Hugo Campos Editor

The Innovation
Revolution in
Agriculture
A Roadmap to Value Creation
The Innovation Revolution in Agriculture
Hugo Campos
Editor

The Innovation Revolution

in Agriculture
A Roadmap to Value Creation
Editor
Hugo Campos
International Potato Center
Lima, Peru

ISBN 978-3-030-50990-3    ISBN 978-3-030-50991-0 (eBook)

https://doi.org/10.1007/978-3-030-50991-0

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Foreword

Innovation is the source of progress. Without it, livelihoods contract and prosperity
declines. In medicine, innovation leads to disease prevention and cures. In the farm-
ing and food sectors, innovation increases production, improves post-harvest han-
dling, as well as reduces the environmental footprint to deliver greater value to
consumers.
Innovation in these sectors is needed more than ever. More than 800 million
people are chronically undernourished worldwide, while two billion suffer from
micronutrient deficiencies. Water, land and forests are under increasing pressure
with changing weather and climate patterns negatively impacting agriculture. Many
of the world’s poor live in rural areas and depend on farming and natural resources
for employment and livelihoods. Innovation is needed, but what constitutes innova-
tion in this field? How does it arise, and what can be done to achieve more of it?
What motivates users to adopt or reject innovation, and how can it be brought to
bear on specific challenges, especially at scale? These questions are the subject of
this timely book: The Innovation revolution in agriculture – A roadmap to value
creation by Dr. Hugo Campos and his coauthors.
This book defines innovation as “significant, positive change” that innovators
work for and hope to achieve. Examples include increases in crop yields due to bet-
ter management and improved seeds. Productivity growth underpins food and nutri-
tion security, poverty reduction, and the conservation of natural resources. It arises
when farmers adopt improved technologies and practices developed by R&D
efforts, often paid for by governments or private investors. Adoption is the “prize.”
There is no market for innovations without user adoption nor any scope for impact
or investor reward. Understanding adoption is therefore key.
Among the factors that drive adoption, two stand out: relevance and availability.
First, innovations must be relevant from the user’s point of view, offering real
improvements compared with what they already have and reducing satisfaction
gaps they deal with in their daily lives. Second, innovations must be available in the
market, allowing supply to fulfill demand, so that value creation can take place.
Adoption-friendly business conditions are important too but may be beyond

v
vi Foreword

developers’ immediate control. Policy bias against agriculture, disrespect for prop-
erty rights, and inadequate farmer access to information, finance, insurance, and
markets can also inhibit adoption.
Ultimately, users adopt innovations that make life easier for them, raise the prof-
itability of what they do without adding too much risk, and help them realize their
dreams and aspirations. Market research to understand how a proposed innovation
helps users “get the job done” can lead to relevance-enhancing insight and design.
Thus, market-led approaches to agricultural innovation are superior to purely
science-­based work from an adoptability point of view.
Science is a means to an end that can be assembled in a variety of ways, but the
focus should be on what users want. The private sector knows this. The public sector
appears often not to be aware of it. The need to innovate is not trivial and the list of
failed innovation attempts in different sectors and industries is long. The common
factor in publicly and privately driven innovation successes over the past 50 years in
agriculture involved products and solutions considered relevant by users and dis-
seminated systematically through national programs and input markets.
Therefore, the authors persuasively contend that innovation requires business
models that create and deliver value. Interacting with the market and clarifying user
needs is the place to start, followed by identifying potential technologies and R&D
strategies to address them —not the other way around. Ecosystems of skills, meth-
ods, partnerships, and resources need to be assembled to drive the task, assess prog-
ress from time to time, learn from failure, change course if required, test prototypes,
and finally bring products to market. Claims of success should be held back until
proof of sustained adoption is demonstrated.
Business models are also needed to improve the enabling environment for uptake
of innovations by farmers and across agrifood value chains. The transaction costs of
accessing markets, information, and farm services are often high from farmers’ per-
spectives and need to be reduced. This book discusses partnership-based ventures
where public and private actors work together to achieve better value. It explores the
role of digital technologies and big data in agricultural innovation and assesses
“market-making” efforts to help farmers respond to new opportunities such as nutri-
tious, high-value, profitable crops.
Agricultural and food markets are undergoing rapid change for two main rea-
sons: (1) rising consumer demand for quality and convenience and (2) changing
economies of scale and scope in procurement, processing, wholesale, and retail.
This changes the technology frontier, calls for appropriate decision support systems
for farmers and others in value chains, and opens prospects for new input and output
traits for crops. Agricultural and food innovation systems are invited to respond.
Studies have shown that investment in agricultural R&D pays high dividends in
terms of productivity growth and other rewards. There should be more of it, particu-
larly in parts of the world where malnutrition abounds, and where climate change is
particularly damaging to food production. The effectiveness of agricultural R&D
efforts varies, however, depending on the approach researchers and developers
take—in other words, the business model they follow. Scientific exploration alone
is unlikely to lead to adoptable technologies and traits.
Foreword vii

Dr. Campos and coauthors make the case for market-preferred solutions based
on users’ needs. Ultimately, developers of agricultural and food systems innovation
must focus on the satisfaction gaps they seek to close, not the technical solutions
that may or may not address these gaps, epitomized by the concept of “user pull, not
technology push”. Product relevance is thus a predictor of adoptability and scalabil-
ity alike. In the end, innovators seeking “significant, positive change” and investors
looking for returns on investment on agricultural R&D ignore the user satisfaction
gap at their peril.

Chair, CGIAR1 System Management Board Marco Ferroni

1
Towards a world free of poverty, hunger and environmental degradation, CGIAR is the world’s
largest global agricultural innovation network. https://www.cgiar.org
Blurb

Praise for The Innovation Revolution in Agriculture – A Roadmap to Value

Creation
This book is an important reframing of the role of innovation in agriculture. Dr.
Campos and his distinguished coauthors address the need for agriculture to feed a
growing global population with a reduced environmental footprint while adapting to
and mitigating the effects of changing climate. The authors expand the customary
discussion of innovation in terms of supply driven R&D to focus on the returns to
investors and most importantly the value to end-users. This is brought to life by
exploring effective business models and many cases from agricultural systems
across the globe. The focus on converting the results of innovation in R&D into
adoption by farmers and other end-users is its greatest contribution. Many lessons
from the book can be applied to private and public sectors across an array of agri-
cultural systems. This book will be of enormous value to agri-business profession-
als, NGO leaders, agricultural and development researchers, and those funding
innovation and agriculture across the private and public sectors.
–– Tony Cavalieri, Senior Program Officer, Bill & Melinda Gates Foundation

The book by Dr. Hugo Campos and coauthors makes a compelling, strong, and
elegant case: market-led approaches to agricultural innovation are superior to purely
science-driven efforts. Innovation must focus on “the job to be done” and the satis-
faction gaps users deal with in their daily lives.
The authors persuasively argue that innovation requires business models that cre-
ate and deliver value to users, society, and investors. Interacting with the market and
clarifying user needs is the place to start, followed by finding technologies and
R&D strategies to address them—not the other way around.
Ultimately, developers of agricultural and food systems innovation must focus
on the user satisfaction gaps they seek to close, not the technical solutions that may
or may not address these gaps, epitomized by the concept of “user pull, not technol-
ogy push.” Innovators and investors seeking returns on investment on agricultural

ix
x Blurb

R&D ignore the stance on innovation Dr. Hugo Campos and his coauthors provide
at their own peril.
–– Marco Ferroni, Chair, CGIAR System Management Board

Hugo Campos, Ph.D., M.B.A., has 20+ years of international corporate and
development experience. His distinguished coauthors represent a rich collection of
successful innovation practice in industry, consultancy, international development,
and academy, in both developed and developing countries.
Acknowledgements

I consider myself a fortunate person. This book is just one example of what luck has
enabled me to do as part of my professional career.
Innovation is, by and large, a collective endeavor, and the same is true about the
tenets and insights considered in this book.
First and foremost, I would like to thank each and every coauthor (Margaret
Zeigler, Ann Steensland, Cees Leeuwis, Noelle Arts, Mathias Müller, Per-Ola
Ulvenblad, Nick van der Velde, Niek van Dijk, Janet Macharia, Kwame Ntim Pipim,
Hiwot Shimeles, David Donnan and Steve Sonka) and the organizations they are
associated with, for selflessly sharing their most priceless asset: time. This book
would not have been possible without the gift of their time and commitment. I am
deeply grateful for their contributions.
Though my fascination with innovation started several years before, it received a
formal jumpstart when Mark Cooper, my former boss at Corteva Agrisciences, sup-
ported my professional development. He encouraged me to take a course that was
not directly related to my job (molecular breeding in maize in those years) on the
Management of Technology and Innovation at the University of Notre Dame. Later,
Miguel Alvarez Arancedo at Bayer was the main champion behind getting me
enrolled in the University del Desarrollo’s MBA program, focused on innovation
and entrepreneurship. The above described chain of events led me to an epiphany:
the realization that innovation is not only about technology, rather it is mainly about
behavioral change. Thanks also to Francisco Santibañez and Fernando Sanchez,
Directors of such MBA program. During their tenure, I had the privilege to serve as
a part-time professor of innovation management, business models design, corporate
entrepreneurship, and technology management. Through many discussions with
hundreds of talented MBA students, I was able to further refine and better articulate
my views on innovation. I am grateful to each of my former MBA students.
I also want to thank the International Potato Center (CIP), my current employer,
as well as Oscar Ortiz, my current boss, for his continuous encouragement and good
advice, for allowing me to work on this book, and for accepting my continuous chal-
lenge of the status quo.

xi
xii Acknowledgements

On behalf of all coauthors, I would like to wholeheartedly thank the Bill and
Melinda Gates Foundation, for kindly accepting to cover the Open Access fees for
our book, as it will enable its contents to become available to a much wider and
more inclusive readership.
Many excellent discussions over the years have led to this book, including with
Steven Blank, Ian Barker, Anthony Cavalieri, Pablo de la Fuente, Greg Edmeades,
Dick Flavell, Bob Fraley, Robert Graveland, Jacqueline Heard, Simon Heck, Jerry
Hjelle, Felipe Jara, George Kotch, Jim Lorenzen, Marco Ferroni, Richard Mithen,
Heidi Neck, Michael Quinn, Mike Robinson, Tina Seeling, Graham Thiele, Claudio
Torres, Pietro Turilli, Pablo Vaquero and Barbara Wells, among others. These dis-
cussions have sharpened my perspective on innovation and have helped me to
extend it, from the corporate world I come from to the domain of international
development.
Catherine Scott and Dave Poulson have shared their rich perspective and experi-
ence in storytelling, to help me to polish my narrative and articulate it more effec-
tively. Thanks are also due to Lilia Salinas and Carla Alvarado for their superb and
kind support with day to day activities at CIP.
I am incredibly fortunate to have established a long-term publishing relationship
with Springer. Special thanks must go to my Editor, Joao Pildervasser, and also to
Anthony Dunlap, Vignesh Viswanathan and Mario Gabriele for all the work behind
the scenes, for nudging me when needed so deadlines were (almost!) met, and par-
ticularly for the second to none professional support as the book moved into produc-
tion, publishing and marketing.
Finally, I owe a deep debt of gratitude to Orietta, my wife, and to our grown-up
children Ignacio and Noelia. I am very proud of them, grateful for their love and
support, and for their tolerance of my business travel schedule.
My wife Orietta, particularly, deserves utmost recognition for her unflagging
support, for her love, and for the tough job of being my wife. She is my best friend
and my most perceptive critic. Orietta, without you I simply could not do what I do.
This book is dedicated to you.
To the readers of this book, my coauthors and I share the hope that you put the
insights and learning gathered here to practice and good use. May they enable you
to lead innovation efforts, and also to help others in their innovative endeavors.
Always keep in mind that the overarching objective of innovation should be improv-
ing the wellbeing, quality of life and outlook of end-users. That will mean this book
has been a success.

International Potato Center  Hugo Campos

Lima, Peru
Introduction

Peter Drucker, one the main and more prolific thinkers of management during the
last decades, once noted that the purpose of a business is to create and keep a cus-
tomer, and that it has only two basic functions: marketing and innovation.
Long-term economic growth is driven by innovation. Agriculture’s innovation
footprint is evident in developed countries. The payoff was considerable. Food
became more affordable. People became less likely to starve. And the increased
productivity from the automation of agriculture led farm workers to migrate to cit-
ies. There they helped the industrial economy develop and grow. New goods and
services were created and consumption increased. Productivity rose even more as
automation drove costs down at a global basis, making transportation, healthcare,
and education more affordable.
Despite such undeniable progress, innovation in agriculture did not have the
same impact globally. In many places, productivity increases are modest. Just like
in any other industry or human endeavor, most agricultural innovation efforts fail to
deliver the value expected to its intended users and fall short of expected returns on
investments to its funders.
Innovation plays a pivotal role in providing affordable, nutritious food, feedstuff,
and fibers to humankind. The need for increasing its success rate is even more press-
ing with the looming challenges of climate change. At only 1.2 °C of mean global
surface warming, many aspects of climate change are not just visible, they are
severe. The challenges agriculture faces to feed the world will rise with increasing
temperatures. Indeed, recent modelling work shows that a warmer world will reduce
global yields of wheat, rice, maize, and soybean1, crops that provide two-thirds of
human caloric intake. The consequences are widespread. “You can’t build peace on
empty stomachs,”2 Nobel Laureate Lord John Boyd Orr, the great crusader against
hunger and the first director-general of the Food and Agriculture Organization,
once said.

1
Chao et al., 2017. Proc. Natl. Acad. Sci. USA. 114(35): 9326–9331.
2
https://www.nobelprize.org/prizes/peace/1970/borlaug/lecture/

xiii
xiv Introduction

Those words resonate today louder than ever.

Regardless of its nature (industry, international development, academy, profit-­
seeking, or non-profit), any current perspective of innovation in agriculture must be
able to articulate the following underpinnings into one cohesive framework: how
best to deploy (always limited) financial resources and human talent within innova-
tion ecosystems, so goods and services are actually adopted and value is created for
users and customers; how to better understand and lessen the formidable barriers
users encounter through the processes of articulating their needs and innovation
adoption; and what aspects other than technology are of the essence to delight cus-
tomers and fulfill their satisfaction gaps.
Through the chapters and minds assembled to prepare this book, we have
attempted to bring an updated body of insights and knowledge able to provide such
framework. Furthermore, we posit that putting such framework to good use will
increase the likelihood of success of innovation in agriculture and food systems.
Our book addresses how to rethink research and development and the role of inno-
vation ecosystems, so that innovation delivers goods and services that users actually
adopt. It also discusses what is needed to increase the actual adoption of innovations
launched to the market, and one of its tenets is that the role that technology plays in
successful innovation is less critical than most people think. Since an essential com-
ponent of every successful innovation effort is a customized business model able to
create, capture, and share value, several chapters discuss, from different perspec-
tives, the critical role that business models play in innovation. We posit that devel-
oping the right business model can be a better predictor of innovation success than
the actual goods or services being launched.
The adoption of innovation represents, by and large, the outcome of behavioral
change rather than a process mostly driven by technology; a case is made that to
increase the success rate of innovation efforts, innovators need a thorough under-
standing of the satisfaction gaps and pains that users or customers deal with on a
daily basis as well as a crystal clear understanding of the job they are trying to get
done. No wonder Peter Drucker once stated: “The customer rarely buys what the
company thinks it is selling him.”
Since behavioral change is deeply rooted in human, sociological, and biological
aspects common to humankind, the knowledge, insights, and experience provided
by our book can be equally applied to for-profit and nonprofit organizations, and to
the domains of intensive agriculture in developed countries and agricultural interna-
tional development as well.
This book has assembled a distinguished group of experts from industry and
academia in diverse aspects of innovation. Ann Steensland and Margaret Zeigler
discuss critical links between innovation and productivity, and the role of Total
Factor Productivity3 on the ability of agricultural and food systems to deliver afford-
able, nutritious food and feedstuff. Cees Leeuwis and Noelle Arts explain the ­pivotal

3
Total Factor Productivity can be thought of as a proxy for the innovative activity of the unit being
measured (country, economic sector, geographic region).
Introduction xv

role of social sciences in adoption and diffusion of innovation. One area of increas-
ing relevance is the paradigm of Open Innovation, addressed by Mathias L. Müller
and myself. Per-Ola Ulvenblad details the dynamics of a diverse array of Swedish
agribusiness models. Nick van der Velde and colleagues provide a refreshing
description of how innovation at the Base of the Pyramid is not a dream but is
already creating substantial value and positive impact in the livelihoods of people in
many developing countries. Agriculture plays a central role in agrifood systems, and
David Donnan provides a compelling narrative on the corporate perspective on food
production and distribution. Finally, Steve Sonka describes how big data already
touches almost every aspect of agriculture and how information technologies
encourage agricultural innovation and sustain increased productivities while reduc-
ing agriculture’s environmental footprint. At the inception of the book, I contribute
a current overview of innovation and discuss several factors increasing the likeli-
hood of success of innovation efforts.
We trust that our collective framework helps you deliver value to your customers
while improving their quality of life, and because of that you can develop further
your personal and professional growth, and the organization you belong to achieves
its goals and objectives. We look forward to hearing about your innovation
endeavors!
Contents

1 The Quest for Innovation: Addressing User Needs and Value

Creation����������������������������������������������������������������������������������������������������    1
Hugo Campos
2 Productivity in Agriculture for a Sustainable Future��������������������������   33
Ann Steensland and Margaret Zeigler
3 Open Innovation and Value Creation in Crop Genetics����������������������   71
Mathias L. Müller and Hugo Campos
4 Rethinking Adoption and Diffusion as a Collective Social
Process: Towards an Interactional Perspective ������������������������������������   95
Cees Leeuwis and Noelle Aarts
5 Development of Sustainable Business Models for Innovation
in the Swedish Agri-­sector: Resource-Effective Producer
or Stewardship-Based Entrepreneur? �������������������������������������������������� 117
Per-Ola Ulvenblad
6 Innovating at Marketing and Distributing Nutritious Foods
at the Base of the Pyramid (BoP): Insights from 2SCALE,
the Largest Incubator for Inclusive Agribusiness in Africa ���������������� 147
Niek van Dijk, Nick van der Velde, Janet Macharia,
Kwame Ntim Pipim, and Hiwot Shimeles
7 Innovation and the Quest to Feed the World���������������������������������������� 179
David Donnan
8 Digital Technologies, Big Data, and Agricultural Innovation�������������� 207
Steven T. Sonka

Index������������������������������������������������������������������������������������������������������������������ 227

xvii
Contributors

Noelle Aarts Socio-Ecological Interactions group at the Institute for Science in

Society, Radboud University, Nijmegen, The Netherlands
Hugo Campos International Potato Center, Lima, Peru
David Donnan Kearney, Chicago, IL, USA
Cees Leeuwis Knowledge, Technology and Innovation group at the Section
Communication, Philosophy and Technology, Wageningen University, Wageningen,
The Netherlands
Janet Macharia BoP, Inc., Utrecht, The Netherlands
Mathias L. Müller Corteva Agrisciences, Johnston, IA, USA
Kwame Ntim Pipim BoP, Inc., Utrecht, The Netherlands
Hiwot Shimeles BoP, Inc., Utrecht, The Netherlands
Steven T. Sonka University of Illinois, Champaign, IL, USA
Ed Snider Center for Enterprise and Markets, University of Maryland, College
Park, MD, USA
Centrec Consulting Group LLC, Savoy, IL, USA
Ann Steensland Global Agricultural Productivity Initiative, Virginia Tech,
Blacksburg, VA, USA
Per-Ola Ulvenblad School of Business, Innovation and Sustainability, Halmstad
University, Halmstad, Sweden
Niek van Dijk BoP, Inc., Utrecht, The Netherlands
Nick van der Velde BoP, Inc., Utrecht, The Netherlands
Margaret Zeigler HarvestLAC, Washinton, DC, USA

xix
Chapter 1
The Quest for Innovation: Addressing User
Needs and Value Creation

Hugo Campos

1.1 Why Innovation?

There is nothing more difficult to take in hand, more perilous to conduct, or

more uncertain in its success, than to take the lead in the introduction of a new
order of things. For the reformer has enemies in all those who profit by the old
order, and only lukewarm defenders in all those who would profit by the new
order, this lukewarmness arising partly from fear of their adversaries… and
partly from the incredulity of mankind, who do not truly believe in anything
new until they have had actual experience of it. – Niccolò Machiavelli

The need to innovate is more urgent than ever before. While every economic sector
has this need, few are more pressing than agriculture and agrifood systems, as they
provide, every single day, food, feedstuff and fibers to humankind. The unforeseen
arrival, and far reaching impact, of the COVID-19 pandemic, only reinforces the
pressing need to get much better and effective at innovation efforts.
There have been many successful innovations in the field of agriculture to date,
leading to increases in farmer productivity and production in many developed and
developing countries. As a consequence, the number of people employed as farmers
has fallen dramatically in some parts of the world: in 1900, 4 in 10 US jobs were in
agriculture, whereas in 2010 this number fell to 2 in 100 (Autor 2014). However, in
Africa and Asia, agriculture still remains as a significant source of jobs and income
for many people. In Africa alone, despite declining as a share of employment, self-­
employed farming remains the single largest source of employment, where it

This work has been supported by the Bill & Melinda Gates Foundation, investment (OPP1213329),
awarded to the International Potato Center (SweetGAINS). It was undertaken as part of, and
funded by, the CGIAR Research Program on Roots, Tubers and Bananas (RTB) and supported by
CGIAR Trust Fund contributors (https://www.cgiar.org/funders/).

