Advances in technology force us to change the way we interact with the world around us, allow us to seek new and innovative ways of operating, and provide opportunities to gain efficiencies and optimization which was previously impossible. Although many sectors have faced changes, the farming industry has undergone an incredible technological revolution to reduce labor and crop yields. Earlier this year, I read an article in the Wall Street Journal about Matt Reimer, a Canadian farmer who converted his tractor into an autonomous vehicle by using a tablet, drone parts, and open sourced software . The alterations cost approximately $8000 . After reading the article, I began to wonder: what problems are facing the modern farmer, how can digital technology help, and what are major companies like John Deere doing to stay relevant with an increasingly technologically sophisticated customer.
Farmers often face tight margins and fluctuating crop prices. Land and agricultural equipment account for high fixed costs and large capital investments. Additionally, farmers must control variable costs such as fuel, pesticides, and fertilizers . Therefore, maximizing operational efficiency is critical to success. Advances in technology and the advent of precision agriculture allow farmers to maximize crop production per acre and use analytics to minimize variable costs. In order to help farmers maximize efficiency, John Deere developed digital solutions to improve operations in agricultural vehicles ranging from GPS guided to self-driving functionality .
At first glance, John Deere’s product offering appears to be a dizzying array of acronyms, sensors, and satellites melded into green and yellow tractors . However, John Deere’s various data packages are designed to: more effectively monitor fields/equipment, link the functionality of machines to maximize productivity, and more accurately drive equipment to maximize the farmed area through AutoTrac . The equipment monitoring features are relatively simple, but the AutoTrac feature and other efficiency tools provide sophisticated solutions to improve efficiency.
AutoTrac is the heart of the self-driving software. It uses a combination of GPS, laser range finders, thermal infrared sensors, color cameras, and inertial navigation to safely steer machinery . In order to enhance the accuracy of GPS, John Deere developed its own RTK radio towers and linked its Starfire receivers to NASA’s ground stations to achieve a stated accuracy of +/- 1 inch . The self-driving technology can be utilized to reduce fatigue, maximize field usage, and integrate the automatic distribution of fertilizers, seeds, water, and pesticides .
Although digital network integration and monitoring is not part of John Deere’s traditional business model, I believe it is valuable for two reasons. First, a clear need for enhanced data monitoring and increased automation exists in the agricultural industry. If John Deere continues to innovate, there is no reason they cannot compete in this market. Additionally, the sale of heavy machinery tends to follow the broader economy. Establishing a consistent revenue source from network subscriptions will help protect John Deere from larger economic downturns.
John Deere certainly faces some challenges from the external factors and competition to achieving success in data monitoring and agricultural optimization. The regulation of the RF spectrum concerns management . Losing the ability to use current frequencies will result in large additional costs to both John Deere and the consumer . Autonomous technology also faces risks with regulation. Currently, few regulations exist regarding self driving technology in the agriculture industry . As self driving regulation reaches the automotive market, laws may become more inclusive.
The installation of the AutoTrac system and subscription fees are expensive compared to competitor options. Depending upon the required driving precision, installation alone may cost over $20,000 per tractor . Also, the John Deere hardware/software combinations are not compatible with other digital operating systems. As a result, considerable friction exists for the customer to initially purchase the product or quit using the product.
In order to maintain a competitive edge, John Deere must either invest heavily in marketing or consider partially subsidizing the equipment installation to gain market share. John Deere should also look to differentiate their product offering through robust encryption and cybersecurity . The October cyber attack which exploited the “internet of things” demonstrated the importance of cybersecurity in the modern environment .
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- John Deere Precision Ag Technology, Deere and Co Corporate Brochure. (2016).
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- Hall, L. (16 Novemer 2016). How NASA and John Deere Helped Tractors Drive Themselves. Retrieved from: www.nasa.gov
- John Deere Precision Ag Technology
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- Blumenthal, E. and Weise, E. (22 October 2016). Hacked Home Devices Caused Massive Internet Outage. The USA Today. Retrieved from: www.usatoday.com
- Image: Deere and Company