Thank you, Justin – this article does an excellent job of highlighting the more nuanced impacts of technological innovation. One question comes to mind here that seems important in understanding how to “transform the liveihoods of smallholder farmers in SSA, not just corporations,” as you importantly highlight. What is the root cause of the data shown in your first exhibit? Is this a result of physical farming conditions, or infrastructure considerations? The answer to this question will inform ways that digitization can be more effectively leveraged to improve productivity for farmers, and therefore actually provide gains for farmers.
It seems to me like some of the solutions needed have to do with scale creating access to capital intensive resources. Your examples of shared infrastructure (e.g. pooled credit and equipment sharing) highlight some ways I hadn’t thought about that digitization can enable communication to make these things possible.
You ask whether farmers, cooperatives, corporations, or governments will cooperate to make such improvements economically feasible. I actually am most interested in understanding whether there are economic gains to be generated by technology companies like Virtual City in focusing on this type of digital innovation. It seems to me that everyone in the supply chain would benefit from improved productivity and yields of smallholder farmers. My question is, is there a way to create a business model that captures this value?
To me, there are two things happening here. First is the impact of digitization on back-end operations. L’Oreal must leverage digital solutions to continually improve their supply chains. Based on the transformations you highlight (world-class information systems, automation in distribution centers, etc.), they are already making big investments here to stay competitive.
The second impact of digitization is more complex: the impact on consumer behavior and demand-side dynamics. Your strategic recommendations focus entirely on this second point, and rightly so. In today’s world, large incumbents like L’Oreal have to be two steps ahead to compete with tech-based, D2C small premium players like Dollar Shave Club, as Zoe mentions.
I’m not sure how I feel about the scarcity tactic. I agree with the prior comment, that this would need to be considered at the brand-level, as it best fits for higher-end brands but might isolate or frustrate core consumers of lower-end brands that should be focused on reliability and accessibility.
To your second suggestion – the importance of direct-to-consumer sales is paramount, I completely agree. There is enormous potential for margin capture, and more importantly, brand loyalty. Currently only a handful of their brands sell D2C on individual websites . I wonder if there is potential for them to leverage the broader portfolio to create a single platform offering a differentiated customer experience and perhaps loyalty benefits, though. As you stated it, their mission should be to create “a stronger customer relationship.”
This post paints a clear picture of the many challenges today’s agriculture industry must grapple with. These issues will continue to escalate with inaction as climate change drives down yields and arable land becomes more scarce.
As Bruce clearly articulates, John Deere is in a unique position to act and tangibly transform the industry. The development of precision agriculture technologies (even those that go beyond the tractor) are an excellent first step.  I presume they have an exceptionally broad network of relationships across the supply chain, and broad commercialization of technologies like what Blue River has to offer is extremely difficult without access to such networks and without the existing relationships and credibitliy that John Deere has to offer.
I think they can take this farther. To address Patrick’s critical question – how can we reduce the barrier to change for farmers – I believe John Deere could identify creative value-sharing arrangements that leverage their extensive capital (which farmers generally lack) to cover upfront capex of new technologies. The excess payoffs in 1) efficiency of resource usage and 2) increased yields could be shared between both parties.
To take it a step farther, John Deere could consider setting up an internal VC fund or new ventures group, as they are uniquely positioned to identify and act on key opportunity areas in agricultural technology. They have access to industry-wide data through Blue River that could be consolidated and analyzed to determine areas for cost reduction / efficiency improvement or identify trends in effectiveness of certain techniques based on geography, crop type, and more. By positioning themselves as a holistic solution-provider for farmers to cut costs and improve efficiency, they can both improve their own bottom line and enable broad-scale adoption of sustainable farming practices.
This is extremely thought-provoking. In today’s world, where access to and spread of information is nearly instantaneous, judgments of a company’s “goodness” or “badness” are often quickly made and deeply held. You raise an important point, which is that this designation is far from black and white. PMI is a great example of this. They have been despicable in their sales tactics, inherently harmful in their impact on customers’ health, and – based on the evidence you’ve provided – a true leader in addressing climate change. I don’t quite know what to make of this, but I must agree that as long as dollars continue to flow into the cigarette industry, I sure hope they’re going to PMI, for the sake of the environment. As the prior comment notes, these are market-leading approaches that can be leveraged across the industry and other agricultural sectors more broadly.