H. Campos (*)
International Potato Center, Lima, Peru
e-mail: [email protected]

© The Author(s) 2021 1

H. Campos (ed.), The Innovation Revolution in Agriculture,
https://doi.org/10.1007/978-3-030-50991-0_1
2 H. Campos

Box 1.1 Main Imperatives Driving the Need to Innovate in Agriculture

and Food Systems in Developing Countries
There are more than 820 million people in the world who are hungry, an
already daunting figure likely to increase because of COVID-19. Hunger is on
the rise in nearly all sub-regions of Africa – nearly 260 undernourished people
live in sub-Saharan Africa alone. Asia contains the largest undernourished
population – over 500 million people. Nearly 15% of the people in Southern
Asia are undernourished. More than 2 billion people, mainly in sub-Saharan
Africa and Southern Asia, are micronutrient deficient.
Systems for producing, packaging, and delivering food are responsible for
20–30% of global greenhouse gas emissions, 70% of freshwater withdrawals,
and 70% of biodiversity loss.
Twice as much water will be required to produce sufficient food in 2050,
but nearly one-third of agricultural production today takes place in water-­
stressed regions.
Climate change will increasingly stretch current food systems.
Source: http://www.fao.org/3/ca5162en/ca5162en.pdf, https://www.wefo-
rum.org/reports/innovation-with-a-purpose-the-role-of-technology-innova-
tion-in-accelerating-food-systems-transformation [verified on October
25th, 2019]

accounts for over 50% of all employment in most countries and 35–54% of full-­
time equivalent-based employment (Jayne et al. 2017). These farmers require to
benefit from innovation to boost their chances at success, achieve higher productivi-
ties, reduce their workload and gender gaps, and feed more hungry people (Box
1.1). Often, however, new technology and/or ideas that are presented to farmers fail
to live up to their initial promise.
There is a critical need to increase the rate of innovation success in agriculture
and agrifood systems, to address the so-called wicked problems plaguing agriculture
associated with climate change and sustainability, as well as to match expectations
in terms of adoption and value creation. The goal of innovation in agriculture and
agrifood systems is beyond simply achieving financial goals or market share targets.
It is also more important even than reaching a target number of users. While these
are valid, relevant objectives, they ought to be understood as means to an end: to
deliver greater value by means of improved well-being and outlooks, and quality of
life for millions of farming families and consumers around the world.
What leads to innovation? Is it simply good technology?
Over 20 years ago, Steve Jobs, former CEO of Apple, said: “One of the things I
have always found is that you have got to start with the customer experience and work
backward to the technology. You cannot start with the technology and then try to fig-
ure out where you are going to try and sell it” (JWWDC 1997). Technology is simply
a driver of successful innovation. It operates within an ecosystem of individuals and
nonprofit, government, and private organizations focused on the social and economic
1 The Quest for Innovation: Addressing User Needs and Value Creation 3

use of new products, processes, and organization forms. Technology alone will not
produce enough nor sustained success in any sector, including agriculture. I would
posit that, increasingly in today’s and tomorrow’s world, technology alone does not
represent the main determinant of the perceived value innovations create for its users.
Is the answer a big budget?. Do more money and larger teams mean more
innovation?
Large budgets are not necessarily a good predictor of innovation success. A myr-
iad of well-funded innovation efforts has fallen short of expectations or outright
failed in the market. Case in point: Motorola’s failed launch in the 1990s of Iridium–
a mobile telephone service providing global coverage that cost investors over $5
billion. While Iridium was expected to capture millions of customers, by the time it
filed for bankruptcy protection, it had only acquired about 55,000. It was finally
purchased for the discounted price of $25 million. Many modest budgets, in con-
trast, have managed to deliver high value to both investors and users. See Box 1.2
for a cassava example.
If it’s not technology or money, what leads to successful innovation?
One pivotal part of the answer is people. People are the most effective predictor
of success of any innovative undertaking. People cannot thrive, however, in organi-
zations that stifle their creativity and experimentation. Organizations must support,
encourage, and foster a culture that enables employee innovation, or they risk crip-
pling the talent they hired to produce results in the first place, leading employees to
look for a brighter outlook and professional development elsewhere. To succeed,
organizations must invest in building a system that both nurtures human innovation
and takes the user into account.
Most innovation failures stem from failing to recognize that innovation is both an
economic and social process rather than simply a technical one. Many innovation
endeavors fail despite funding availability, talented people, strong technology, and
sincere intentions. Ultimately, innovation success depends on whether the value
developers think they are delivering matches the actual value users1 find in the prod-
uct or service. The business model associated with any innovation is also pivotal to
fulfilling users’ expectations and determining if an organization survives.
Why do we have to innovate? Isn’t maintaining business as usual good enough?
The simple, straight, and honest answer is no. Failure to address disruptive change
and implement business model innovations has led to the demise of many successful
companies and organizations, in both developed and developing countries.2

1
For the sake of simplicity, throughout this chapter, the term “users” will also encompass other
parties toward whom innovation efforts are targeted, such as customers, clients, adopters, end-
users, and beneficiaries.
2
The longevity of corporations is rapidly declining in the United States. In order to survive, they
must innovate more rapidly than ever before. The 33-year average tenure of companies on the S&P
500 index in 1964 shrank to just 24 years by 2016 and is forecast to drop to just 12 years by 2027.
Even large companies such as Alcoa, DuPont, and Yahoo all left the S&P 500 index in the period
2013–2017. Companies like these have been replaced by firms like Facebook, Under Armor, and
PayPal. While the chance of remaining in the S&P 500 index for the first 5 years after being listed
before 1970 was over 90%, companies listed from 2000 to 2009 only had a 60% chance of main-
taining their grip on that rank (Anthony et al. 2018). A similar trend pervades all markets, including
agriculture, both in developed and in emerging economies.
4 H. Campos

The pace of change is increasing rapidly. While this shift can be cause for con-
cern in traditional organizations, it also presents an opportunity – a bright outlook
for those bold enough to launch innovations that contest the status quo.
Innovation is the key to how an organization not just survives but thrives instead.

Box 1.2 Innovative Ways to Create Value Out of Agricultural

Byproducts
Cassava is the main crop in Africa on a wet weight basis, with Nigeria being
the world’s largest cassava-producing country3. Cassava peels make up 20%
of the whole root, but are discarded during processing. The peels amount to
nearly 40 million tons per year in Africa alone, giving cassava a bad name as
an environmental polluter with the mountains of waste around processing
centers. To create a business opportunity out of this undesirable byproduct,
the International Institute of Tropical Agriculture has developed high-quality
cassava peel (HQCP) feed ingredients from wet peels. This innovation enables
rapid water removal and accelerates the elimination of hydrocyanide. The
intermediate product (60% dry matter, up from 30% in fresh peels) is safe for
livestock to consume and stable for up to a week and can be sun-dried or heat-
toasted to a storable product (90% dry matter). This can be done any time of
the year in a small- and medium-scale setup or flash-dried in a more industrial
case (see http://bit.ly/2j7bRu3). Since three tons of fresh peels yield about one
ton of HQCP, Africa’s cassava peel waste could generate at least 12 million
tons of HQCP annually – equivalent in metabolizable energy (ME) to 8 mil-
lion tons of maize thus spared for direct human consumption. In addition,
there is willingness to pay for HQCP; for example, when maize prices reached
$300, HQCP was being purchased for $150. This ratio holds for wide
price bands.
The huge value creation of this high-impact innovation provides an alter-
native source of feedstuff, protects the environment, and provides new income
sources to smallholders producing cassava. It has been supported by the
CGIAR Research Program (CRP) on Root Tubers and Bananas (RTB), and it
leverages the expertise of several private and public partners in Nigeria, such
as the National Office for Technology Acquisition and Promotion (NOTAP),
Raw Material Research and Development Council (RMRDC), Bank of
Industry, and SingleSpark® from the Netherlands, makers of FeedCalculator®.
Source: Dr. Iheanacho Okike, International Institute of Tropical
Agriculture, ­( [email protected])

3
http://www.fao.org/faostat/en/#home [verified on October 11th, 2019].
1 The Quest for Innovation: Addressing User Needs and Value Creation 5

1.2 Toward a Working Definition of Innovation

Since more than a century ago, the seeds of these ideas were already present. In
Austrian economist Joseph Alois Schumpeter’s book, The Theory of Economic
Development (1911), the concept of “creative destruction” was articulated as a pro-
cess “that incessantly revolutionizes the economic structure from within, inces-
santly destroying the old one, incessantly creating a new one.” He also described
innovation as the cause of market dislocations, which enabled new firms to displace
old firms from markets (Schumpeter 1942).
Schumpeter pioneered the idea that competition should not be based only on
price, but instead on capabilities and performance. He was the first known econo-
mist to shift the basis of competition from the ability to reduce costs to the capabil-
ity to innovate.
Building on these ideas, for the purposes of this book, we will use Scott Berkun’s
definition of innovation. Berkun, author of The Myths of Innovation book, states that
“innovation is significant, positive change.” Innovation is something you work
toward. It should be the end result or outcome. It is the sum of an organization’s
efforts to keep its value proposition to customers and end-users both relevant and
compelling.
Though such definition of innovation appears to be unexpectedly unassuming and
simple, be mindful that the articulation of all the components leading to the success-
ful practice of innovation, and the ability to claim success in terms of significant value
actually delivered to customers, is a remarkably complex, yet attainable, endeavor.

1.3  he Deep Relationship Between Innovation, Design,

T
and Human Needs

The growing awareness that technology is only one driver of successful innovation
has led to the development of a more human-centered approach to innovation. This
approach is strongly anchored in a deep understanding of customers and other
stakeholder needs, preferences, non-spoken and poorly articulated perspectives, and
emotions. Here the attention is not on focus groups or on collecting and analyzing a
deluge of marketing data. Instead, human-centered innovation identifies the sources
of meaning for users.
Because users have a rather limited ability to articulate their unmet needs, innova-
tors increasingly borrow the perspectives of designers to capture such needs. This goes
well beyond purely aesthetic aspects and instead builds on empathy, visualization,
enlightened failure, and market experimentation. A design perspective aims to under-
stand the behavior that people struggle with while living their lives, bringing a human-
centered perspective to innovation efforts. Only through the willingness to immerse
yourself in the lives of users can you uncover their constraints and frustrations with
non-existent or limited solutions. That immersion simply cannot happen in your office
or within the boundaries of your organization. Instead, you must empathize with the
pain, disappointment, and frustration your users endure in their daily lives.
6 H. Campos

In the agricultural and agrifood sector, there have been diverse attempts to under-
stand what the needs of farmers, members of supply chains, and users look like and
to involve them in the technology design and innovation processes. However, a
deliberate and explicit consideration of human-centered design to address how tech-
nology fits into the social, cultural, and emotional context of its users is not common
practice. This is unfortunate, as such considerations would only increase the likeli-
hood of success of innovation efforts, as well as the ability of innovation practitio-
ners to truly apprehend how value is perceived by farmers and other participants in
food systems. Fortunately, several diverse human-centered methods to innovate
have been already developed in other domains. The following section briefly
describes one approach – design thinking.

1.3.1 A Primer on Design Thinking

One highly effective approach to create human-centered products and services is

design thinking.4 It is typically structured as three overlapping phases:
• Inspiration
• Ideation
• Implementation
Typically, these phases proceed sequentially, although sometimes design think-
ing loops back onto itself as solutions are tried out. It is quite different from highly
linear or more rigid approaches to innovation.
Design thinking shapes the experience of both innovators and users. It recog-
nizes organizations as human groups and factors in the importance of emotions. It
encourages learning and engagement. By closely involving users in the identifica-
tion of the opportunity and its solution, design thinking garners a wider commit-
ment to change (Liedtka 2018). Among its stand-out main characteristics, design
thinking is human-centered, possibility-driven, option-focused, and iterative.
Design thinking starts with real human beings instead of demographic data, and
before even attempting to generate solutions, it purposely delves into the lives, chal-
lenges, and circumstances of the people whose lives we aim to improve. It is possi-
bility-driven since it addresses the question, “What if anything were possible?” and
it focuses on developing multiple options before zooming in on the most appropri-
ate one. Furthermore, design thinking is iterative, as it sails through several rounds
of prototypes and multiple rounds of real-life experiments to refine ideas and poten-
tial solutions (Liedtka et al. 2017).
Design thinking is a highly effective, pragmatic innovation and problem-solving
approach.

4
A detailed discussion about design thinking goes beyond the scope of this chapter. Books such as
Change by Design by Tim Cook and Creative Confidence: Unleashing the Creative Potential
Within Us All by Tom Kelley and David Kelley provide a more extended perspective on design
thinking.
1 The Quest for Innovation: Addressing User Needs and Value Creation 7

1.3.1.1 Inspiration

During the inspiration phase, multidisciplinary teams look for user satisfaction
gaps. These gaps are sometimes referred to as the “the pain of the customer.” They
are different, however, from the “voice of the customer.” The most effective way to
apprehend satisfaction gaps is to learn directly from the people you seek to help.
Identifying these gaps cannot be achieved through surveys, interviews or focus
groups, or demographic data, though. Instead, you must immerse yourself in the
lives of users to deeply understand their needs, pains, and aspirations.
One option to achieve that, among many alternative ones, is to develop a detailed
map of the journey users take in their quest to address their satisfaction gaps. An
ethnographic analysis of all the contact points occurring between users and goods/
services is also an effective approach. The construction of empathy maps and trajec-
tory maps are also effective approaches during this stage. The focus of inspiration
should not be on data collection and analysis, but rather on gaining insight about
what makes for a meaningful customer journey (Liedtka 2018).

1.3.1.2 Ideation

Ideation ensues inspiration, and it aims to detect unarticulated gaps between what
users require and what they actually receive. This phase generates, develops, and
tests entry points for design. Field observations and research are distilled into
insights to discover solutions or drive change.
The inspiration and ideation phases are about divergent thinking, where on-­
purpose insights are made to clash against each other. Openness, empathy for oth-
ers, sheer curiosity, and the ability to learn by doing are essential to this process. At
this stage, the visual representation of concepts through early draft prototypes can
help explain complex thoughts and help the team gain insight. During ideation,
people identify themes, create insight statements, and attend co-creation workshops
where users and innovation developers jointly work together to establish solutions.

1.3.1.3 Implementation

Implementation is the ensuing phase, when the innovation solution actually gets
developed. The best concepts from the ideation stage should point to a clear way
forward through prototyping. Prototyping uncovers potential implementation chal-
lenges and unintended consequences of products or services.
Prototypes anticipate how people understand the potential solutions to their sat-
isfaction gaps. The team develops several iterations of concept prototypes. Later on,
functional prototypes are tested, and a “looks like” design model is agreed upon.
Prototyping plays an especially important role in developing countries where inno-
vation ecosystems are generally weak or incomplete. Prototyping enables
8 H. Campos

innovators to experiment, learn, and adapt concepts, so they can quickly and cheaply
refine the product into something even better.
Successful design thinking does not just end with a product or service that sim-
ply reduces the pain of the user. The solution must then be communicated to a wider
audience through powerful, compelling narratives and storytelling for wide product
or service adoption to take place.
A word of warning – design thinking can create substantial tension in organiza-
tions and companies accustomed to linear, milestone-based product development
and innovation. One of the tenets of design thinking and human-centered design is
the need to achieve a close rapport with users – something at odds with a more
structured view of developing new products and services.
Additionally, design thinking not only embraces but actively seeks failure as a
key learning approach. Yet, many organizations have a near zero tolerance for fail-
ure. That means that the implementation of a human-centered approach in organiza-
tions requires strong leadership and full organizational support, or else it is likely to
fail, once again leading to innovation efforts falling short of expectations (Bason
and Austin 2019).

