Agribusiness and Digital Disruption – What has changed?
The global pandemic continues to have far-reaching and unpredictable effects on many businesses, and indeed, on entire industries. While agriculture has been comparatively resilient when looking at other industries in the pandemic, areas of the agriculture industry have been pushed to the limit during this stressful period, faced with everything from consumer panic buying and supply chains being stretched, to the restriction of movement having ripple effects across the supply chain. With harvest season now almost completely over, and Brexit looming on the horizon, the pressure remains high in the sector.
For months we’ve been asking when we’ll start to return to normal, and by now, the tone of that conversation is changing. We have all now accepted that we are unlikely to see a complete return to the ‘old normal’ that we saw back in February. And for agribusinesses, this might be a good thing.
The pandemic alone will not decide the future of agriculture. Organisations are currently navigating the complexities of a withdrawal from the European Union, and the associated loss of substantial support schemes. Under such subsidies, innovation is often severely suppressed, so as these schemes end or are replaced, how can agricultural businesses promote innovation and streamline to ensure they become profitable entities?
We spoke with our lead Agricultural consultants, to see what changes the industry might expect post Covid-19:
WHY IS GROWTH IN AGTECH SO IMPORTANT?
AgTech has been making leaps and bounds over the last five years and has become something of a hot topic in investor circles. The development of available technology in the sector is wide reaching – everything from data management to moisture sensors and drone technology. What makes the disruption in agriculture so different is that it is less about the consumer and instead is about delivering desperately needed innovation and efficiency, to bring farming and agriculture into the digital age. We all know this is nothing new – a growing population and climate change means the agricultural industry needs to find new and more effective ways to do more with less.
Competition in farming has steadily increased, along with the other factors such as increasingly low margin, and we are at a point where there is now a pressing need to keep farming viable. Conventional farming today is supported by huge government subsidies; even with these, farming is an extremely tough business. Political uncertainty and the future of these subsidies also serve to make the situation tougher. AgTech presents an almost unique opportunity to innovate and change the way we approach agriculture, as well as attracting new and young talent to the industry.
WILL TECHNOLOGY ADOPTION INCREASE?
This is a hard one to judge. One side effect of this global pandemic is that across the supply chain the industry has had to take a hard look at their use of technology and reassess where it sits in the process. For example, we have seen changes to the supply chain, leveraging eCommerce to seek out a more local consumer, as well as investment in automation, to combat labour shortages.
On the one hand, adoption of technology has been steadily growing, and the lasting impacts of Covid-19 could see this accelerate if businesses want to survive in the changing environment. Businesses may take the view that as change is happening anyway, they should capitalise and innovate. On the other hand, with money and budgets getting tighter, there is a risk of a slowdown in the adoption of technology as agribusinesses tighten their belts. The future is by no means certain, and another attitude could be to wait and see happens globally, and how other businesses decide to adapt and evolve before making any decisions. The biggest risk here is that companies get left behind and are faced with huge amounts of ground to cover in order to ‘catch up’ to the rest of the market.
We would always advise trying to make small, incremental changes, moving in the right direction with a more agile approach. This can also allow businesses to control the risk level, and pivot and adapt their strategies during the innovation and transformation process. Five steps in roughly the right direction gets you closer to the finish than not taking any steps at all.
WILL WE SEE MORE RESISTANCE TO CHANGE AND DIGITAL SOLUTIONS?
Resistance to change exists in all industries, and has always been one of the main challenges to overcome in agriculture. This reluctance isn’t something that is just going to disappear because most of the world has had to find ways to move parts or all of their business online. Much has been tried and tested during the past few months, and introducing new technology and ways of working may be more important now that it has ever been before.
That said, because of these strained times, we are certainly going to see a strong focus on ‘the need to have’ (as opposed to the ‘nice to have’). Farmers specifically will be looking for products and services that will make a significant and meaningful impact. They will be looking for the ‘low hanging fruit’ where they will feel an immediate benefit, such as driving yield improvements, preparing for ELMS, and reducing input costs. There is a growing understanding of the value of data and how far it can be utilised, including the possibility of more accurate predictions.