How can we, as consumers, be smart and choiceful about where we put our dollars? I think of the viral responses to one of Uber’s recent scandals: in what appeared to be a misunderstanding, within hours thousands were deleting their Uber app and posting “#deleteuber.”  Setting aside the rest of Uber’s tumultuous year… in this isolated scenario customers were quick to conclude that Uber must be “bad” and punish the company by switching to competitors. As the purchasing power of millennials grows, this type of discretion in purchasing behavior will become increasingly important. For companies like PMI, transparency and effective communication will be critical to sway consumers in their favor, giving credit where it’s due.
 “What You Need to Know About #DeleteUber”. https://www.nytimes.com/2017/01/31/business/delete-uber.html
This is an incredibly compelling argument for – as you’ve written – a “simple concept.” The costs of stockouts in the medical world are far higher than in retail / consumer goods; “higher” is definitely an understatement, as illustrated by your opening example. So why is the industry where this really matters so far behind? Hospital management – not doctors, clinicians, or staff – are likely the ones identifying strategic cost-cutting initiatives.
One company advertising such services cross-industry, Mvix, writes: “Consider the amount of inventory that exists across the U.S. healthcare supply chain network. If total healthcare costs in the U.S. are around $3 trillion, the system probably requires inventories equaling at least $300 billion. If a conservative 20% could be eliminated through better inventory management, $60 billion could be saved in working capital… That is a lot of new free cash flow.” 
With these sorts of cost savings, it’s hard to imagine why such technological advancements – which to me appear relatively risk-free – won’t be adopted at scale. As you mention, this is particularly relevant as the industry consolidates; fixed costs of investment in new systems can be spread across networks to make them cost-efficient and enable speedy pay-back. So to my naïve eye, upfront cost seems the major barrier – but I would imagine that with a more intimate understanding of hospital systems, it’s far more complex decision.
 “Can Hospital Digital Signage heal Inventory Management Problems?” http://mvixdigitalsignage.com/blog/can-hospital-digital-signage-heal-inventory-management-problems/
I may be a die-hard Whole Foods fan, but I still drag myself down the road to Trader Joes every week. I just can’t stomach the cost. So when I heard the news of the Amazon acquisition, and began to hear the buzz about real, serious price cuts, I was thrilled. Publicity and marketing materials catered to consumers like me; Whole Foods’ CEO John Mackey said, “By working together with Amazon and integrating in several key areas, we can lower prices and double down on that mission and reach more people with Whole Foods Market’s high-quality, natural and organic food.” (Forbes: Amazon Lays Out Its Whole Foods Strategy And Shakes Up Wall Street Anew). The key takeaways seem straightforward: Amazon is doing some fancy Amazon magic to maintain quality high, but slash prices. I didn’t think about the “how,” though. Is it too good to be true?
As you mentioned, Whole Foods was founded on the principles of local and organic. This was a key differentiator from other grocers, and one of the key reasons consumers are willing to pay more for their products, as you highlight in Figure 2. It is unsurprising that as Whole Foods has scaled nationally, they’ve had to consolidate certain elements of their supply chain. I presume dry goods and private label products comprise a hefty majority of their inventory. But I like to think that, at least pre-merger, produce and meat continued to be sourced locally where possible.
You make an excellent point that with Amazon in the picture, it’s hard to know if they will continue to prioritize local over profits. There are many reasons I’d imagine they will NOT do so… to cut raw material costs and increase purchasing power; to reduce labor costs (assuming the sourcing / accreditation process is resource-intensive); to centralize procurement to enable integration with Amazon Fresh and other digital platforms. But the optimist in me hopes that Amazon will recognize and protect Whole Foods’ core values with long-term, sustainable profits in mind. Perhaps with their financial backing and technological systems they can absorb or decrease the costs of local sourcing, making it nearly impossible for smaller players to compete – but ultimately supporting local communities nationwide. Only time will tell… fingers crossed.