1.4 Innovation Is Different from Research and Development

Often innovation and research and development are referred to as if they are inter-
changeable concepts. Nevertheless, their meaning, scope, and purpose are quite dif-
ferent: research and development (R&D) comprise creative and systematic work
undertaken in order to increase knowledge – including knowledge of humankind,
culture, and society – and to devise new applications of already available knowledge
(OECD 2015). This differs in many ways from the working definition of innovation
provided in Sect. 1.2.
The difference between the two can create misunderstandings, as well as concep-
tual, practical, and very expensive mistakes. Though in theory, corporate R&D
spending relates to increased innovation and the growth of revenues and profits,
that’s not always the case. The magnitude of R&D expenditures is only moderately
related to the number of innovative products/services launched or even those that
gain high market share and profits.
To some extent, confusing R&D and innovation arises from a narrow, technology-­
driven stance on innovation. Innovation, by default, encompasses a much wider
scope than R&D, and as Gina O’Connor from Babson College aptly puts it, innova-
tion involves three diverse capabilities: discovery, incubation, and acceleration. In
many cases, the resources, investments, and time required during the incubation and
acceleration stages far exceed those needed to develop technologies in the first place.
Indeed, within profit-seeking firms, R&D and market success are two different
things. Strategy & – a business unit within PricewaterhouseCoopers – was unable to
find a statistically significant relationship between R&D spending and sustained
financial success when it analyzed the top 1,000 most innovative companies over 12
1 The Quest for Innovation: Addressing User Needs and Value Creation 9

Table 1.1 Top R&D spenders and innovative companies (http://www.strategyand.pwc.com/

innovation1000 [verified on October 11th, 2019]) in 2018
Most innovative companies Top R&D spenders
Rank Company Rank R&D spending (US $ billion)
1 Apple 1 Amazon (22.6)
2 Amazon 2 Alphabet (16.2)
3 Alphabet 3 Volkswagen (15.8)
4 Microsoft 4 Samsung (15.3)
5 Tesla 5 Intel (13.1)
6 Samsung 6 Microsoft (12.3)
7 Facebook 7 Apple (11.6)
8 General Electric 8 Roche (10.8)
9 Intel 9 Johnson & Johnson (10.6)
10 Netflix 10 Merck (10.2)

years. Spending on R&D was also found to be unrelated to growth in sales or prof-
its. Moreover, the top 10 most innovative companies are rarely the top 10 spenders
on R&D (Viki 2016).
Which main aspects separate the most innovative companies from less innova-
tive ones?
More innovative companies show:
• Close alignment between innovation and business strategy
• Company-wide cultural support for innovation
• Close involvement by leadership with innovation programs
• Deep understanding of insights from end-users
This trend was again observed in 2018 (Table 1.1), when only two out of the five
most innovative companies, namely, Amazon and Alphabet, also ranked among the
five top R&D spenders.
Analyzing R&D intensity – a metric defined as the ratio between R&D expendi-
ture and total revenue – sheds light on the effectiveness of innovation efforts.
Dramatic differences can be verified even among the most innovative companies.
Although Amazon, Alphabet, Microsoft, and Tesla show a large R&D intensity,
within a 12–15% range, in the case of the most innovative company of 2018 – Apple –
its R&D intensity only reached 5%. Furthermore, in the case of Nokia, despite a high
R&D intensity in 2018 (21%), it ranked lower than 20th in terms of innovation.5
It might be a little unfair to compare firms across diverse industries and R&D
intensity landscapes. Regardless, such comparison sheds light on the actual nature of
the relationship existing between R&D efforts and the ability to translate them into
products and/or services that are actually adopted by users and therefore create value.

5
https://www.strategyzer.com/blog/innovation-vefrsus-rd-spending [verified on October
11th, 2019].
10 H. Campos

Markovitch et al. (2015) provide reinforcing evidence regarding the lack of a

direct relationship between R&D efforts and innovation outcomes: Using data from
141 US firms across a decade of data, they could not find any statistically significant
relationship between a firm’s investments in basic, exploratory R&D (measured by
each firm’s number of patents over the previous decade, weighted by how scientifi-
cally novel they were) and the firm’s stock market value.
This should not be a surprise once the meaning and purpose of innovation are
understood. R&D can only contribute to the development of goods or services that
are technically superior to previous alternatives.
What about other examples?
As you will see throughout this book, successful innovation requires much more
than technical advantage. If this were the sole factor driving success, the Betamax
system developed by Sony would have become the dominant design and the com-
mercial winner in the video cassette recording market in the 1980s. Instead, it rather
quickly became obsolete.
A successful example of limited R&D expenses related to a successful innova-
tive product is the Japanese company Nintendo, which developed the Wii home
video game console from off-the-shelf components. It achieved remarkable com-
mercial success with a technologically inferior product compared to those of com-
petitors. And it did it in a market where Sony and Microsoft spent much more on
cutting-edge gaming consoles.
Yet another well-documented example about the non-existent or weak relation-
ship between R&D spending and innovation success is the garment industry in the
Philippines. Despite no access to formal R&D or academic collaborations, it has
introduced incremental innovations in both products and processes, through reverse
engineering and combining knowledge on new ways to successfully innovate and
remain competitive in global markets (Rosellon and Del Prado 2017).
This is not meant to discourage R&D efforts. Many successful innovations have
required long and expensive public or private research efforts. Many companies
have translated large R&D budgets into successful innovations that are rapidly
adopted. The takeaway message here is that an expensive R&D effort does not guar-
antee innovation success. The opposite also holds true: it is perfectly feasible to
achieve large returns from innovation and become a successful organization in the
field of innovation with a rather limited R&D investment. Furthermore, Open
Innovation (see Chap. 3) is a very effective approach to increase the ratio of success
of innovation efforts.
Innovation can succeed regardless of an organization’s size, the nature of its
users, or the economic sector within which it operates. That’s encouraging news for
young start-ups, small, and cash-strapped organizations. If they have the talent and
boldness to lead, design, and execute innovation plans, they have a high likelihood
of successfully challenging and even defeating older, larger, and much better-funded
organizations.
1 The Quest for Innovation: Addressing User Needs and Value Creation 11

1.5  oes Innovation Only Pertain

D
to Profit-Seeking Organizations?

Most of the insight, experience, and literature relevant to innovation relates to for-­
profit efforts where companies and organizations innovate to remain in business.
They grow and adapt to the needs and desires of customers and markets along the
way. However, that does not mean that the natural domain of innovation is only
within profit-seeking organizations. Leewis and Aarts provide an updated perspec-
tive of innovation adoption in agriculture in Chap. 4 of this book.
Nonprofit organizations, regardless of their role, size or geographic footprint, are
also under increasing pressure to innovate. Their users and beneficiaries have needs
that continuously evolve. They must adapt to the needs and expectations of their
donors and funding agencies, as well as to the increasing scrutiny from govern-
ments, international bodies, and philanthropic organizations.
From this perspective, this chapter argues that nonprofit organizations already
run a business. They might not seek profits but, nonetheless, they remain a business
(Box 1.3). Regretfully, even today, the word “business” raises concerns, and it is not
taken well within some university and other knowledge-seeking organizations.
Are there good examples of an innovative nonprofit?
Several Boxes provided throughout this book describe successful nonprofit inno-
vations. A further example of an innovative nonprofit model is the Innovation Lab
set up by Oxfam.6 In a systematic way, it addresses core development challenges
that have potential for market systems solutions. Market-based ideas are analyzed,
and pilot projects are run to make the solutions better.
BlocRice is an innovative program launched by Oxfam in Cambodia aimed at
increasing rice farmers’ leverage to secure fairer prices. It is based on digital con-
tracts established among rice agricultural cooperatives, exporters in Cambodia, and

Box 1.3 The Actual Meaning of the Word Business

Often the word “business” encounters skepticism, diverse opposition, and even
a degree of disdain in academic and nonprofit organizations. This is unfortu-
nate, as the actual meaning of this word has very little to do with corporate
greed or utter disregard for anything other than a ruthless pursuit of profits.
The word “business” is derived from the old English word bisignes, “attend
to, be concerned with, be diligent.” Its actual meaning is “moving towards a
goal, to be determined about serious action.” We advocate the use of this word
because it conveys a positive activity worth pursuing.

6
https://www.oxfamamerica.org/explore/research-publications/oxfam-innovation-lab/ [verified on
October 11th, 2019].
12 H. Campos

buyers in the Netherlands. Yet another very good example of innovation in a non-
profit organization is Mercy Corp’s Social Venture Teams, which acts as an internal
incubation and acceleration lab. Its purpose is to develop innovations able to be
scalable into business in emerging markets. Chapter 6 by van der Velde et al. in this
volume delves into several, additional successful examples of innovation within the
nonprofit domain in developing countries.
The increasing relevance of innovation for nonprofit organizations is best
reflected by emerging rankings that highlight the most innovative nonprofit organi-
zations.7 For instance, the magazine Fast Company has added nonprofit organiza-
tions to the large number of sectors it ranks on innovation.
Does this extend to the public sector?
The need to innovate also reaches the public sector since government delivers, as
a monopoly, services to millions of citizens who sustain it with taxes. The public
sector represents the main economic force in many countries, particularly in emerg-
ing ones. As global standards of transparency, accountability, and value for money
become more stringent, governments are also increasingly pressured to innovate.
Public sector innovation in developing countries is even more pressing and rele-
vant, since public sector expenditures represent a larger proportion of gross domes-
tic products (GDP) in many such countries than in developed ones. Furthermore,
innovation in the agriculture and agrifood domains is particularly critical in devel-
oping countries, as their economic footprint is much larger than in developed ones.
For instance, agriculture, food, and related industries accounted for about 37% and
5% of total GDP in Ethiopia and the United States in 2017, respectively. In other
words, properly executed innovation in agriculture and agrifood systems has much
greater leverage, spillover power, and a larger ability to create additional value and
new jobs in developing countries than in developed ones.
While many governments are forced to adapt to a maelstrom of change, progress
is often ad hoc rather than reliable, reactive vs. deliberate, and sporadic instead of
systemic. The public sector has not yet ensured that innovation leads to consistent
and reliable options that can deliver better outcomes and greater impact.
OPSI,8 the OECD Observatory for Public Sector Innovation, provides tools,
resources, and models for public sector innovators. These are important because
public-service institutions need to learn to innovate and to pay more attention to
social, technological, economic, and demographic shifts. It’s the only way to cater
to the increasing needs of their progressively empowered citizens.
What’s a good example of innovation in the public sector?
There are some encouraging examples from the public sector, though. One such
example is NESTA (https://www.nesta.org.uk/) in the United Kingdom,9 which rep-
resents a remarkably successful example of developing innovation in the public

7
https://www.fastcompany.com/most-innovative-companies/2018/sectors/not-for-profit [verified
on October 11th, 2019].
8
https://oecd-opsi.org/toolkit-navigator [verified on October 11th, 2019].
9
NESTA was formerly the National Endowment for Science, Technology and the Arts, which
evolved into an independent organization in 2012.
1 The Quest for Innovation: Addressing User Needs and Value Creation 13

domain. In addition to developing creative economy and innovation policies,

NESTA impact includes, but is not limited to, health, education, and the arts.
In today’s world, the need to innovate spans the entire continuum from private to
public sector – profit-seeking and nonprofit organizations. At its core, innovation is
a way of life, an attitude based on continuously challenging the status quo, rather
than merely reacting to changes in customers, regulations, competitors, and markets.

1.6 Disruptive Innovations

Perhaps one of the greatest misunderstandings about innovation comes from the
concept of “disruptive innovation.” When it works, it can allow smaller, less-funded
organizations to disrupt the market share of established, incumbent ones (Christensen
et al. 2015). Although there are certainly large organizations able to drive smaller
organizations out of business, when disruption occurs, it can allow a proverbial
David to overtake Goliath.
Products or services in and of themselves do not represent disruptive innova-
tions, however. The concept refers to the trajectory of a product or service along the
value curve rather than about a discrete product or service. Disruptive innovations
need not be breakthrough innovations. Instead, they consist of products and services
that are simple, accessible, and affordable (Dillon 2020).

1.6.1 How Do Disruptive Innovations Unfold?

Incumbent organizations usually focus on improving the value delivered to their

most demanding customers. This follows the logic that these customers are the most
profitable. The result is that the needs of only a fraction of users are met. Other
customers are left inadequately served (incumbent’s sustaining trajectory in
Fig. 1.1). These overlooked and/or non-consuming customers represent a significant
opportunity to provide more than expected value at a (relatively) low price.
Since incumbents tend to focus on the most profitable, high end of the market,
they usually fail to defend the least profitable segment as vigorously. This allows
new entrants – the disrupters – to move up-market, improving value and quality
while keeping the features that enabled them to challenge the incumbents (Entrant’s
disruptive trajectory in Fig. 1.1). Innovations tapping into non-consumption are par-
ticularly relevant in developing countries, since they represent a means to alleviate
poverty. They can open new markets, becoming the main building block toward
greater prosperity, as argued by Christensen et al. (2017).
Disruptive innovations originate either from the low end of markets or from tap-
ping into products and services not yet consumed (Wunker and Farber 2019) (Box
1.4). One private sector example is low-cost air travel, a hugely successful disrup-
tive innovation built upon addressing non-consumption (Taneja 2017). Many low-­
cost air carriers, such as Southwest in the United States, EasyJet and Ryanair in
14 H. Campos

Fig. 1.1 Trajectory in the market of disruptive innovations. (Modified from Christensen
et al. 2015)

Europe, IndiGo in India, Azul in Brazil, Lion Air in Indonesia, and Sky Airline in
Chile, have successfully challenged incumbent, larger airlines.
These no-frill air carrier fleets usually have only a single type of aircraft to reduce
maintenance costs. They fly to smaller, secondary airports which are cheaper to
operate.10 The cheap fleets reduce staff by issuing tickets and boarding passes digi-
tally. They charge high fees for checking in with a staff person. This shift has
enabled these companies to tap into a mass of consumers who would otherwise use
cars, trains, or buses or just not travel at all. In other words, low-cost carriers do not
necessarily compete against other airlines. Instead, they cater to the very large num-
ber of customers that would have not previously considered travelling by air.
In the case of low-cost air travel, the financial advantage of innovation came as a
result of improving the quality of life of its users by making air travel affordable.
A relentless focus on the needs of users should also be aimed at by agricultural
and agrifood systems innovations. If individual innovators address the unmet needs
of users, returns on investment will increase.
In Africa, innovators who address the daily unmet needs of low-income consum-
ers have a larger likelihood of success than if they chased after higher margin oppor-
tunities arising from the growth of the middle class. This market creation mindset is
behind the shift from poverty to prosperity in Taiwan, South Korea, Singapore, and
Hong Kong.

10
In the case of London, Luton airport offers much cheaper fees to air carriers than flagship airports
such as Gatwick and Heathrow. In the state of California, Oakland airport offers cheaper landing
and taxiing fees than its neighbor, San Francisco airport.
1 The Quest for Innovation: Addressing User Needs and Value Creation 15

Box 1.4 Tapping into New Markets: Rapid Diagnostic Tests for Malaria
Malaria is a severe public health issue. According to the World Health
Organization (WHO), in 2016 there were over 215 million cases of malaria
globally, which claimed nearly 450,000 deaths each year, out of which nearly
200 million cases and 400,000 casualties occurred in Africa. It remains as the
single most deadly global health disease.
Blood tests are unaffordable for many Africans. Others are reluctant to go
to hospital and be tested for malaria using traditional diagnostics. Instead,
they rely on self-medication to treat potential cases. This creates yet another
public health burden because many of the misdiagnosed cases are treated with
antibiotics. This unneeded treatment accelerates the building up of antibiotic
resistance, which has already rendered unsuccessful, previously highly effec-
tive drugs such as chloroquine and artemisinin.
The Baltimore, USA-based startup company Fyodor Biotechnologies saw
an opportunity in this problem and developed a low-cost urine test for malaria.
For less than $2 and without the need for access to health workers, this test
provides an accurate diagnosis in less than 30 minutes. It is simpler to use
than testing blood samples. It has already been launched in Kenya, and plans
are in place for its commercialization in other markets.
Source: https://www.who.int/malaria/media/world-malaria-day-2018/en/
[verified on October 11th, 2019], https://www.christenseninstitute.org/blog/
innovators-creating-prosperity-fyodor-biotechnologies/ [verified on October
11th, 2019]

Another reason to focus efforts at the base of the pyramid, as discussed else-
where in this volume by van der Velde and coauthors in Chap. 6, is that the actual
growth of the African middle class has been much less robust than forecast
(Christensen et al. 2017).
An example that illustrates how this principle works in action is the development
of sweetpotato cultivars enriched in vitamin A, known as Orange-fleshed sweetpo-
tato (OFSP) by the International Potato Center, which explicitly examined the
unmet needs of end-users, many of whom were living in poverty. Such cultivars
represent a rich, affordable source of beta-carotene, which the body converts into
vitamin A (Low et al. 2017). Scientists at the International Potato Center challenged
the conventional wisdom concerning food-based approaches and institutional barri-
ers, to address the unmet need of having a diet with proper levels of vitamin A,
particularly in children and lactating mothers. To date, a multi-partner, multi-donor
initiative based on OFSP has already reached over 6 million households in sub-­
Saharan Africa, most of them representing the base of the pyramid.
16 H. Campos

Table 1.2 Some traits of the exploitative and explorative domains observed in ambidextrous
organizations
Ambidextrous organizations
Exploitative business Explorative business
Type of innovation Sustaining innovation Disruptive innovation
Strategic intent Cost, profit Learning, growth
Critical tasks Operations, efficiency Nimbleness, new business models
Culture Efficiency, risk-averse, quality Speed, risk-taking, flexibility
Leadership style Authoritative, top-down Visionary, involved
Adapted from Frederik (2015)

1.7 The Dilemma of Exploration Versus Exploitation

One of the most intellectual and practical challenges that organizations face is how
to balance the goods and services they currently deliver to customers, against the
need to develop the future innovations their continued existence depends upon.
Many once-dominant companies have faltered when developing products needed
to address market changes – to either retain current customers or gain new ones.
Kodak excelled at analog photography and was the uncontested global leader for
decades on end. It failed, however, to make the leap to digital cameras and adjust its
business model to succeed in an increasingly digital world.
Organizations must create a dual capacity to exploit their current business while
exploring new opportunities. These “ambidextrous organizations” have been exten-
sively analyzed by Charles O’Reilly of Stanford University and Michael Tushman
of Harvard University. Ambidextrous organizations pursue sustaining innovations
that increase business success, instead of solely focusing on creating new markets.
Typically, they have most of the traits shown in Table 1.2 and are able to pursue
disruptive, exploratory innovations which are critical for the organization’s future
(O’Reilly and Tushman 2004).
Much of the discussion on how to implement ambidexterity examines structural
aspects, such as the creation of separate units to pursue new opportunities while
keeping the same general manager to lead both the new unit and the parent company
(O’Reilly and Tushman 2004). However, there are equally if not more relevant
aspects to consider, such as having strong, shared values within the organization,
which enables corporate headquarters to relinquish some autonomy to divisions
without losing overall alignment and strategic fit.
Govindarajan (2016) recently developed a practical framework to allocate time
and resources to the competing and opposing demands of managing today’s needs
and tomorrow’s possibilities:
• Manage the present core business at peak efficiency and profitability.
• Identify and abandon old and irrelevant practices, ideas, and attitudes.
• Convert breakthrough ideas into new products/services and business.
1 The Quest for Innovation: Addressing User Needs and Value Creation 17

Becoming proficient at both current business and future exploration is no small

feat, though. It has only been achieved by a few companies. Recent work by Haan
et al. suggests that no more than 2% of companies achieve it.11 Among the features
shared by such a select group of companies, the following stand out: excellence at
both exploration and exploitation; retaining an “outside-in” focus even when suc-
cessful; embracing necessary disruptions – even if painful; and having in place a
clear model for renewal.

