In 1837, farmers were in a bind. The prairie soil of the Midwest was sticking to farmers’ cast-iron plows and hindering productivity. Enter John Deere, a typical blacksmith producing horseshoes and hayforks, who had an innovative idea. By creating polished-steel plows from sawmill blades, Deere overcame the sticky soil situation, boosted productivity, and launched John Deere.
Fast-forward 179 years and John Deere is still leveraging innovation to revolutionize farming and address a societal problem: food scarcity. Given that the global population will reach 9.6 billion people by 2050, food production must increase by 70% over the next few decades. (i) Farmers are pushing equipment providers, like Deere, to reimagine themselves as technology companies and focus on their technological capabilities to differentiate in the world of “smart farming.”
Deere’s Customers Fawn Over New Customer Value Prop: Process Optimization through Data-Centric Technologies
While the farming industry used to rely on steel machines and farmers’ gut feelings, digital technology transformed the lay of the land, literally and figuratively. A modern-day farm may consist of:
- Fleets of machines driving themselves and each other in tight formations through IoT sensors and wireless communication
- Seeds being planted at the optimal depth, distance & pressure after soil type information is collected from IoT sensors and analyzed on mobile applications
- Deere technicians arriving with necessary parts after remotely reading diagnostic codes
- Farmers accessing real-time data on tractor location & system performance as well as crowd-sourced data from the cloud
To compete, Deere can no longer differentiate on having the biggest, fastest equipment and instead needs the smartest, most productive equipment. Deere’s new value proposition focuses on process optimization – reduced costs, increased yield and increased sustainability – through data-centric technologies and improved information flow. Over the past several years, Deere invested in four product areas to enhance its value proposition:
Deere, will you be a doll & grab me a new operating model?
To execute on its tech-enabled business model, Deere adjusted its operating model and expanded its core capabilities. In 2009, Deere created the Global Operating Model for Sustainable Growth, merging the “organization and internal reporting of the agricultural equipment segment with the commercial and consumer equipment segment.” (iii) This new division was divided into four regions and five product portfolios to promote agility, innovation, and responsiveness to customer needs and market conditions. (iv) This structural change positioned Deere to leverage economies of scale and innovate across products, holistically.
Deere also adjusted its people and processes. As Deere’s CIO notes, “when you think of John Deere you think of a bunch of mechanical engineers who are designing big steel parts, but we have 2,600 employees who…are writing software.” (vi) Deere formed an internal division dubbed the Intelligent Solutions Group, which required Deere to recruit and manage new skillsets. Through the years, Deere had perfected a continuous improvement process, but it now had to simultaneously support an agile development process for its new software engineers. (vii & viii)
Investing in cloud-computing capabilities, big-data analytics and open APIs also transformed Deere’s operations. Deere developed a partnership with AWS, enabling machine data and agronomic data to be routed seamlessly to the cloud through telematics. Deere took its technological capabilities one-step further by creating its Open Data Platform where 3rd party developers can create applications to conduct data analysis or connect other pieces of equipment to Deere’s data.
These adjustments to Deere’s org structure, employee talent pool and development processes are a few examples of the strides Deere is taking to transform its operations.
Can Deere Continue to Buck the Odds and Evolve into a Tech Company?
While Deere has successfully adapted to digital disruption thus far, it must continue to evolve its operating model and fend off looming threats to the business.
Increase Adoption Rate. 88% of the 2.1 million farms in the US are small family-farms. (ix) Through enhanced marketing tactics, user training and user support, Deere must focus on adoption of its technologically-advanced products.
Push for Government Subsidies. Given the seriousness of food scarcity, Deere should work with other stakeholders to push for government subsidies for the development and adoption of new technologies.
Update Brand and Improve Recruiting. As Deere rises to the ranks of a leading tech-firm, it will need to invest in its talent. The competition for software engineers is fierce, and Deere should rebrand & restructure to recruit talent.
Address Data Concerns. Issues around data ownership will increase as adoption increases, so Deere must implement strict operating procedures and policies to address this matter. “From a policy perspective, issues related to big data involve nearly every stage of its existence, including its collection (how it is captured), management (how it is stored and managed), and use (how it is analyzed and used).” (x)
One thing is certain, Deere ain’t no deer in headlights when it comes to digital disruption. From the polished-steel plow to the world of IoT, Deere’s journey has been long, and the company must remain innovative and agile to survive in the world of smart farming.
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(i) “Towards Smart Farming: Agriculture Embracing the IoT Vision,” Beecham Research (May 2015), https://www.beechamresearch.com/files/BRL%20Smart%20Farming%20Executive%20Summary.pdf , accessed November 2016.
(ii) John Deere, “Farm Forward With John Deere Farm Sight,” YouTube, published September 7, 2012, https://www.youtube.com/watch?v=_LwqYxnWXJI, accessed November 2016.
(iii) John Deere, 2009 Annual Report, p. 47, https://www.deere.com/en_ASIA/docs/brochure/our_company/investor_relations/annual_reports_and_ceo_message/2009/pdf/2009annualreport.pdf, accessed November 2016.
(iv) “John Deere Announces New Global Operating Model for Sustainable Growth,” April 14, 2009, PR Newswire, http://www.prnewswire.com/news-releases/john-deere-announces-new-global-operating-model-for-sustainable-growth-61806762.html, accessed November 14, 2016.
(v) Charles Donahue, “Smart Agromatics: A Perspective From John Deere,” PowerPoint presentation, June 18, 2014, Smart AgriMatics International Conference, Paris, France.
(vi) Christopher Mims, “To Feed Billions, Farms Are About Data as Much as Dirt,” Wall Street Journal, August 9, 2015, http://www.wsj.com/articles/to-feed-billions-farms-are-about-data-as-much-as-dirt-1439160264?mg=id-wsj, accessed November 14, 2016.
(vii) John Deere, “Building the Best Combines,” YouTube, published August 26, 2016, https://www.youtube.com/watch?v=rglT0M4HzTI, accessed November 2016.
(viii) John Deere, “John Deere, ISG and the technology to help feed the world,” YouTube, published December 21, 2012, https://www.youtube.com/watch?v=hoqPFmJpFNw, accessed November 2016.
(ix) “Family Farms are the Focus of New Agriculture Census Data,” press release, March 17, 2015, on USDA website, http://www.usda.gov/wps/portal/usda/usdamediafb?contentid=2015/03/0066.xml&printable=true, accessed November 2016.
(x) Megan Stubbs, “Big Data in U.S. Agriculture,” Congressional Research Service Prepared for Members and Committees of Congress (January 2016), Congressional Research Service, https://www.fas.org/sgp/crs/misc/R44331.pdf, accessed November 2016.