The most important thing for agricultural businesses to remember it to always consider longer term strategic objectives. Focusing only on the short term and firefighting during this crisis could leave you exposed as the situation changes.
WILL COVID-19 IMPACT R&D?
The post pandemic environment is a tough one, especially for cash-poor start ups. However, it seems investment firms and larger agricultural firms are taking the long view when it comes to R&D. There is already a significant technology gap in agriculture so maintaining investment in critical new technologies will be essential to keep up with developments and digital solutions. Falling behind now in such competitive and high-pressured markets could be fatal for technology companies and agribusinesses alike. On the side of the user, we could also see agribusinesses demanding more from technology providers and more evidence of the potential benefits, raising the threshold of whether businesses will decide to adopt technology and change the way they operate.
WHAT ARE THE BIGGEST CHALLENGES AROUND AGTECH FACING THE AGRICULTURAL INDUSTRY TODAY?
Data is one of the most common challenges we encounter. Quite simply, there is an enormous amount being produced, and only a small fraction of that is being used in a meaningful way. In many instances, agribusinesses just don’t know where to start when thinking about the ‘data’ problem. At every level, farmers and business are producing a huge amount of data but do not have the tools to access it or derive any meaningful value. This leaves them often facing a situation where data has been poorly collected with little to no strategy, resulting in data silos that cannot be connected or utilised. It’s a problem that continues to grow and will continue to get more difficult the longer it is left un-tackled. This is where most support is, and why we are seeing a growing emergence of data platform businesses in the agricultural industry.
From sensors on the field to drones and weather satellites, there is highly valuable data being collected every day that could be used to deliver meaningful insight, with the right data strategies and analytic tools in place. The opportunities this could offer are wide ranging, and the potential efficiency gains are not insignificant – everything from greater visibility on risk, food traceability, and pricing transparency through to monitoring natural trends.
WHAT’S HOLDING AGRIBUSINESSES BACK?
There are a number of factors that are changing the face of agriculture today. ELMS is on the way, bringing with it a new host of regulatory requirements for businesses to adhere to. As part of this, carbon and climate change mitigation continue to have a growing importance. Compound this with the challenges presented by Covid-19, and agriculture has a lot of changing situations that could influence the advancement into digital. The three common factors that we hear as holding businesses back from making the move to a more digital operation are:
- a lack of internal expertise on digital/technology (therefore a lack of understanding on where or how to start),
- a lack of budget,
- or a lack of time.
Often the lack of knowledge or expertise is the hardest challenge for businesses to overcome. The idea of tackling digital transformation can be a daunting one, and we often encounter an element of fear when we first start talking with businesses who are trying to make changes. This is normal and it’s essential that consultancies, software and technology providers, and other businesses with the technical expertise work closely with agribusinesses to help breakdown the transformation journey into smaller change projects to deliver value quickly and efficiently.
FINALLY, WHO SUFFERS MOST FROM A RELUCTANCE TO CHANGE?
So, who actually feels the most impact from the resistance to change – is it the customer, the farmers? Actually, there isn’t just one group that suffers the most, arguably the effects can be felt across the entire supply chain. The biggest for agribusinesses today is getting left behind. With AgTech becoming more prevalent we should expect to see digital disruption across all areas of the sector. Failing to change isn’t optional any longer. Technology moves fast, and the benefits it can bring can be realised quickly, meaning those who decide to put off change could put themselves at greater risk of being outperformed by competitors.
In summary, whilst we are all facing the challenges of the unknown as we navigate the pandemic, the opportunities it provides are numerous, and can be seen particularly in the agricultural sector. If businesses can capitalise on the high demand, and new technology on offer, we could be looking at some significant shifts in approaches and ways of working. Leveraging complimentary expertise from a variety of industries will also allow agriculture to innovate and become more efficient in their practices.