1.8 Innovation and Failure12

Most innovations launched to the market by companies fall short of revenue expec-
tations. Approximately 80–85% of all fast-moving-consumer-good launches fail,
according to 2018 research13 by Nielsen, the global measurement and data analytics
firm. Though there is no equivalent data known on nonprofit organization innova-
tions, it is unlikely that the opposite would apply to their goods and services.
This points to substantial shortcomings in the ability to match value propositions
with the actual needs of customers and users. While the technology itself can cer-
tainly go wrong in the design process, the difficulty of designing the right business
models – vs. simply the right technology – remains one of the most challenging
components of innovation success.
How could it be that the vast majority of commercial and social innovations fail –
falling short of their profit, adoption, and/or impact goals?
How can we better articulate the social, emotional, and economic gains brought
about by innovations so that their adoption rates improve?
Why are people so reluctant to embrace change?
Why do most organizations, both private and public, struggle in their innovation
efforts?
These are critical questions that every individual and organization genuinely
interested in embracing innovation need to consider.
In the agricultural realm, the story of coffee illustrates how innovation can lead
to tremendous success despite failure. Today, coffee14 is a regular part of the lives of

11
https://bcghendersoninstitute.com/the-2-company-b9e5dc587b2b [verified on October
11th, 2019].
12
Throughout this chapter, we will refer to failure as the inability to reach expected sales, profit
targets, adoption, or market penetration of innovations launched to the market. Though it is a rather
narrow definition, it is a pragmatic, results-driven one and consistent with the book #x2019;s views
on innovation.
13
https://www.nielsen.com/wp-content/uploads/sites/3/2019/04/setting-the-record-straight-com-
mon-causes-of-innovation-failure-1.pdf [verified on October 11th, 2019].
14
The late Calestous Juma, formerly of Harvard University, discusses the history of coffee in his
book Innovation and its Enemies (2017), shedding light on the tensions and complex interactions
arising among innovations, preexisting products, cultural landscapes, and social fabrics.
18 H. Campos

people in most of the world. For many of us, it represents nothing less than a “must
have” to start a productive day.
Yet, hundreds of years ago, coffee was banned, several times, in many parts of
the world. In Mecca, it was banned because of the fear that coffeehouses could
become sources of social agitation against religious authority. In Constantinople,
during the reign of Sultan Suleyman, a fatwa against drinking coffee was issued in
1543. In Europe, the situation was not any different as coffee and/or coffeehouses
were once banned or curtailed by King Charles II in England, King Frederick the
Great in Prussia, and the Swedish Parliament!
Obviously, tremendous social and cultural changes have shaped our perceptions
of coffee. Only two decades ago, coffee shops in the United States were generally
small, locally owned places where people gathered over poor-quality, cheap coffee.
Along came Starbucks, which changed the game by introducing Americans to high-­
end, European-style coffee drinks that are now a regular part of the lives for millions
of people every day. How was Starbucks able to innovate so successfully in a rela-
tively short period of time? A main driver has been its ability to adroitly cater to the
needs of its customers and to the job they need to get done while drinking coffee.
For instance, Starbucks does not just provide coffee for its customers. Instead, it
provides a “third place” outside their homes and workplaces, which offers not only
coffee but also a secure, warm, and welcoming environment where people can
gather and connect.
As of 2018, Starbucks runs over 28,000 coffee shops and employs nearly 300,000
people worldwide. To put its global team size in context, that’s more people than the
population of about 150 individual countries.15 Yet, Starbucks is having to innovate
again. Starbucks Reserve is the coffee giant’s newest initiative of specialty outlets
which are meant to compete with third-wave coffee shops that source unusual or
small-lot beans and train baristas in hand-poured preparation methods. Ever-­
evolving customer needs have to be taken into account, or Starbucks may soon find
itself going the way of Eastman Kodak.
The learnings from the development and adoption of a globally successful inno-
vation such as Starbucks in the coffee sector can be widely applied to a wide range
of sectors, regardless of the technology they use, the sector they work in, or the
geography they serve.
The launch of new technologies represents social experiments. There are many
psychological, social, and economic factors that individual and organizational inno-
vators must understand. The sheer success and global adoption of Starbucks illus-
trate how success can be achieved if an organization takes into account the emotional
and social underpinnings of its end-users.
The takeaway here is that tensions around innovation arise not so much from
either the potential benefits or pitfalls an innovation represents. Rather, tension
comes from hidden feelings and sentiments of insecurity, since innovations chal-
lenge seemingly stable economic interests and social institutions.

15
http://worldpopulationreview.com/countries/ [verified on October 11th, 2019].
1 The Quest for Innovation: Addressing User Needs and Value Creation 19

One positive way to frame innovation failure is: “failure is the experience that
precedes success.” There is rarely successful innovation without a fair share of fail-
ure along the way. Every successful innovator deals with the frustration, pain, and
anxiety associated with numerous setbacks. I actually invite you to embrace the
concept of clever failure, namely to fail often, cheaply, and as early as possible in
the innovation process. Because failure is inherent to innovation, organizations
should embrace it and help employees brace for it, and provide mechanisms to de-­
risk it instead of shying away from it. Take pains to understand why consumers
rarely adopt or purchase innovations at the rate developers expect. A basic under-
standing of behavioral economics provides insight and can help organizations plan
for the way human beings act, adapt, and react.

1.8.1 Loss Aversion

Loss aversion refers to when losses loom larger than gains.16 This asymmetry
between the power of positive and negative expectations or experiences has an evo-
lutionary history. Species that treat threats as more urgent than opportunities have a
better chance to survive and reproduce (Kahneman and Tversky 1979).
What has loss aversion to do with innovation failure? A lot. At its core, loss aver-
sion is an expression of fear. Losses elicit stronger, more visceral feelings than com-
parable gains. When our customers, used to the value that a good or service provides,
are faced with innovative alternatives, they might rather stick with the one they feel
comfortable with to reduce the risk of losing the value they are used to receive.
This has obvious implications for the rate at which innovations are adopted and
purchased. Agriculture provides excellent examples of how loss aversion can sig-
nificantly obstruct the adoption of technologies. Ward and Singh (2014) elegantly
demonstrated that more loss-averse farmers are less likely to switch to new rice
cultivars, although the new cultivars clearly outperform older, popular varieties
under both normal and drought conditions. No wonder that many new cultivars,
across many different crops, fall short of expected adoption, and therefore do not
achieve profit or impact goals.

1.8.2 Status Quo Bias

Status quo bias refers to the tendency to stick to the current status of affairs. One
implication of loss aversion is that individuals have a strong tendency to remain at
the current status quo. This has been extensively demonstrated through decision-­
making experiments (Kahneman et al. 1991).
Status quo bias explains why we are biased toward the default option: Most peo-
ple tend to use their default Internet browser instead of installing a new one which

16
Richard Kahneman, 2002 Nobel Memorial Prize Winner in Economic Sciences.
20 H. Campos

may provide more speed, improved security, and a better navigating experience.
Status quo bias can make people stick to their usual choices even when not in their
best interests. Recently, Karl et al. (2019) demonstrated that participants in health
insurance programs in the US that provide different financial benefits could be clas-
sified from very low to very high status quo bias categories. A high status quo bias
was associated with a higher rate of physical inactivity, a higher sum of unhealthy
lifestyle factors, and a higher BMI.17
What does it take to get end-users to adopt a new innovation?
Innovative goods or services often require consumers to change their behavior.
Organizations trying to innovate frequently fail to fully appreciate just how daunt-
ing that task is that they face. Consumers assess innovations in terms of what they
gain and lose relative to existing products. John Gourville of Harvard University
refers to this as the “curse of innovation.” Generally, consumers overvalue the exist-
ing benefits of an entrenched product, whereas innovators overvalue the benefits of
their new products/services. The result is a large mismatch between what develop-
ers think users desire and what users really want. This widening gap between the
two groups increases the likelihood of failure for even the most innovative new
products.
Gourville (2006) suggests avoiding this mismatch by avoiding the launch of
innovative goods or services that demand substantial behavioral change. He argues
that organizations should target non-consumption and strive for benefits that outrun
losses at least by a factor of 10 as a rule of thumb. A strong example of this principle
is Google,18 and as a consequence, it was able to quickly displace other search
engines when it launched its own. The principle also explains why many innova-
tions touted as “the next big thing” quickly flop upon hitting the market. To claim
success, an innovation must continuously gain market share, in either adoption or
actual profit terms.
Within agriculture, the fast adoption of biotech crops in countries such as
Argentina, Australia, Bolivia, Brazil, Canada, China, India, Mexico, Paraguay,
South Africa, Uruguay, and the United States, among others, illustrates this concept
as well: between 1996 and 2017, their global acreage grew over 100X, from 1.7 to
nearly 190 million hectares, out of which 53% were planted in developing countries
(ISAAA 2017). This fast adoption story relates to the ability of biotech crops to
deliver features which strongly resonate with the pain farmers face in their daily
lives at the farm, such as convenience, simplicity, flexibility, speed, and peace of
mind in terms of controlling weeds and insects.
An additional way to reduce failure is to launch innovations that only require
small or negligible behavior changes, a tactic successfully deployed by Toyota. Its
hybrid electric vehicles (e.g., Prius) deliver a driving experience nearly identical to

17
BMI (body mass index) is a person’s weight in kilograms divided by the square of height in
meters. A high BMI can be an indicator of high body fat, although not always, and can be used to
screen for weight categories that may lead to health issues.
18
When launched in 1998, the web browser Google provided its users with much more accurate
results than existing search engines such as Altavista and Ask and faster results than Yahoo.
1 The Quest for Innovation: Addressing User Needs and Value Creation 21

that of a gasoline-only car. Consumers didn’t need to make a major shift in their
behavior to shift to this new product.

1.8.3 Managing Failure

Above all, organizations need to resist doing nothing at all – never implementing
new or creative ideas. Robert Sutton of Stanford University suggests that inaction is
far worse than failure. Failure, after all, implies some sort of output. Because the
quality of innovation is intrinsically linked to quantity of ideas, it makes sense to
employ metrics based on quantity of ideas.
Examples of such metrics include how many prototypes built, patents filed,
papers published, projects completed, etc. Without a high quantity of attempts, there
can be no innovation. Therefore, output – regardless of success or failure – must be
rewarded. This may seem unrealistic without additional information.
So how do you reward failure?
According to Sutton, organizations can do the following:
• Make sure people are aware that failure to execute new ideas is their greatest
failure and that it will bring about consequences.
• Make certain everyone learns from past failures; do not repeatedly reward the
same mistakes.
• If people show low failure rates, be suspicious. Perhaps they are not taking
enough risks, or maybe they are hiding their mistakes, rather than allowing oth-
ers in the organization to learn from them.
• Hire people who have had intelligent failures where lessons have been extracted
that enabled subsequent success. Let others in the organization know that’s one
reason they were hired.
In the pharmaceutical industry, although spending on research and development
went up more than 300% industrywide during the 1990s, the number of new drugs
approved by the US Food and Drug Administration (FDA) during that period
dropped by 50%. Companies see drugs that have cost hundreds of millions of dol-
lars in the R&D phase simply stall out or fail in the FDA approval process. If this
attrition does not improve, drug development will become prohibitively expensive.
Vertex Pharmaceuticals is one example of a company that on purpose tries ideas
that fail in pursuit of solutions. Vertex uses biotechnology to create transformative
medicines targeting diseases such as cystic fibrosis, Duchenne muscular dystrophy,
and hemoglobinopathies, among others, and also pain. Paradoxically, Vertex has
attempted to decrease the attrition rate by increasing it during the early stages of the
innovation process. The driving idea is that the more ideas (molecular combina-
tions) researchers can test, the better their chance of finding a few good ones.
Consequently, many ideas lead to dead ends, but at a much earlier stage. Good
leads – in this case, effective, safe drugs – have a better chance of getting approved
and ultimately generating sales.
22 H. Campos

Vertex has purposefully placed itself at an intersection of disciplines and tech-

nologies where it generates thousands of new drug candidates every day. The goal
is to produce as many potential drug compounds as possible to find the intersection
of the few combinations that will provide Vertex with a breakthrough drug.
This is how it works in the Vertex example: supercomputers randomly combine
molecules with different drug targets. They then throw out the combinations deemed
to be ineffective. The remaining molecule combinations go to a team of computer
scientists, biologists, chemists, medical doctors, manufacturers, and lawyers, who
evaluate them and bring those with the highest potential to fruition. Some com-
pounds are discarded quickly and others a bit later. Some get developed into drugs.
On any given day, Vertex’s computers generate thousands of combinations; the
vast majority of these end up as failures. By increasing the output of ideas and being
unafraid to fail often and quickly, Vertex also has a better chance of developing suc-
cessful drugs. The strategy is working – at the time of writing, Vertex has already
secured FDA approval for four of its products, and several more are in various
phases of the approval process for human use.

1.9 The Theory of Jobs to Be Done

One of the main reasons innovations fall short of adoption and value creation is the
deep lack of understanding about what drives a user to choose one good or service
over another. While marketing departments allocate talented people and significant
budgets to reaching end-users, in many cases “the customer rarely buys what the
company thinks it is selling him.”19
The jobs to be done (JTBD thereafter) theory20 addresses why people buy or
decline to buy what companies try to sell them. One of this theory’s main advan-
tages is that it dramatically increases the ability to predict the likelihood of innova-
tion success, a welcome addition to the toolbox of innovators. It was developed by
the late Clayton M. Christensen and colleagues at Harvard University.
At the core of JTBD is the tenet that users do not purchase goods or services.
Instead, people bring things into their lives to get a specific job done or achieve
progress toward a particular goal under specific circumstances. The goods and ser-
vices that users acquire are really unconscious means to filling in satisfaction gaps.
Unless we understand the “jobs” that people want to fill, the likelihood of innova-
tion success is severely undermined regardless of budget size or innovator skill.
A “job” can only exist within a given context – the where, when, who, or what.
However, aspects such as the user’s life-stage, family status, and financial status
also need to be considered. These insights are powerful predictors of user behavior.

A quote from the late author Peter Drucker, known for his work on business management.
19

Developed and popularized by Clayton Christensen and colleagues at Harvard University, and by
20

Anthony Ulwick from the consulting firm Strategyn.

1 The Quest for Innovation: Addressing User Needs and Value Creation 23

For instance, “I am short of money” is too vague to allow innovators to fully

grasp the “why” at stake. When recast in the framework of a JTBD, however, inno-
vators gain valuable clues needed to predict user behavior: “I am short of money to
pay my mortgage which is a source of concern to me. I am a proud provider for my
wife and young kids.” That kind of insight helps the innovation better meet the
needs than the alternatives offered by competitors.
JTBDs can be quite different from solutions. For instance, many providers of
MP3 reproducers focused on the presumed solution, namely, providing music. In
contrast, Apple aimed the iPod at helping customers listen to music through a seam-
less experience. It reconsidered the whole business around personal music manage-
ment, enabling customers to acquire, organize, listen to, and share music.
As value creation targets JTBDs, organizations and firms can not only improve
what they already have but also target new, “blue ocean” markets.21
The deepest and most significant advantage of this framework is that it explicitly
acknowledges that each JTBD consists of several dimensions (see Box 1.5).

Box 1.5 The Anatomy of a Job to Be Done

To fully grasp the why behind purchasing decisions, you must understand the
complex nature of people. Every effective job must account for all three of
these components:
• Functional – it addresses practical, technical aspects.
• Social – it addresses behavioral aspects of users, as well as how the user
interacts and relates to people and groups of people.
• Emotional – it addresses very deep, personal aspects of users such as feel-
ings, sentiments, aspirations, and desires.
Think of the job to be done by a luxury Swiss watch:
• Functional component – it provides an exact, accurate, and reliable account
of the passing of time.
• Social component – it conveys an aura of status and economic success,
providing cues about social status and power. “I am one of the few who can
afford this very expensive and exclusive watch; therefore, I am successful
and powerful.”
• Emotional component – it represents, in this case, a deep sense of belong-
ing to family, passing the watch on from generation to generation. It can
also represent the deep act of love from a spouse or partner reflected in
such an expensive gift.

21
Describing the concept of blue ocean markets is beyond the scope of this chapter. Interested read-
ers are kindly invited to read the book Blue Ocean Strategy: How to Create Uncontested Market
Space and Make the Competition Irrelevant by W. Chan Kim and Renee A. Mauborgne.
24 H. Campos

Most innovation efforts are mainly driven by their functional components. That
immediately reduces their likelihood of success, since it is the social and emotional
components that are the ones representing a strong, if not the strongest, driver of
user preferences and subsequent adoption when people are presented with many
alternatives. Within the agricultural domain, innovations solely focused on produc-
tivity or technological progress, but which fail to account for cultural and social
aspects,22 are also likely to fall short of expectations.
What are some examples of successfully meeting or failing to address the JTBD?
The failure of many innovations, including those on the cutting edge of technol-
ogy, can invariably be traced back to their inability to address a JTBD for a large
enough constituency. The Segway two-wheeled vehicle is a good example. This
cutting-edge technology was introduced to great fanfare and included the strong
financial support of very successful entrepreneurs such as Jeff Bezos of Amazon.
Yet, it failed to receive widespread adoption. Its failure was due, at least in part, to
not enough users truly needing it.
In contrast, understanding the why behind consumer buying decisions increases
likelihood of success. Beat headphones have captured a substantial market share in
the United States, even though they are a technically inferior product when com-
pared to headphones produced by makers such as Bose or JBL. How can this be?
Beat Electronics appeals to the deep craving for high status of most teenagers. In
part due to the association with rapper Jay-Z, users of Beat headphones are seen as
“the cool kids” in high school (Wunker and Farber 2019).
The effectiveness of addressing a yet-to-be articulated JTBD is evident in the
exponential growth of the mobile phone application Snapchat. It reached 190 mil-
lion daily active users in 2019 despite fierce competition. The customer base of
Snapchat users is much younger than that of other social media. What is so unique
about Snapchat? Its main differentiating feature is that messages only last for a few
seconds on the recipient’s phone.
Why has Snapchat been so successful to date? The JTBD theory explains it: at
the time of its launch, Snapchat successfully addressed the emotional component of
its JTBD by addressing the needs of teenagers who have long avoided parental
scrutiny.
More recently though, the innovations launched by Snapchat have fallen short of
addressing the evolving user needs, and therefore its customer base has been eroded,
with many of its users deciding to choose competing products such as Instagram.
Finally, a further advantage of the JTBD theory is that it enables organizations to
better understand the competitive landscape, to gain insight about previously unno-
ticed competitors, and to understand the main drivers behind the why in the cus-
tomer’s mindset, whether it be social or emotional.23

22
These can include gender norms or dietary preferences, depending on the market and country
being served.
23
Amazon does not only compete with other providers of entertainment sharing the same techno-
logical means, namely streaming, such as Netflix or HBO. It also competes with any other unre-
lated provider of leisure and pleasure in the privacy of your own home.
1 The Quest for Innovation: Addressing User Needs and Value Creation 25

1.10 Business Models

A business model represents how an organization creates, distributes, and captures

value, and it is an oftentimes neglected aspect of many innovation efforts, which
tend to focus on the good or service to be launched, instead of on how to manage the
value created. In addition, as already mentioned, it is unfortunate that the business
world tends to be associated only with profit-seeking endeavors. Even innovation
teams with enough business acumen oftentimes spend insufficient time and
resources on their business models.
The self-inflicted damage caused by organizations paying insufficient attention
to designing the right business model not only reduces an innovation’s likelihood of
success, but it also grants the upper hand to competitors.
A business model is not a business plan. Nor is it a projection of future cash
flows, profits, and break-even points. A business model embodies how the organiza-
tion views value creation, how its goods or services address the JTBD, and how it
allocates its talent and resources.
The ability to design business models tests whether an organization is truly
customer-­centered. In many cases, organizations only pay lip service to keeping
customer needs at the center of everything.
Innovative organizations cannot operate without a business model. A well-crafted
model lets the organization test hypotheses, formulate and address questions, and
challenge underlying assumptions.
A business model can be a mighty source of innovation. Even for companies
with a strong digital footprint, a well-designed business model is key to transforma-
tional growth (Johnson 2018). Business models can be nicely articulated with the
canvas framework developed by Osterwalder and Pigneur (2010). A canvas is a
visual chart which is very effective to describe the founding blocks of the business
model of an organization, good, or service. Ulvenblad provides in Chap. 5 of this
book a detailed account about business models in Sweden.
With the right adaptive business model in place, an organization can rapidly
evolve and achieve success.

