving labor efficiency and the optimal use of inputs
Of course, all of this is not without its challenges and barriers. The necessity of financial resources to fund these technologies, creation of privacy or confidentiality regulations and standards, while not stifling innovation, development of a data infrastructure (which encompasses interoperability rules, data quality standards, norms or regulations on data ownership and data privacy, shared modelling frameworks, shared databanks, digital platforms, cloud-based storage and processing, etc.) are only a few areas that poses such challenges.
Maybe one of the most important aspects to be developed so these new technologies can produce truly disruptive innovations in the agricultural sector is the data/analytical capabilities of the professionals that are going to be driving data into actionable intelligence. Considering the Resource Based View conceptual framework, to be able to leverage assets (in this case data) to achieve competitive advantage, the right competencies have to be present.
Professionals in the agricultural sector will have to be versed in data analytics and will also have to be immersed in a new organizational culture, one that is data-driven, but also results oriented.
Disruptive innovation is the way forward in the agricultural sector and the road will be paved by digital technologies. But to be able to tread this path many obstacles will have to be overcome, some structural and others cultural. The main focus, however, should be in having the right capabilities to achieve the end goal: revolutionize agriculture.
DIAL Ventures, the innovation arm of the Purdue Applied Research Institute, tackles big problems facing the U.S. and the world such as food safety, supply chain efficiency, sustainability, and environmental impact. DIAL Ventures creates new companies that drive innovation in the agri-food industry which, in turn, makes a positive impact on our lives and lifestyles for years to come.
If you are interested in becoming a DIAL Ventures Fellow or Corporate Partner, contact us at email@example.com.