1.10.1 The Components of Business Models

A business model can be articulated around four components (Fig. 1.2):

Taken together, these four components can yield a powerful new way of doing
business and achieving innovation.

1.10.1.1 The Value Proposition

Value propositions are closely related to the JTBD concept. The value proposition
is the promise made to users. A value proposition is a good or service enabling users
to carry out a JTBD in a more convenient, effective, and/or affordable way (Eyting
26 H. Campos

Fig. 1.2 The four components of a business model. (Adapted from Johnson 2010)

et al. 2011). It fulfills the job better than all other alternatives and at an appropriate
price (Boxes 1.6 and 1.7).
While designing a value proposition, questions from the perspective of the cus-
tomer – not from the organization – should be addressed:
• Is my JTBD properly and truly addressed?
• What will the good, the service, or a combination of them look like?
• Who is giving me this offer?
• How are they giving it to me?
• If it is a product or good, how do I dispose of it?
• What tradeoffs are imposed on me along with the offering?
• What does the landscape of payment options look like?
Once these questions are answered, a value proposition can be developed through
experiments to better understand the JTBD.
Ultimately, developing the value proposition is by far the most important compo-
nent of any business model. Any organization wanting to innovate and succeed must
spend time on developing the right value proposition before moving forward.
1 The Quest for Innovation: Addressing User Needs and Value Creation 27

Box 1.6 Hortifrut: Worldwide Leader in Berries Production

Hortifrut is a Chilean company and a global leader in the production and com-
mercialization of blueberries. As the world’s second largest provider of ber-
ries, it enjoys a comfortable 25% of global market share of blueberries and
has sales in over 35 countries. Its value proposition can be summarized as
“berries for the world – every day.” That appeals to both wholesale customers
and retailers such as Carrefour, Walmart, and Costco, as it simplifies and
strengthens supply chains. At the same time, this value proposition enables
the company to capture attractive prices all year instead of facing periods
when prices drop because of excessive supply.

Box 1.7 Safaricom and M-Pesa: The Power of an Effective Value

Proposition
While experimenting with diverse business models to develop a micro-loan
business in Kenya, the telecom firm Safaricom found a much more compel-
ling value proposition: a cheap, safe, and reliable system to send money by
mobile phone to friends and family in rural areas. This insight became the key
value proposition of M-Pesa (M for Mobile, Pesa for money in Swahili).
M-Pesa is a branchless banking system that allows customers to pay bills,
deposit, withdraw, transfer, and save money in a virtual account. In some mar-
kets, like Kenya, users can use a mobile phone to transfer money between the
service and a bank account. As of 2018, Safaricom reported more than 28
million M-Pesa users and over 155,000 M-Pesa agents in Kenya. There are
over 10 million active users in countries other than Kenya.
From its humble beginnings in 2007, M-Pesa has become a huge economic
player in Kenya: it processes over 1.7 billion transactions a year, accounting
for more than 50% of Kenya’s GDP value.

1.10.1.2 Profit Formula

The profit formula articulates how an organization creates value for itself, and for its
shareholders/stakeholders. Its main components are (1) the revenue model, (2) the
cost structure, (3) the margins model, and (4) resource velocity (Johnson et al.
2008). Revenue models establish the price at a given volume of transactions to cover
overhead, fixed costs, and desired profit margins. Profit formulas also establish the
resource velocity at which the organization turns over assets to achieve adequate
returns. Profit formulas need to account for the customer’s willingness to pay.
Do not assume that business models and profit formulas are interchangeable. The
profit formula is an element of a business model.
28 H. Campos

The value proposition defines value for the customer, whereas the profit formula
establishes value for the organization and its shareholders/stakeholders
(Johnson 2010).

1.10.1.3 Key Resources

Key resources are competencies such as human talent, technology, facilities, equip-
ment, channels, reputation, freedom to operate, and brand. They deliver in an effec-
tive way the value proposition to end-users. Key elements create value for the user
and the organization. An organization needs to understand how those elements
interact with each other. Generic elements found in every organization and which do
not create competitive differentiation are not considered key resources (Johnson
et al. 2008). For retailers such as Amazon, a key resource is its Information
Technology infrastructure. Within the agricultural domain, examples of key
resources can include the scientific expertise, market understanding, and proprietary
knowledge at companies such as Bayer, Benson Hill, Calyxt, Cargill, Corteva,
Enko, HZPC, Inari, Indigo, John Deere, KWS, Mosaic, Pairwise, Provivi and
Syngenta among others, as their competitors may lack such resources. By leverag-
ing such key resources, these companies increase the value and benefits their users
get from the goods and services they offer.

1.10.1.4 Key Processes

Key processes may include training, budgeting, manufacturing, planning, sales, and
services. Such processes enable companies to deliver value propositions to users on
a recurrent basis which is then able to be scaled up (Johnson 2010). In the case of
Hortifrut, a key process is its ability to supply high-quality, fresh berries to customer
throughout the whole year because it sources from production fields in different
environments, including Chile, Peru, Spain, and Mexico. Building on previous
expertise and local partners, it is also producing and commercializing berries in
China. In the case of Tuskys, one of the leading supermarket chains in Kenya, which
commercializes bread and pastries enriched with vitamin A, a key process is the
method of incorporating the puree of vitamin A-enriched sweetpotato into their pro-
prietary bakery operations.

1.11 Closing Remarks

This chapter lays the foundation for successful innovation. These concepts can be
applied to any economic sector – to profit-seeking and nonprofit organizations, and
to both private and public endeavors. If there is one economic sector with an unpar-
alleled application potential, however, it is agriculture and agrifood systems in both
1 The Quest for Innovation: Addressing User Needs and Value Creation 29

developed and developing countries. The ultimate goal of all innovation endeavors
in this sector should be improving the quality of life, the outlook, and the well-being
of farmers and end-users.
Firms seeking profits and nonprofit organizations remain as absolutely valid
innovation pursuits. But such pursuits should be seen as a means to that end. Every
innovation effort must allocate as much human talent and as many resources in
developing business models as they spend on developing solutions which address
the JTBD for end-users.
Taken together, the insights, concepts, and examples provided in this chapter
articulate the pathway and the way forward to increased success and deeper impact
of innovation efforts, which are urgently required in agriculture and agrifood
systems.

Acknowledgments I would like to sincerely thank Oscar Ortiz and Graham Thiele from the
International Potato Center for thoughtful comments on a draft version of this chapter. Thanks also
must go to Noelia Campos, Catherine Scott and David Poulson for their review of this chapter,
much improving its style and readability. Figures 1.1 and 1.2 are adapted and reprinted with per-
mission from Harvard Business Publishing. Figure 1.1 from “What is Disruptive Innovation” by
Clayton M. Christensen, Michael Raynor and Rory McDonald, Harvard Business Review
December 2015. Harvard Business Press 2015 by Clayton M. Christensen, Michael Raynor and
Rory McDonald, all rights reserved. Figure 1.2 from “Seizing the White Space: Business Model
Innovation for Growth and Renewal” by Mark W. Johnson. Harvard Business Press 2010 by Mark
W. Johnson, all rights reserved.

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Chapter 2
Productivity in Agriculture
for a Sustainable Future

Ann Steensland and Margaret Zeigler

2.1 The Global Agricultural Imperative

In 2050, the number of people living on our planet will grow to nearly 10 billion,
and that could double the demand for food, feed, fiber, and biofuels from 2005 lev-
els (von Lampe et al. 2014). It is imperative that this demand be met in a way that is
economically viable, environmentally sustainable, and socially beneficial.
Our food and agriculture systems face enormous challenges to sustainably pro-
ducing sufficient, nutritious affordable food, feed, fiber, and biofuel for a growing
world. At present, agriculture is the largest user of water globally; agriculture also
is the single largest use of land, covering a third of the planet’s surface. Competition
between food production and other uses of water and land will increase in the com-
ing decades. In addition, climate change threatens agricultural productivity due to
increased temperatures and shifts in weather patterns (Box 2.1), thereby making it
difficult for crops and livestock to grow and thrive and for agricultural laborers to
endure the physical challenges.

Box 2.1 The Challenge of Climate Change for India’s Farmers (Naresh
et al. 2017)
India’s farmers are struggling as temperature and rainfall patterns become
hotter, drier, and wetter. By the end of the century, the mean summer tem-
perature in India could increase by five degrees Celsius. The number of
days of extreme heat could increase by more than a month, and the num-
ber of warm nights could more than double. The amount of rain is also

(continued)

A. Steensland
Global Agricultural Productivity Initiative, Virginia Tech, Blacksburg, VA, USA
e-mail: [email protected]; https://globalagriculturalproductivity.org/
M. Zeigler (*)
HarvestLAC, Washington, DC, USA

© The Author(s) 2021 33

H. Campos (ed.), The Innovation Revolution in Agriculture,
https://doi.org/10.1007/978-3-030-50991-0_2
34 A. Steensland and M. Zeigler

(continued)
expected to increase by as much as 40%, while the frequency of extreme
rain events is also increasing, as well as the number and length of droughts.
Under these conditions, by 2035, yields for India’s major food crops are

expected to decline by as much as 10%. Rising temperatures and the increase

in extreme heat will make living and working conditions unbearable and
reduce the productivity of farmers and agricultural laborers. Livestock will
also struggle with the heat, and nutrition of their fodder will be reduced.
Without support and adaptation, agricultural productivity in India could
decline by as much as 25%; the productivity of small-scale rain-fed farms
could decline by as much as 50%, posing formidable challenges to food
security, human well-being, and economic and political stability.

Volatile agricultural business cycles also create challenges for farmers as they
seek to manage risk and invest for the future. Conflict and migration generate fam-
ine and human suffering. And global health is compromised by malnutrition, poor
diets, and disease.
The previous 10 years have witnessed unprecedented demand for agricultural
commodities, driven by income increases and population growth in China and India,
as well as demand for biofuels stimulated by high energy prices.
Over the decade 2017–2026, the OECD and the United Nations Food and
Agriculture Organization (FAO) project that the rate of demand growth for all agri-
cultural commodities will slow compared with the prior decade (OECD/FAO 2017).
The rate of demand growth for cereal grains, meat, fish, and vegetable oil will be cut
nearly in half, the notable exception being increasing demand for fresh dairy (Box
2.2 and Fig. 2.1). OECD and FAO attribute the decline in the rate of demand growth
to moderating rates of economic growth, particularly in China, and a decline in
demand for biofuels.
While the rate of demand growth may be slowing (compared to the previous
10 years), the overall demand for food and agriculture products is still rising, as is
the global population. In fact, the highest demand growth for many agricultural
2 Productivity in Agriculture for a Sustainable Future 35

Box 2.2 Meeting India’s Milk Demand (Steensland and Zeigler 2018)

Fig. 2.1 Milk productivity in India and the United States. India has ten times as many
dairy-­producing bovines (cattle and buffalo) as the United States but produces only 50%
more milk. (Data from FAOSTAT 2014). Figure: adapted from 2017 Global Agricultural
Productivity Report (GAP Report), page 14)

Over the next decade, India will account for 54% of the increase in global
demand for fresh dairy products, requiring an additional 56 million tons of
milk. India is already the largest dairy producer in the world, but dairy cattle
and buffalo productivity is low. In 2014, India had 50 million dairy cows and
40 million water buffalo, a total of 90 million animals producing 140 million
tons of milk. Dairy cattle produce an average of 14,000 hectograms per ani-
mal, and buffalo produce 19,000 hectograms per animal (FAOSTAT 2014).
By contrast, the United States had just 9.2 million dairy cows and pro-
duced more than 93 million tons of milk, an average of 101,000 hectograms
per animal (OECD/FAO 2017). Given the projected demand in India, improv-
ing the health and productivity of the current dairy cow and buffalo popula-
tions needs to be prioritized. Indian farmers and consumers are increasingly
choosing buffalo over dairy cow milk (Landes et al. 2017). Consumers prefer
the higher fat content of buffalo milk, and it brings a higher return to farmers.
Buffalo are more adaptable to the changing climate in India, and they convert
the low-quality indigenous grasses into milk more efficiently than cattle.
Improving genetics, feed, and animal care practices can provide more milk
using fewer animals. Increasing access to mechanization for small- and
medium-scale farmers would reduce reliance on cattle for draught power,
allowing investments in milk production.

products is coming from regions most vulnerable to climate change, with high rates
of population growth and low rates of agricultural productivity, such as South Asia
and sub-Saharan Africa. These regions are characterized by small farms, with little
access to productive inputs, and a substantial proportion of the rural workforce
­represented by women. As production increases to meet the growing demand,
36 A. Steensland and M. Zeigler

concerns are rising about the environmental impact these low-productivity systems
will have on the natural resource base, along with rising greenhouse gas emissions.

2.2 What Is Productivity in Agriculture?

For agricultural producers of all scales, there are multiple approaches to meeting the
current and future demand for agricultural products:
• Land Expansion – Producers use more land to produce more agricultural prod-
ucts and, in some cases, convert forest to cropland or rangeland.
• Irrigation – Producers deploy or extend irrigation systems to protect land against
drought and improve its productive capacity, which may permit multiple crop-
ping seasons. If not carefully managed, groundwater may be depleted.
• Intensification – Producers increase applications of fertilizer, machinery, labor,
seeds, herbicides, or other inputs on existing land to grow more crops or raise
more livestock.
Meeting demand in a way that reflects the needs of producers and consumers
today, while safeguarding future agricultural capacity, is best achieved another way:
• Productivity Growth – Adopting technologies and production practices that
result in more output from the same amount, or less, inputs. This can be mea-
sured as total factor productivity (TFP).
While the terms are sometimes used interchangeably, agricultural “productiv-
ity” is distinct from “output” and “yield.” Output is the gross amount produced, and
yield measures the amount of output per unit of production, usually land. TFP
(Fig. 2.2) is the ratio of agricultural outputs (gross crop and livestock output) to
inputs (land, labor, fertilizer, feed, machinery, and livestock). TFP measures changes
in the efficiency with which these inputs are transformed into outputs.
TFP is calculated using measurable inputs, so water and seeds are not factors in
the equation. Eighty percent of global agriculture is rain-fed, making it difficult to
quantify water usage. It is also difficult to quantify seed usage since millions of
farmers, particularly those at smaller scales, use open pollinated varieties (OPVs),
which are derived from the grain of the previous harvest.
By measuring TFP, as opposed to yields or output, we begin to understand the
extent to which increased output is due to better use of these critical resources.
Policymakers, development agencies, researchers, and producers use TFP to identify
where improvements are needed in agricultural production systems and to determine
which investments and policies increase productivity and enhance sustainability.
Producers, governments, and agribusinesses who pursue this course are not just
interested in whether agricultural output is growing but to what extent increased
output is due to better use of existing resources through the application of improved
products, technologies, and practices – essentially, how innovative their opera-
tions are.
2 Productivity in Agriculture for a Sustainable Future 37

Fig. 2.2 Total factor productivity. (Source: 2018 Global Agricultural Productivity Report (GAP
Report))

Examining TFP is the best way to get that information, which can be enormously
useful in identifying where improvements are needed in agricultural production sys-
tems, how to make investment decisions, and what policies support more productive
and sustainable agriculture.

2.3 Productivity and Innovation in Practice

For crops, improved TFP results from adopting innovations like higher-yielding,
pest-resistant, and/or drought- and flood-tolerant seed varieties. The growing bio-­
innovation sector includes precision use of microbes (bacteria and fungi) to help
crop farmers generate more yield on the same land. Microbes also protect plants
from dry conditions and increase yield, as well as protect plants from pests.
38 A. Steensland and M. Zeigler

Agricultural extension agents or agricultural retail service providers can equip

growers with knowledge of best practices that enable more efficient and timely
cultivation techniques, improve soil and water quality, and improve crop yields.
TFP growth also comes from widespread adoption of precision data and informa-
tion technologies in farm equipment to target applications of fertilizer, water, and
crop protection. Having access to geo-referenced data also enables farmers to
improve soil quality, plan for crop rotation cycles, and place less productive land
into conservation.
In livestock production, TFP increases when favorable genetic traits in animals
are selected and bred and when animals receive better overall husbandry, vaccina-
tions, and high-quality feeds that deliver more nutrition per volume. In forestry,
genetically improved trees provide faster-growing products for earlier harvesting
and more volume per tree.
Ensuring that farmers and producers of all scales and sizes gain access to better
innovation, technology and training, and knowledge for best practices will help fos-
ter greater TFP and reduce impact on the soil, aquifers, and other underground water
bodies and water and air quality, as well as effectively use increasingly scarce labor
in agricultural operations.
TFP looks beyond simply how much farmers are producing. It reveals how effi-
ciently they are producing it and indicates how well they are conserving available
resources to meet future needs. Productivity growth in agriculture lowers the cost
per unit of output, helping producers succeed in today’s competitive business cycle,
and enables agri-food systems to provide lower prices for consumers.
Farmers use productive technologies and practices such as improved seeds and
farm equipment, genetically improved livestock, and good animal husbandry to
increase output while conserving land and water and protecting soils for future gen-
erations. In addition to promoting competitiveness and conservation, productive
technologies and good practices also support the UN Sustainable Development
Goals (SDGs) to end hunger and malnutrition, protect the safety of the water supply,
and reduce greenhouse gas emissions.
Case studies throughout this chapter demonstrate how farmers of all scales, pro-
ducing a variety of products in different geographies, are conserving and protecting
their soil and water resources while reducing their climate impact. Innovations
highlighted include drought-tolerant new plant varieties that enable poor farmers in
dryland areas to grow in stressful conditions (Box 2.3); precision agriculture tech-
nologies that enrich soil in the field and keep nutrients out of streams; and animal
care innovations and practices that improve the health and productivity of each ani-
mal while reducing emissions from livestock production.

Box 2.3 Corn Productivity Feeds Vietnam (Zeigler and Steensland 2017)
Corn is already the second largest crop in Vietnam after rice, yet the country
still imports between five and seven million tons of corn each year to feed
livestock for growing consumer protein demand. With little additional land
available for production, farmers must improve corn productivity on existing

(continued)
2 Productivity in Agriculture for a Sustainable Future 39

(continued)
land to seize the market opportunity to supply livestock feed. Better produc-
tion practices and better seeds are needed.
As part of Monsanto (now Bayer AG) Vietnam’s sustainable development
efforts, more than 200,000 farmers have received training since 2015 on good
agronomic practices and hybrid corn seed selection. Seeds with beneficial
traits improved through conventional breeding and advanced biotechnology
are now becoming available for many farmers in Vietnam.

Vietnamese farmer, Huynh Van Hue, enjoys a successful corn harvest

using the rice-to-corn rotation protocol.
High-yielding improved corn seeds such as hybrids and stacked trait bio-
technology (seeds engineered to deliver to farmers both insect protection and
herbicide tolerance traits) help farmers grow more while requiring less labor
to remove weeds and apply crop protection. The improved corn is particularly
resilient against three harmful pests: Asian corn borer, common cutworm, and
corn earworm.
To help farmers make the transition from rice to corn, Monsanto agrono-
mists and rice farmers developed a series of best agronomic practices, the
Dekalb® Cultivation Rice-to-Corn Rotation Protocol, that was selected as a
preferred cropping system by the Vietnamese Ministry of Agriculture and
Rural Development. Farmers in pilot programs used this protocol across sev-
eral departments of Vietnam and increased their incomes by up to 400% while
supplying more corn for livestock feed. New jobs and businesses such as corn
drying and feed mill development are becoming part of the growing corn
value chain.
The Ministry has set a goal of transitioning 668,000 hectares of rice-­
growing land to corn production in the northern region of Vietnam by 2020.
Farmers in other regions of the country are also being supported as they diver-
sify to more resilient, high-value crops and livestock while sustainably inten-
sifying rice production in the most suitable areas.
40 A. Steensland and M. Zeigler

2.4 Productivity Rises, with Room to Grow

TFP accounts for the largest share of growth in global agricultural output today
(Fig. 2.3). In the 1960s, the Green Revolution introduced high-yielding new plant
varieties of wheat and rice to millions of small farmers in Mexico, India, and other
developing countries, along with access to fertilizers, irrigation, and machinery. As
farmers began to use those inputs more efficiently, the contribution of inputs per
land area to agriculture output declined (orange bar), and TFP’s contribution
increased (green bar).
Agricultural productivity supports the needs of producers, consumers, and the
environment. Productive use of inputs and capital helps farmers control costs during
volatile business cycles. Consumers benefit from lower food prices and natural
resources, particularly land and water, are conserved.
However, the most recent 10-year period of available data (2006–2015) reveals
that TFP’s contribution to output growth is declining and more output has been
generated by placing additional land into production. (Compare the two columns,
2001–2010 and 2006–2015, in Fig. 2.3.) Farmers around the world expanded their
production in response to lower global grain stocks and higher prices during
this period.
In high-income countries, improvements in productivity expand output while
reducing inputs used in agriculture and dramatically freezing land expansion
(Fig. 2.4). Innovations that have raised productivity include advanced crop tech-
nologies (genetically modified seeds, novel genetic and breeding approaches, and
improved crop protection products) along with advanced livestock breeding,
improved animal feed and care, precision agriculture, and better nutrient manage-
ment. In the most recent decade, however, the downward trend in productivity
growth can also be seen in high-income countries. (Compare the two columns,
2001–2010 and 2006–2015, in Fig. 2.4.)
Low-income countries have mirrored the global trend in TFP growth and enjoyed
a substantial increase in agricultural output since the 1960s (Fig. 2.5). However,
since the 1980s, opening new land for agricultural production (red bar) remains the
primary driver of agricultural output. TFP’s contribution to agricultural output has
grown during the most recent 10-year period. (Compare the two columns on the
right in Fig. 2.5.)
Nonetheless, economic and political forces have driven land expansion in low-­
income countries: transitions to market-based economies, the introduction of input
subsidies and prices supports, growing populations needing more land to cultivate,
and the extension of irrigation. While some land is suitable for agricultural expan-
sion, greater productivity on existing cultivated land needs to be prioritized to mini-
mize agriculture’s impact on soil, water, forests, and wildlife.
Low labor productivity on small-scale farms, predominantly found in low-­
income country agricultural systems, largely accounts for the higher inputs per hect-
are of agricultural land results (Fig. 2.5, orange bar). Small-scale farms are
labor-intensive due to insufficient off-farm or urban employment opportunities that
could absorb the excess labor in rural areas. Small-scale farmers also struggle to
2 Productivity in Agriculture for a Sustainable Future 41

Fig. 2.3 Sources of growth in global agricultural output, 1961–2015. *Depicts data for the most
recent ten-year period. **Depicts data for the most recent five-year period. (Source: USDA
Economic Research Service (2018))

purchase or rent machinery at competitive prices relative to their labor cost and, in
addition, lack the market insight needed to capture better prices for their produce.
This contributes to high rates of rural poverty and food insecurity.

2.5  gricultural Productivity and the Sustainable

A
Development Goals

The United Nations’ 17 Sustainable Development Goals (SDGs) took effect at the
beginning of 2016, launching the countdown to achieve inclusive, sustainable devel-
opment and economic growth by 2030. Many SDGs have clear implications for
agriculture, while agriculture and forestry play a central role in the strategy to
42 A. Steensland and M. Zeigler

Fig. 2.4 Sources of growth in agricultural output: high-income countries, 1961–2015. *Depicts
data for the most recent ten-year period. **Depicts data for the most recent five-year period.
(Source: USDA Economic Research Service (2018))

achieve many of the goals. Most notably, Sustainable Development Goal 2 (SDG 2)
calls the world community to “end hunger, achieve food security and improved
nutrition, and promote sustainable agriculture.” As part of a comprehensive set of
actions, the UN’s 2030 Agenda for Sustainable Development calls for “doubl[ing]
the agricultural productivity and incomes of small-scale food producers, p­ articularly
women, indigenous people, family farmers, pastoralists and fishers, including
through secure and equal access to land, other productive resources and inputs,
knowledge, financial services, markets, and opportunities for value addition and
non-farm employment” (von Lampe et al. 2014).
Accelerating agricultural productivity must be at the core of a comprehensive
strategy to sustainably feed the world (Box 2.4). With more than three-quarters of
the world’s poor being heavily dependent on agriculture for their direct subsistence
food needs as well as for their incomes, agricultural development through produc-
tivity improvements and higher incomes is one of the most powerful ways that farm-
ers, pastoralists, and fishers can rise out of poverty and improve their nutrition
and health.
Productivity benefits producers of all sizes by improving the resilience and com-
petitiveness of their operations. Productivity also enables better stewardship of land,
water, and other natural resources.
2 Productivity in Agriculture for a Sustainable Future 43

Fig. 2.5 Sources of growth in agricultural output: low-income countries, 1961–2015. *Depicts
data for the most recent ten-year period. **Depicts data for the most recent five-year period.
(Source: USDA Economic Research Service (2018))

Box 2.4 Doubling Agricultural Productivity Is the Right Goal

The projected slowdown in demand for food and agriculture products over the
next decade has prompted calls for a reduction in the agricultural output tar-
gets for 2050 (Hunter et al. 2017). Yet a large and growing body of sophisti-
cated modeling by agricultural economists examining long-term scenarios for
agriculture, food, and the environment indicates that it may be too soon to
consider revising these goals downward.
The Agricultural Model Intercomparison and Improvement Project
(AgMIP) is an international collaborative effort to improve agricultural eco-
nomic models. AgMIP coordinates regional and global assessments of cli-
mate impacts and uses multiple scenarios for crop and livestock production
across differing geographies to explore the effects of uncertainty, data selec-
tion, and methodology on the models’ results.
AgMIP’s analysis of ten leading global multi-sectoral projection models
found that world agricultural production of crops and livestock between 2005
and 2050 will need to rise by between 60% and 111%, with demand growth
particularly strong for ruminant products (cows, sheep) as well as for com-

(continued)
44 A. Steensland and M. Zeigler

(continued)
modities used in the production of biofuels – sugar, coarse grains, and oil-
seeds (von Lampe et al. 2014). (The OECD/FAO prediction of a decrease in
the rate of demand growth for food and agriculture products extends only to
2026, not to 2050.)
Most importantly, AgMIP points to the impact climate change will have on
the ability of agriculture to meet future demand. The ten models suggest that
climate change will generate higher prices for agricultural commodities in
general and particularly for crops (von Lampe et al. 2014). The impact of
climate change must be considered to avoid a downward bias in projected
supply estimates.

2.6 Tracking Productivity: The GAP Index™

The 2018 Global Agricultural Productivity (GAP) Index™ reveals that for the fifth
straight year global agricultural productivity growth (TFP) is not accelerating fast
enough to sustainably meet the food, feed, fiber, and biofuel needs of nearly 10 bil-
lion people in 2050.
In 2010, the Global Harvest Initiative (GHI) calculated that global agricultural
productivity (as measured by TFP) must grow by an average rate of at least 1.75%
annually to double all agricultural output through productivity growth by 2050. The
US Department of Agriculture’s Economic Research Service (USDA ERS) esti-
mates that since 2010, TFP growth globally has been rising by an average annual
rate of only 1.51% (Fig. 2.6).
The GAP Index™ was created in collaboration with Dr. Keith Fuglie of USDA
Economic Research Service. Dr. Fuglie provides annual updates of TFP data for the
GAP Report.
The average annual TFP growth rate in low-income countries is particularly trou-
bling. Sustainable Development Goal 2 (SDG 2) calls for doubling productivity for
small-scale farmers in the low-income countries. The current annual rate of TFP
growth in low-income countries is only 0.96%, down from 1.5% 3 years ago. This
is well below the TFP growth rates needed to achieve the SDG 2 target of doubling
productivity for small-scale farmers in the lowest-income countries by 2030.
If this trend continues, farmers in low-income, food-deficit countries (where
population growth is rapidly rising) will use more land and water to increase their
output, straining a natural resource base already threatened by extreme weather
events and climate change. Many low-income countries will need to import food but
lack sufficient income to purchase enough to meet the needs of their citizens. Poor
urban households will bear the brunt of higher food prices in these countries, but
they will also impact low-income rural populations since they are net food buyers.
Some of the food demand will not be met, and millions of people will be debilitated
by hunger and malnutrition.
2 Productivity in Agriculture for a Sustainable Future 45

Fig. 2.6 The Global Agricultural Productivity (GAP) Index™ (2018). (Source: Food Demand
Index is from Global Harvest Initiative (GHI) (2018); Agricultural Output from TFP Growth is
from USDA Economic Research Service (2018))

2.6.1 Regional TFP Growth Rates Raise Concerns

Rates of productivity growth vary greatly by region, as can be seen by comparing

food demand indexes against projected agricultural output from TFP growth for the
period 2000 to 2030. Figure 2.7 compares the percentage of the estimated food
demand for 2030 that can be met with projected TFP growth for six world regions
and China.
At current rates of TFP growth, sub-Saharan Africa (SSA) will meet only 8% of
its food demand through productivity (Fig. 2.7). Trade plays a key role in closing
Africa’s food demand gap; 50% of its vegetable oils, 35% of its poultry meat, and
23% of its sugar requirements are imported (OECD/FAO 2016). Without significant
increases in agricultural productivity growth, African countries will not meet their
SDG targets for reducing hunger, malnutrition, and poverty and will rely more on
trade to meet growing demand and most likely will continue to expand land area
under cultivation to grow more food, threatening wildlife habitat and releasing soil
carbon from forest conversion to cropland. In addition, an increasing financial bur-
den will be imposed on them in order to increase their imports of raw food materials
which oftentimes are paid for in foreign currencies.
With 60% of the world’s population and considerable economic diversity, the
Asian regions (South Asia, Southeast Asia, East Asia, including China) exhibit
varying degrees of capacity to meet food demand through productivity.
China has prioritized agricultural development and food security and has
achieved great progress in reducing hunger. Yet with little arable land and growing
affluence, China will require more investments in productivity and more trade to
meet future demand.
46 A. Steensland and M. Zeigler

Fig. 2.7 Percent of food demand met through productivity (TFP) growth in 2030. Note on meth-
odology: The projection of agricultural output from TFP growth uses USDA ERS (2017) estimates
of average TFP growth during 2004–2014 and assumes this is maintained through 2030. The pro-
jected growth in food demand uses UN estimates of population, World Bank estimates of GDP
forecasts and PricewaterhouseCoopers LLP (PwC) estimates of GDP growth in PPP, and estimates
of the income elasticity of food demand from Tweeten and Thompson (2008).The income elastic-
ity of food demand indicates the share of the growth in per capita income that will be spent on
food. Multiplying the income elasticity by the growth rate in per capita income gives the growth
rate in per capita food consumption holding food prices fixed. Adding this to the population growth
gives the total growth in food demand for a given price level. (Source: Food Demand Index is from
Global Harvest Initiative (2017). Agricultural Output from TFP is from USDA Economic Research
Service (2017))

South Asia will only meet 25% of its growing demand through productivity by
2030. Despite increasing agricultural output since the Green Revolution, India still
relies on large amounts of inputs per land area and high labor inputs to produce
food, rather than boosting productivity. Other Asian countries, such as Indonesia
and Vietnam, could potentially reduce hunger and improve agricultural productiv-
ity, but face significant threats from climate change, requiring accelerated invest-
ments to keep up with the challenge.
Latin America (LAC) continues to position itself as a rising global breadbasket.
At present TFP growth rates, LAC will be able to meet 127% of regional food
demand through productivity growth, an increase of 11 percentage points since
2014. The LAC region and particularly the southern cone nations of Argentina,
Brazil, Paraguay, and Uruguay comprise the world’s largest net exporting zone of
agriculture products (Regúnaga 2013). These countries and others in Latin America
have the potential to vastly increase their productivity to sustainably supply food
and other agricultural goods for their own populations and to a growing world.
Harmonizing trade rules and improving the trade capacity of low-income countries,
2 Productivity in Agriculture for a Sustainable Future 47

coupled with improvements in supply chains and infrastructure, will foster timely
and beneficial trade to close food and agriculture demand gaps.
In 2030, North America is projected to reliably supply safe, abundant food for
the world, producing nearly as twice as much food to meet its own food demand.
However, the potential for a new era of trade protectionism has sent a chill through
agricultural producers who fear they will lose access to traditional trade partners or
fail to access new markets at a time when prices are low and farmers are struggling.
Investments in R&D would become more critical than ever under these circum-
stances (Box 2.5).

Box 2.5 Public Research Sparks Innovation and TFP

Due to agriculture’s dependence on limited resources like water and land, it
may be unique in its reliance on productivity and innovation to meet the rap-
idly growing demand of consumers by 2050 (Fuglie 2018). Agri-food innova-
tion systems rely heavily on public agricultural research and development
(R&D) and extension systems as well as regulatory frameworks that incentiv-
ize risk taking innovation and investment. Such agricultural R&D investments
require long gestation periods of more than a decade to realize the full benefits
that these investments generate. Over time, they pay large dividends, includ-
ing higher profits for farmers, more abundant food supply at lower cost for
consumers, and more opportunities and a higher quality of life in rural
communities.

Filomena do Anjos is a senior lecturer and veterinarian at Eduardo Mondlane University,

Mozambique. She is developing a more economical poultry feed, as more than 70% of rural
families in Mozambique raise chickens. Photo credit: Carlos Litulo

Agricultural R&D along with extension programs are essential public

goods and the principal drivers of total factor productivity (TFP) growth.
Public sector R&D and extension programs deliver innovation and informa-
tion to agricultural producers. They provide access to proven techniques such
as conservation agriculture and animal care practices to improve the sustain-
ability and resilience of their operations. While farmers innovate on their

(continued)
48 A. Steensland and M. Zeigler

(continued)
farms, experimenting with practices that can boost their own production, indi-
vidually they do not have the capacity to conduct long-term research and
development activities.
Public R&D provides foundational results that the private sector can fur-
ther develop to improve specific crops, livestock, machinery, or food manu-
facturing industries. R&D and extension services help producers control
costs, reduce loss and waste, and become resilient to weather challenges and
climate change while conserving natural resources.
Countries that build national agricultural research systems (NARS) capa-
ble of producing a steady stream of innovations suitable for local farming
systems, such as Brazil’s EMBRAPA, have generally achieved higher growth
rates in agricultural productivity than countries that do not make these
investments.

Future TFP growth in North America will be driven by innovations such as

advanced crop and livestock breeding and data systems that monitor plant growth
and animal health. However, public sector investments in the research and
­development (R&D) that drive agricultural innovation has slowed in the United
States and in many high-income countries (Fig. 2.8).
For high-income countries, the growth rate in spending for public agricultural
R&D averaged 4% annually between 1960 and 1990. Between 1990 and 2009, the
growth rate declined to just 1.3% annually and then began to contract between 2009
and 2013, declining on average 1.5% annually.
Public R&D provides discoveries that are the foundation for further private sec-
tor innovation; lower public investments constrict the innovation pipeline. Private
sector research investments, while significant, cannot make up the public R&D
funding gap. Increased public sector R&D investments are needed to reinvigorate
productivity growth. Additionally, as urbanization increases, so does competition
for land and water resources. Continued farm consolidation will create some addi-
tional efficiencies, but land and water-use policies must balance the resource needs
of agricultural producers with those of their urban customers.

2.6.2 Growing Productivity While Protecting Against Risk

Globally, productivity growth must continue to be a priority to sustainably meet the

demand for food, feed, fiber, and biofuel. Yet productivity alone is insufficient to
achieve economically, environmentally, and socially sustainable food and agricul-
ture systems.
2 Productivity in Agriculture for a Sustainable Future 49

Fig. 2.8 Public agricultural R&D spending in high-income countries, 1960–2013. (Source: USDA
ERS analysis of data from the Organization for Economic Co-operation and Development, Pardey
and Roseboom (1989), World Bank and numerous supplementary sources. Paul Heisey and Keith
O. Fuglie, “Agricultural research investment and policy reform in high-income countries.” USDA
ERS Research Report Number 249, May 2018)

Food and agriculture systems are vulnerable to a variety of risks, including

extreme weather events and climate change, market volatility, and political instabil-
ity. During times of crisis, agricultural producers seek to minimize their losses with-
out putting their future productivity at risk. Good innovations and an enabling policy
environment can ensure they stay productive during seasons of risk. This also helps
stabilize the supply and price of food and agriculture products (Box 2.6).
Public and private insurance programs, such as crop insurance or weather index
insurance, help preserve producer incomes and enable them to keep their most pro-
ductive assets and to more effectively manage risk. Some producers participate in
conservation programs that reward them for protecting their soil and water resources.
Those without access to insurance and conservation programs face difficult choices.
During hard times, small-scale farmers usually raise cash by selling cattle and
equipment or by leasing their land; the poorest farmers have little to sell. Instead,
they reduce their consumption of food and may resort to pulling children from
school and into labor. They also reduce the already less than optimal proportion of
family income spent on providing access to health services for children and women,
particularly lactating and pregnant women. These coping strategies have negative,
long-lasting impacts on the health and economic prospects of the family as well as
their farm operations.
50 A. Steensland and M. Zeigler

Consumers also face risks from economic instability or food price shocks.
Governments are establishing social protection programs to stabilize households
experiencing food and income insecurity. Some countries rely on national reserves
to feed their population and manage food prices. Ensuring that agricultural trade
remains open is essential to keeping food prices stable, especially when commodity
stocks are low.

Box 2.6 Social Protection Programs Reduce Risk (Daidone et al. 2014)
Social protection programs, such as cash grants, provide the poorest rural
residents with income stability and food security while also reducing their
reliance on agricultural wage labor and freeing them up to invest time and
resources in their own farms, to develop off-farm enterprises, or to pursue
training for non-agricultural employment. In 2010, the Zambian Ministry of
Community Development for Mother and Child Health (MCDMCH) piloted a
Child Grant Program (CGP) in three provinces, where the program gave
households with children under the age of 5 a total cash grant of $12 per
month. Payments were made monthly and without condition.
The Child Grant Program, a pilot project in the Eastern Province of
Zambia, provided families who have children under the age of 5 with a
monthly grant that helped stabilize family incomes, enabling parents to invest
more time and resources in developing their farms and off-farm enterprises.

The program not only reduced the severity of poverty, but it changed the
participants’ perception of their own food and income security: the number of
households that reported being better off than they had been 12 months earlier
increased by 45%. Perhaps most encouraging was the increased investment in
productivity-enhancing and labor-saving inputs and the increases in agricul-
tural output by CGP beneficiaries. The value of the overall harvest increased
by 50%, on average, with most of the additional production being sold. CGP
households increased both their ownership of livestock (21%) and the diver-
sity of their livestock.
Finally, the income stability of the cash grants enabled participants,
­particularly women, to reduce their wage labor hours and develop their own

(continued)
2 Productivity in Agriculture for a Sustainable Future 51

(continued)
enterprises. The percentage of households that operated off-farm businesses
increased by 17%. The CPG grants also had a significant multiplier effect:
each Zambian kwacha transferred to a recipient generated 1.79 kwacha in the
local economy.
In order to move people from “protection to productivity,” social programs
must be accompanied by investments and partnerships that improve produc-
ers’ access to secure land tenure, transportation, electricity, and irrigation
infrastructures and agricultural knowledge and innovations developed and
disseminated by a robust research and extension system.

2.7 Food Wasted Is Productivity Lost

Reducing agricultural losses on the farm and food lost throughout the agricultural
value chain avoids wasted resources and unnecessary greenhouse gas emissions.
On average, Americans throw away one pound of food each day, the equivalent of
30% of the calories they normally consume. Fruits and vegetables alone account for
almost 40% of the waste, 17% is milk and dairy products, and 13.5% is meat (Conrad
et al. 2018). These wasted foods are important sources of vitamins, minerals, protein,
and calcium that promote healthy lifestyles and reduce healthcare costs. In addition,
they represent a waste of all the water needed to produce them in the field and to
process them in the value chains connecting farm produce with consumers.
Higher-income households tend to replace spoiled foods quickly, for example,
purchasing another carton of strawberries during the next trip to the grocery store
when the carton in the refrigerator goes bad. In those households, the lost nutrients
are replaced and therefore more likely to be consumed. But the price of highly per-
ishable foods can prevent many households from replacing spoiled food right away,
so the opportunity to consume those nutrients is lost, along with the food.
Not only do spoiled foods end up in landfills producing methane, but they are a
waste of the agricultural resources used to produce them.
A USDA study calculates that the equivalent of 30 million acres of cropland
would be needed to produce the food and animal feed for livestock products (dairy,
meat, and eggs) that Americans throw away each year (Conrad et al. 2018). Nearly
4.2 trillion gallons of irrigation water is wasted, including 2.3 trillion gallons to
produce the wasted fruit and vegetables alone. Wasted fruits and vegetables are
responsible for most of the pesticide waste, while most of the wasted cropland and
fertilizer is used to produce feed for livestock.
While beyond the scope of this chapter, wasted food is also a waste of agricul-
tural labor, capital (mechanization), and public and private sector investments in the
development of technologies for agricultural productivity and sustainability
(Fig. 2.9). The economic and environmental costs of transporting, packaging, and
storing food that eventually ends up in the garbage and landfills also need to be
taken into account in the cost of wasted food.
52 A. Steensland and M. Zeigler

Improvements must be targeted throughout every part of the value chain: better
harvesting and storage practices, better livestock care to reduce disease, improve-
ments to the cold chain and the transportation infrastructure it relies on, reductions
in waste at the processing and retail levels, and changes in consumer behavior.
Reducing loss and waste on a wide scale depends on government investments in
public goods, such as infrastructure. An enabling policy environment that supports
private sector innovation in harvest and storage technologies and stimulates behav-
ior change by consumers is also vital. In addition, there are opportunities to increase
the productive use of unconsumed food and agricultural byproducts (Box 2.7).
These are potential sources of bio-energy, animal feed, fertilizer, and new products.
Reducing loss and waste and creating more opportunities to use waste produc-
tively will help meet the growing global demand for agricultural products, generate

Fig. 2.9 Agricultural inputs and resources used to produce food waste in the United States, annual
average, 2007–2014. (Source: Conrad et al. (2018))

Box 2.7 Cutting Food Loss Improves Nutrition Too!

In Nigeria, nearly 30% of children under the age of 5 are vitamin A deficient,
a condition that can lead to blindness and increased risk of disease and prema-
ture death (Maziya-Dixon et al. 2006). Tomatoes are an excellent source of
vitamin A, and Nigerian farmers produced 1.8 million metric tons of tomatoes
in 2010, making their country the 16th largest producer in the world (Ugonna
et al. 2015).

(continued)
2 Productivity in Agriculture for a Sustainable Future 53

(continued)
But the tomato supply chain is poorly organized and underdeveloped, and
as a result half of the annual tomato harvest never reaches the market.
Meanwhile, Nigeria imported 150,000 metric tons of processed tomato prod-
ucts in 2014, valued at $160 million (Ugonna et al. 2015).
The Geneva-based Global Alliance for Improved Nutrition (GAIN) has
convened a coalition to develop solutions for reducing tomato losses that are
market-based, nutritionally focused, locally adaptable, and financially sus-
tainable. The Postharvest Loss Alliance for Nutrition (PLAN) brings leaders
from government, finance, and academia together with representatives from
Nigeria’s tomato industry, including aggregators, processors, packagers, and
cold chain operators.
The Alliance is targeting specific elements in the supply chain for improve-
ment: crating and cooling technologies to protect prevent spoilage; a larger
more reliable fleet of transport vehicles; new processing technologies and
financing models to increase capacity; and outgrower schemes to link proces-
sors with farmers. Growers, traders, and processors also need technical assis-
tance in negotiating contracts, tracking inventories, re-tooling and maintaining
machinery, food safety protocols, and networking within the industry.
Businesses with the capacity to scale up and innovate are receiving technical
assistance and access to grants or affordable financing so that they can experi-
ment with technologies and implement new approaches.
Strengthening the tomato value chain will not only give Nigerian produc-
ers access to a robust and growing market, but it will also provide low-income
consumers a safe, affordable source of nutritious food that will improve the
health of millions of children.

clean energy, mitigate carbon emission, create new jobs and industries, and improve
incomes and food security, especially for small-scale producers.

2.8 Sustainable Agriculture Is Built on Productivity

Sustainable agriculture must satisfy human needs, enhance environmental quality

and the natural resource base, sustain the economic vitality of food and agriculture
systems, and improve the quality of life for farmers, ranchers, forest managers, fish-
ers, agricultural workers, and society as a whole.1 Improving agricultural sustain-
ability requires multi-faceted, collaborative solutions involving producers,
agribusinesses, transporters, retailers, and policymakers.

1
Based on the definition in Toward Sustainable Agriculture Systems in the twenty-first Century,
National Research Council, USA, 2010.
54 A. Steensland and M. Zeigler

The United Nations defines sustainable growth as “meeting the needs of the pres-
ent without compromising the ability of future generations to meet their own needs.”
No one understands this delicate balancing act better than farmers, ranchers, forest
managers, and fishers.
As they balance the demands of the present with the needs of the future, produc-
ers decide how much risk they are willing to take. They must consider the risk
management options available to them, as well as factors they cannot control like
weather, market prices, and economic or political uncertainty. While trade-offs are
inevitable, policies and investments that support agricultural productivity and
expand risk management capacity give producers the best chance to meet current
and future needs while increasing their adaptability and resilience.
The next section of the chapter outlines how farmers in Colombia, the United
States, Kenya, and India are adopting innovation to build productive sustainable
agriculture systems.

2.8.1 Making Colombia’s Beef More Sustainable

With abundant natural resources and increased political and economic stability in
many countries, the Latin America and the Caribbean region (LAC) looks to agricul-
ture as a key opportunity to feed its expanding middle class and become a breadbas-
ket to the world. Agricultural productivity growth on the continent has skyrocketed
in recent decades, and the region is now beginning to shift toward lower-carbon,
environmentally friendly agriculture systems (Truitt Nakata and Zeigler 2014).
Despite this progress, difficult issues must be addressed. Conserving forests and
biodiversity while improving livestock productivity in Latin America will be key to
cultivating a successful sustainable agriculture system. While Latin America produces
more beef than any other region, emissions from beef production are the second high-
est in the world after South Asia. Nearly one-third of Latin America’s beef sector
emissions come from land-use change for pasture expansion (Gerber et al. 2013).
The problem is acute in Colombia, one of the world’s top cattle-producing coun-
tries with 23 million head of beef and dairy cattle. Cattle production uses 28% of
Colombia’s total land area (Nelson and Durschinger 2015), with 80% of all agricul-
tural land in Colombia used for pasture.2 Decades of civil conflict have exacerbated
forest and biodiversity loses, with some three million hectares (7.4 million acres) of
forest destroyed.
Colombia faces a challenge in helping its small- and medium-scale farmers shift
to sustainable lower-carbon cattle production systems that use less land, conserve
more forests, and provide higher incomes.
In the recent decade, many Colombian ranchers have begun to work with local
cattle trade associations and the national Colombian Cattle Ranching Association

2
Government of Colombia, Census of Agriculture (2014).
2 Productivity in Agriculture for a Sustainable Future 55

(Federación Colombiano de Ganaderos, FEDEGAN) as well as a Colombia sustain-

able livestock foundation (La Fundación Centro para la Investigación en Sistemas
Sostenibles de Producción Agropecuaria, CIPAV) to implement a more resilient
form of livestock production: the silvopastoral production system (SPS) (Box 2.8).
Rows of fodder shrubs interspersed with grasses and trees characterize silvopas-
toral systems.

Photo credit: Neil Palmer, CIAT

With technical advice from CIPAV’s SPS experts, ranchers plant fodder shrubs
in high densities and intercropped with grasses and trees in rows. Using special fod-
der shrubs like Leucaena leucocephala and grasses like Brachiaria (high-protein
fodder and grasses developed by CGIAR (Consultative Group for International
Agricultural Research) institutions such as the International Center for Tropical
Agriculture (CIAT)) boosts forage nutrition for cattle, allowing them to gain weight
and produce more milk and meat in less time.
Leucaena shrubs grow rapidly and help fix nitrogen to soil, enriching soil health.
Such forages grow deep root systems that help prevent soil erosion and can be inte-
grated in other silvopastoral systems globally.

Box 2.8 Enabling Higher Productivity While Protecting the

Environment in Colombia
Using a healthy agricultural systems (HAS) approach that focuses on increas-
ing productivity while preserving the assets – the water, soil, and rich biodi-
versity that make productivity possible – The Nature Conservancy (TNC) and
its partners are enabling farmers of all sizes to adopt practices that repair the
land and sequester carbon, thereby ensuring more productive and profitable
farm operations.
In Colombia, TNC and partners have supported 2600 ranchers in their tran-
sition to healthy agricultural systems over the past 7 years. Results have been
impressive. Milk and meat production increased by 20%. Bird species
­numbers increased from 140 to 193, and the number of terrestrial mollusks,

(continued)
56 A. Steensland and M. Zeigler

(continued)
ants, butterflies, and other wildlife increased. Monitoring studies have con-
firmed reduced pollution of water sources.
Healthy agricultural systems in Colombia optimize natural ecosystems to
restore vitality to landscapes, increase productivity and farm profit, slow
deforestation, and boost sustainability.

The climate impact of the healthy agricultural systems approach is equally

impressive. To date, farmers have contributed to capture 1.5 million tons of
CO2 equivalent by converting degraded pastures into silvopastoral systems
(grazing systems incorporating special fodder, grasses, and trees with rota-
tional plots for livestock). They have avoided additional emissions by planting
secondary forests and by preserving the natural forests within the project
areas. Both contributions are highly significant for Colombia, as the country’s
climate change commitment for the cattle ranching sector is to mitigate 10.3
million tons of CO2 equivalent by 2030.
The Nature Conservancy is working to expand these practices across
Colombia and other countries in Latin America, demonstrating that agricul-
ture and natural habitat can work hand in hand to preserve the planet while
increasing production to feed a growing world.

Trees provide shade for the cattle, protecting them from heat. And with more
vegetation in the pastures, the soil retains nutrients, water, and carbon, making
ranches more resilient to cyclical drought.
The Government of Colombia has proposed reducing the total land used for live-
stock by 21% by 2030, and the national cattle ranching association, FEDEGÁN,
proposes similar pastureland reduction goals along with productivity increases. But
making the transition from extensive cattle ranching systems to the newer silvopas-
toral systems is not easy, as it requires both technical support and a change in mind-
set. Many ranchers perceive forestry and cattle ranching as incompatible practices
and often clear forested areas so cattle can graze on grasslands. Ranchers also fear
that by using less pasture and conserving more forests, they risk losing some of their
farmland to the government or other ranchers.
2 Productivity in Agriculture for a Sustainable Future 57

Government policy can help ranchers shift to silvopastoral systems with less
risk. In Colombia, the Ministry of Agriculture and Rural Development is imple-
menting more opportunity for ranchers to formalize ownership of land through
secure land titling and helping ranchers to gain greater access to finance, as well as
to certify they did not gain land through deforestation. Pilot programs are now avail-
able that provide low-interest loans and technical assistance to ranchers who want
to convert their operations to silvopastoral systems. Eventually, more retail chains
may be incentivized to purchase zero-deforestation beef, similar to retail agree-
ments in Colombia with coffee growers.
By focusing on reducing costs, by providing quality meat and milk, and by cer-
tifying zero-deforestation branded meat and milk, Colombia’s ranchers may be able
to compete with imported products for the rising number of middle-class consum-
ers. Implementing silvopastoral systems is an example of how innovation and pro-
ductivity benefit farmers, consumers, and the environment.

2.8.2  ow Innovation Grows More Sustainable Pork

H
in the United States

Decades of public research and development along with research and growing part-
nerships with the private sector have resulted in high levels of pork productivity in
the United States. Today is only takes five breeding hogs to produce the same
amount of pork from eight hogs in 1959, or 38% fewer breeding animals.3 As
recently as 1989, the United States was a net importer of pork; today it is a net
exporter, reaching more than 100 countries.4 Consumers in these markets trust the
safety and quality of US pork products, and demand continues to grow.
This substantial increase in pork productivity demonstrates how TFP works and
the economic and environmental benefits of productivity growth.
Widespread adoption of innovative technologies and practices has increased
pork output using the same amount or less land, labor, fertilizer, feed, machinery,
and livestock. Efficient uses of these inputs generated cost savings for producers
and consumers and improvements in the environmental footprint of the pork and
animal feed value chains.
Pork productivity begins in the genes. Genetic researchers and veterinarians ana-
lyzed hundreds of animal traits to select and mate pigs to breed descendants that are
healthier, use less feed, and produce more meat. Heritage breeds are cross-bred to
create the best meat flavor and quality for consumers.
The pork feed value chain has also experienced a dramatic increase in productiv-
ity and sustainability (Box 2.9). Over the past 30 years, productivity-enhancing crop
technologies and practices reduced the amount of land, labor, machinery hours,

3
https://www.pork.org/wp-content/uploads/2012/06/10-174-Boyd-Camco-final-5-22-12.pdf
4
https://www.ers.usda.gov/webdocs/charts/83729/usporkexports1.png?v=42887
58 A. Steensland and M. Zeigler

Box 2.9 Building Sustainability Through the Pork Value Chain in the
United States
Private sector investment, innovation, and scale are helping more farmers and
ranchers shift to lower-carbon production systems. Smithfield Foods, the
world’s largest pig producer and pork processor, led the protein industry as
the first to announce an ambitious greenhouse gas (GHG) emission reduction
goal throughout its entire supply chain (The 25 by ’25 Initiative). By 2025,
Smithfield will reduce its absolute GHG emissions from its 2010 baseline by
25%, or four million metric tons, equivalent to removing 900,000 cars from
the road.
The initiative began with the creation of a robust model to estimate the
GHG footprint of Smithfield’s entire supply chain – a collaboration with the
University of Minnesota’s NorthStar Institute for Sustainable Enterprise and
in partnership with the Environmental Defense Fund (EDF). To ensure
Smithfield reaches this goal, the company launched Smithfield Renewables, a
platform within the organization that will unify, lead, and accelerate its carbon
reduction and renewable energy efforts.
Smithfield made commitments to improve the carbon footprint of the feed
crops for their pork production, optimize fertilizer use and improve soil
health, install efficient manure management technologies, and more effi-
ciently track and manage logistics of transportation fleets to cuts costs and
emissions.

In 2017, Smithfield fed its pigs more than 7.4 million pounds of grain. The
GHG analysis of the Smithfield supply chain noted that animal feed accounts
for 15–20% of their entire production carbon emissions. By helping farmers
in their feed supply chain shift to efficient fertilizer and soil health practices
(such as using cover crops, nitrogen sensors, and other conservation practices)
and by promoting sustainable grains such as sorghum (a resilient crop that
costs less to grow, offers good nutrition for pigs, and serves as part of a crop-­
diversification strategy), the program provides a triple win: more profit for
farmers, improved soil and water health with less greenhouse gas emissions
for the planet, and nutritious sources of feed for healthy pigs.
2 Productivity in Agriculture for a Sustainable Future 59

fuel, and fertilizer used to produce hog feed. Alfalfa, corn, and soybean seeds
improved through biotechnology and conventional breeding become healthy crops
that are pest-resistant and herbicide-tolerant. Best practices for fertilizer manage-
ment ensure that the right amount of the appropriate fertilizer is used at the right
time and in the right place.
Machinery equipped with precision systems, such as GPS, cover every inch of
the field with precisely planted seeds and treat each plant with the nutrients and crop
protection products needed. Precision systems also allow less productive land to be
identified and set aside for conservation use, such as pollinator or wildlife habitat.
These crops are blended with nutrients to make pig feed that is healthier and
easier to digest, resulting in fewer methane emissions during the digestive process.
“Smart barns” provide consistent temperature, comfortable housing, and readily
available feed and water. With detailed data on the health and development of the
herd, farmers can reduce energy use, save labor, and protect pigs from disease.

2.8.3 Investing in Productivity for Africa’s Dairy Hub: Kenya

Kenya’s dairy farmers produce more than five billion tons of milk per year, the most
in Africa (FAOSTAT 2017). The dairy industry accounts for 6 to 8% of Kenya’s
GDP and provides income for two million households. Consumers also benefit from
Kenya’s dairy productivity; per capita milk consumption is 100 liters (26 gallons)
per year, more than any other developing country (Katothya 2017).
Kenya’s dairy industry is endangered by climate change. A substantial increase
in mean temperature is predicted for East Africa and could lead to a reduction in
fodder output and grazing land capacity. Increasing temperatures threaten the health
and productivity of livestock. As droughts lengthen and intensify, large-scale cattle
losses are likely. Small-scale farmers will be forced to sell cows or land to cope with
the loss of income, making it difficult for them to recover financially when the
drought is over.
As part of its climate change adaption and mitigation strategy, Kenya’s dairy sec-
tor needs to increase the productivity of its dairy cattle and reduce the GHG emis-
sion intensity of milk production (Box 2.10). Sub-Saharan Africa’s milk production
has the highest emission intensity in the world, three times greater than the global
average and almost double that of South Asia.
Kenya is home to 75% of the dairy cattle in Southern and Eastern Africa; 80% of
Kenya’s milk output is produced by small-scale farmers. By improving cattle pro-
ductivity and reducing emission intensity, the dairy sector in Kenya can signifi-
cantly mitigate greenhouse gases while increasing small-scale farmer income.
More than half of the emission intensity of milk production in sub-Saharan
Africa comes from methane produced during a cow’s digestive process. One strat-
egy for reducing these emissions is to add legume silages to a cow’s diet. Legumes
are digested more efficiently, so a cow produces less methane and more milk.
Improving the genetics of dairy cattle is another way to reduce methane emissions
60 A. Steensland and M. Zeigler

Box 2.10 Better Breeds and Better Feed Are Key for Climate Resilience

Photo credit: International Livestock Research Institute (ILRI)

The drylands of northeastern Kenya are particularly vulnerable to climate
change. This region receives less than 500 millimeters (20 inches) of rain per
year and has fewer than 90 plant growth days. Many of the people in this
region are pastoralists, moving regularly to find forage for their livestock.
Boran cattle are well-suited to the dryland areas of East Africa but produce
very little milk and meat compared to cross-bred and high-grade varieties.
The International Livestock Research Institute (ILRI) farm in Nairobi is
breeding Boran cattle that efficiently digest the low-quality grasses and silages
that are common to the drylands. This will decrease methane emissions and
improve milk and meat productivity.
In addition to improved cattle genetics, improving the fodder and feed for
cattle is key to achieving more robust milk products and livestock that are
climate-resilient. The International Center for Tropical Agriculture (CIAT)
has developed Brachiaria grass varieties that are drought-resistant and
increase milk productivity in dairy cows by 40%.

(continued)
2 Productivity in Agriculture for a Sustainable Future 61

(continued)
These nutritious grasses are easier for cattle to digest. Demand for these
improved grasses is skyrocketing, and farmers are now diversifying their
income by growing and selling them at the local “fodder stores” which pur-
chase and sell fodder in local markets.

and increase milk productivity. Kenya has already made strides in this direction; the
country is home to more than 70% of the cross-bred and high-grade dairy cows in
Africa. Sixty percent of the milk produced in Kenya (three billion liters) comes
from high-grade cattle and cross-breeds. But high-grade dairy cattle are more sus-
ceptible to disease than local cattle varieties, so breeding for disease resistance is a
top priority.
The health of cattle in Kenya and exposure to disease continue to threaten pro-
ductivity and farmer livelihoods. Part of the county is infested with tsetse fly, the
biological vector of trypanosomiasis (sometimes called sleeping sickness), a para-
sitical disease that causes anemia and emaciation in cattle. The condition is chronic,
and if left untreated, it is often fatal. If a cow survives the infection, its milk produc-
tivity can drop by 30 to 40%. Trypanosomiasis is a zoonotic disease that is passed
between animals and humans via the tsetse fly, although the number of human cases
in Africa has dropped substantially due to sustained public health efforts.
To ensure a sustainable livelihood and earn sufficient incomes to invest for the
future, small-scale dairy farmers need consistently healthy, productive herds. Good
animal care and feeding practices promote productivity and prevent disease, but
access to affordable, quality animal healthcare products is also essential.

2.8.4 Mechanizing for the Future in India

India’s small-scale farms have enjoyed healthy yields, thanks to the Green
Revolution and continued improvements in seeds, crop protection products, and
access to fertilizers (Box 2.11). Nevertheless, labor productivity on small farms
remains stubbornly low. Family members do the bulk of the farm work because
mechanization rental and ownership are more expensive than family or hired labor.
Not only is this an inefficient use of labor, but it contributes to high rates of rural
poverty and food insecurity. For example, the income from a one-hectare farm, even
if it is high-yielding, must meet the needs of as many as 12 people. As a result, small
farmers are heavily dependent on food rations, wage labor, and government support
to supplement their farming incomes.
Custom Hiring Centers (CHCs) give farmers affordable access to mechanization
without having to own the machines themselves. Farmers can rent tractors and
implements for soil preparation, seeding, application of nutrients, and crop protec-
tion and harvesting. CHCs are centrally located to serve several villages, reducing
62 A. Steensland and M. Zeigler

Box 2.11 Balanced Crop Nutrition Boosts Productivity and Incomes in

India
Since 2008, the Mosaic Villages Project, a collaboration between The Mosaic
Company, The Mosaic Company Foundation, and implementing partner, the
S M Sehgal Foundation, has helped Indian farmers move out of poverty and
achieve greater food security. Mosaic’s investment includes funding and the
expertise of Mosaic agronomists who work alongside local partners to train
farmers in balanced crop nutrition and agronomic best practices.

Photo credit: The Mosaic Company Foundation

In the remote districts of Mewat and Alwar in Rajasthan, the Krishi Jyoti
Project, or “enlightened agriculture,” helps farmers improve productivity of
three crops: pearl millet, wheat, and mustard. The project focuses on five key
aspects of agricultural production: soil health, seed and fertilizer, water man-
agement, agronomic training, and market linkages. Village leaders selected
farmers representing all castes and landholding sizes to participate in the
program.
With balanced crop nutrition practices – using the right mix of macro- and
micro-nutrients to meet the needs of the crops and soils – together with agro-
nomic expertise and financial support, farmers increased yields by as much as
25% over traditional farming practices. In total, Krishi Jyoti has directly ben-
efited more than 26,000 farmers across 60 villages and boosted cultivation
across nearly 16,000 acres of land. Average income per acre has also grown
between 4480 Rs ($70 US) for wheat to 5760 Rs ($90 US) for mustard.
Communities participating in the Krishi Jyoti Project are using the addi-
tional income to help create a better life for future generations. The S M
Sehgal Foundation and Mosaic funded renovations for 20 schools in Alwar,
Mewat, and Sonipat – including adding sanitation facilities, safe drinking
water systems, and school kitchens.
2 Productivity in Agriculture for a Sustainable Future 63

the time and cost of transporting the equipment. CHC partnerships include equip-
ment manufacturers, such as John Deere, who provide the equipment, product ser-
vice, and training in agronomy practices and equipment usage. State governments
contribute financial support and invest in infrastructure for the centers and in road
improvements to ensure that equipment can be transported efficiently. Local entre-
preneurs are hired to operate the centers, deploy and maintain the equipment, as
well as manage the contracts with the farmers.
Nearly 90% of farmers with less than two hectares participate in a government
food ration program. India has 120 million individual landholdings under two hect-
ares. To meet its targets for reducing food insecurity and poverty, the government
needs to invest in non-agricultural employment and skills training for rural workers
to move more people out of agriculture, particularly manual labor, while fostering
off-farm agricultural employment in jobs such as agro-dealerships, equipment and
machinery maintenance, processing, and storage.
Farmland consolidation can help achieve greater economies of scale as well. The
necessity for consolidation is amplified by the growing competition for land. India’s
rapidly expanding manufacturing and service industries need room to grow and are
already competing for land and displacing farmers across the country.

2.9  olicies to Create an Enabling Policy Environment

P
for Productivity in Agriculture

Meeting the rising demand for nutritious, affordable food as well as materials for
fuel, clothing, housing, and consumer products will require innovative, productive,
and sustainable food and agriculture systems. Together, governments, producers,
and the entire agri-food system must commit to improve and transform the system
to achieve a healthy population and a healthy planet. Improving agricultural sustain-
ability requires multi-faceted solutions built on science-based public policies.
Productivity in agriculture grows when governments invest in public research,
development, and extension services; when all participants in the agri-food system
embrace, customize, and disseminate science-based and information technologies;
when the private sector can be incentivized to form partnerships for infrastructure
development and improved nutrition; and when capacity for regional and global
trade in agriculture is streamlined.

2.9.1  mart Regulatory Systems Build Trust

S
and Competitiveness for Productivity

Governments establish agricultural policies and regulations to ensure human health

and safety, protect the environment and animal welfare, and foster economic growth
while meeting consumer needs for food, fiber, fuel, and other coproducts. Smart
regulatory systems that keep pace with rapidly changing innovations in science and
technology can foster the adoption of such innovations (Box 2.12).
64 A. Steensland and M. Zeigler

Box 2.12 A Twenty-First-Century Regulatory System for Agriculture

For thousands of years, agriculturalist have improved the quality and perfor-
mance of crops and livestock through trial and error, saving seeds from plants
or breeding animals from those that exhibited the desired traits. Today, the
tools used by agricultural breeders have evolved through science-based inno-
vations. With an ability to understand the genetic sequence of plants and to
link a particular gene with a specific plant characteristic, breeders can quickly
and efficiently improve plants while avoiding the transfer of unwanted genes.

In the past decade, new gene-editing techniques such as CRISPR-Cas

(clustered regularly interspaced short palindromic repeats, DNA sequences
that can be used to instruct genes to perform beneficial functions and more
precisely edit DNA) have become available, unlocking potential benefits for
farmers, consumers, and the environment. Breeders can now edit genes by
turning on or off various genetic functions that increase crop yields during
drought, protect the plant or crop against viruses and pests (reducing the
amount of pesticide needed), improve the nutritional quality and content of
crops, or help vegetables maintain longer shelf life. Gene-editing technolo-
gies such as CRISPR-Cas rely on natural processes that happen in the genome
but channel and target those changes more precisely.
Seed companies are exploring how this technology allows breeders to
develop better hybrids by quickly finding and leveraging the inherent diver-
sity existing in crops. Livestock breeders are also harnessing the power of
gene-editing tools to improve the resilience, productivity, and nutritional con-
tent of animals for better meat, milk, and eggs.
To fight a devastating corn disease affecting small-scale farmers in Africa
(maize lethal necrosis), Corteva Agrisciences™ and the International Maize
and Wheat Improvement Center (CIMMYT) have formed a public-private
research partnership to improve the resilience of maize to this devastating
disease using CRISPR-Cas technology.

(continued)
2 Productivity in Agriculture for a Sustainable Future 65

(continued)
Plants and animals derived from new breeding methods such as biotech-
nology and gene-editing should be assessed for potential health or safety
impacts, rather than for the processes used to produce the trait or product.
Without streamlined modern regulatory systems, innovation from small com-
panies, public-private research partnerships and universities many not reach
farmers who need solutions. In the United States, the regulatory system for
biotechnology had not been revised since 1986 and required modernization to
address new breeding technology. In 2020, the USDA finalized new regulations
under the Sustainable, Ecological, Consistent, Uniform, Responsible, Efficient
(SECURE) rule, providing new guidance for plant breeding innovation.
Plant breeding innovations like CRISPR-Cas will only be achieved through
improving and updating regulatory systems and active engagement and col-
laboration with farmers, academia, governments, NGOs, and public research
institutes, both in the United States and around the world.

A successful regulatory system establishes predictable, clear, science-based oper-

ating conditions for farmers and ranchers – particularly with regard to seeds, crop
protection, and animal health – as well as for mechanization companies, insurance
and finance firms, and food processing and retail industries, so that the overall agri-
culture sector can deliver value for people, the environment, and the national economy.
In today’s global competitive environment, regulatory systems are being called
upon to do even more, as consumers seek more information about production meth-
ods, nutritional content, labor practices, and sustainability of local, national, and
international food and agriculture systems. Transparency and traceability are grow-
ing in importance for developing consumer trust, while affordability and accessibil-
ity remains a paramount concern for many customers.
It is especially important that government regulatory systems help foster produc-
tivity and innovation while avoiding unnecessary costs, delays, and burdens to the
agriculture sector, ultimately impacting the ability to swiftly deliver quality prod-
ucts to consumers. Regulatory systems should have a sound legal and empirical
basis, minimize costs and market distortions, and promote innovation through intel-
lectual property protection and market incentives. They must be clear and practical
for users and be compatible with domestic and international trade principles.5 Smart
regulatory systems contribute to innovation and productivity when all the partici-
pants – government, industry, producers, scientific researchers, members of the
media, and consumers – responsibly engage in practice as well as understanding
about new opportunities that science and technology bring (Fig. 2.10).
Ideally, farmers practice good stewardship with innovation technology; input
providers, processors, and retailers work within regulatory frameworks; govern-
ment consults with all relevant parties and establishes well-functioning, science-­

5
https://www.oecd.org/fr/reformereg/34976533.pdf
66 A. Steensland and M. Zeigler

(continued)

Fig. 2.10 Science-based regulatory systems for productivity in agriculture. (Source: 2016 Global
Agricultural Productivity Report (GAP Report))

based, and clear regulatory practices; media responsibly explain agricultural

policies, innovations, and practices in a fact-based manner; and consumers have
easy access to facts to make informed decisions.

2.10 Investing in Farmers

To maximize the productive potential of investments in agricultural R&D, innova-

tions such as mechanization and improved practices for soil and animal health, gov-
ernments, and the private sector need to invest in the productivity of farmers,
ranchers, foresters, and fishers.
Farmers and producers are already the largest investors in the agricultural value
chain. A review of agricultural investment sources in low- and middle-income coun-
tries by the UN Food and Agriculture Organization (FAO) found that 78% of
­agriculture investments come from on-farm investment in agricultural capital by
farmers themselves (Lowder et al. 2012) The remaining 22% comes from govern-
ment expenditures, public sector agriculture R&D, foreign direct investment, and
official development assistance.
Yet, millions of small-scale farmers, especially women and young people, are
undercapitalized because they do not have legal title to their most important capital
asset, their land.
In low-income countries, the right to occupy, cultivate, inherit, lease, buy, or sell
land is often determined by a complex system of social customs that are granted and
2 Productivity in Agriculture for a Sustainable Future 67

arbitrated by communal authorities (sometimes called “customary” or “tribal”

authorities). Communal rights may be recognized by civil authorities as well, but
they do not have the same legal standing as land titles or leaseholds granted by the
state (Cousins 2016). Formal lenders see communal tenure rights as a risky invest-
ment and are reluctant to extend credit, regardless of the productive potential of
the land.
Communal tenure systems are often dominated by social and patriarchal hierar-
chies that disenfranchise vulnerable groups. As a result, gender, age, and commu-
nity standing often determine the quality, quantity, and terms of the landholdings.
Furthermore, without civil legal protections, communal landholders have little
recourse if their land is appropriated by customary or state authorities. In these cir-
cumstances, communal landholders, particularly women, are less likely to make
investments in improved seeds or fertilizer, suppressing their earning potential and
making it difficult to save for capital purchases, such as mechanization and irriga-
tion technologies. Likewise, long-standing and widespread land disputes stifle the
sale, purchase, leasing, and inheritance of land, effectively freezing the land market,
discouraging productive investment, and stifling economic growth (Valetta 2012).
Policies that secure and promote farmer access to land, water, and improved
inputs enable farmers of all scales to remain competitive even during the challeng-
ing phases of business cycles and help them respond to changing climate patterns.

2.11 Concluding Remarks

Without productivity growth, the world’s agriculture and food systems will not be
able to sustainably produce the food, feed, fiber, and biofuel needed for ten billion
people in 2050. An enabling policy environment also supports the productive poten-
tial of farmers, ranchers, foresters, and fishers by generating new market opportuni-
ties, increasing their access to affordable financing, and improving the environmental
sustainability of their operations. The data show that a global focus on productivity
growth is urgently needed to reverse the downward trend in productivity growth.
While this chapter has focused on the role of the producer, the role of the con-
sumer in productive sustainable food systems is just as critical. Significant reduc-
tions in food waste are critical to sustainable food systems, and most food waste
occurs at the retail and consumer point of the value chain. Consumers also need to
educate themselves on the science and practice of agriculture and be willing to chal-
lenge their assumptions about what makes their food “sustainable.” Without con-
sumer acceptance of science-based innovations such as biotechnology, gene-editing,
and proven practices in livestock husbandry, the target levels for agricultural pro-
ductivity and sustainability will not be realized.
Innovation and productivity are interdependent, but access to and acceptance of inno-
vative technologies and practices must be improved if they are to realize their potential.
68 A. Steensland and M. Zeigler

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2 Productivity in Agriculture for a Sustainable Future 69

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Chapter 3
Open Innovation and Value Creation
in Crop Genetics

Mathias L. Müller and Hugo Campos

3.1 Origins of Agriculture

The evolution of human society is closely associated with, and has been dependent
on, the progress man has made in agriculture. Therefore, it is no surprise that the
field of agriculture has been a particularly fertile ground for innovation. The
Neolithic Revolution, at the start of the Holocene calendar, about 12,000 years ago,
marks a transition period during which our ancestors’ lifestyles changed from hunt-
ing and gathering to cultivating crops and growing livestock (Bocquet-Appel 2011).
The fertile crescent in the Middle-East, from upper Egypt to the Persian Gulf,
including the southeastern regions of Turkey and the western fringes of Iran, are
often called the “cradle of civilization” for the fact that sedentism and farming
emerged there first (Maisels, 1993), fundamentally transforming the way of life of
previously nomadic groups of hunter-gatherers. The dawn of agriculture (from
Latin ager = “field” and cultura = “growing, cultivation”) was made possible by a
warming of the earth’s temperatures by approximately 20 °C following the last ice
age, as could be inferred from ice cores collected in Greenland (Platt et al. 2017).
The increasingly stable climate made the cultivation of crops and the raising of
animals feasible and more reliable. Over the next two millennia, similar develop-
ments to those in the fertile crescent occurred and gave rise to the eight centers of
origin of agriculture and their derived crops (Vavilov 1951). While the transforma-
tion of lifestyles had a profound effect on the environment through the practice of

Mathias Müller is a Corteva Agriscience employee. Corteva Agriscience is a for profit agricultural
company.

M. L. Müller (*)
Corteva Agriscience, Johnston, IA, USA
e-mail: [email protected]
H. Campos
International Potato Center, Lima, Peru

© The Author(s) 2021 71

H. Campos (ed.), The Innovation Revolution in Agriculture,
https://doi.org/10.1007/978-3-030-50991-0_3
72 M. L. Müller and H. Campos

local deforestation and irrigation, it also led to fundamental changes in society and
the way humans segregated tasks for greater efficiency. Though successful innova-
tion examples can be found in every single aspect of agriculture, we will only
describe some of those related to crop breeding, since a comprehensive discussion
of past innovations in agriculture is beyond the scope of this chapter.

3.2 Innovations in Crop Breeding

Wild grains were collected and eaten from at least 20,000 BC by hunter-gatherer
populations. From around 9,500 BC, the eight Neolithic founder crops, emmer and
einkorn wheat, barley, flax, peas, chickpeas, lentils, and bitter vetch, were cultivated
in the Eastern Mediterranean regions extending from current Greece to Libya. Rice
was domesticated in China around 6,000 BC, followed by mung, soy, and azuki
beans (Diamond 1997). Plants which initially succeeded were self-pollinators
which were easy to grow, and their early domestication selected for properties such
as shatter resistance in wheat for easy harvesting. One of the many benefits of agri-
culture is greater efficiency. Hunter-gatherer populations were regulated by the
amount of food and the number of kills a tribe could achieve. For example, a tribe
of 50 might have needed a territory of 100 square kilometers to survive (Tallavaaraa
et al. 2018). This in turn meant that the earth could, at most, support a population of
20 million hunter-gatherers. Efficiency became key to population growth and suc-
cess of the human race; innovations in agriculture made it possible.
It is noteworthy that modern agriculture is capable of supporting today’s world
population of 7.7 billion, but that important innovations and significant productivity
increases are urgently needed to support a world population, projected by the United
Nations Department of Economic and Social Affairs to be 9.7 billion in 2050.1
Progress in early agricultural practices was slow, progressive, and localized.
Earliest cultivators likely combined hunting-gathering with what they managed to
grow (Kavanagh et al. 2018), and it took thousands of years to progressively select
seeds that were easier to cultivate and provided more nutritious food. Our ancestors
did not live in a global society; hence the same innovations had to be made indepen-
dently in different parts of the world, sometimes thousands of years and miles apart.
Weiss et al. (2006) divide domestication of plants into a “gathering” stage, a “culti-
vation” stage during which plants were sown and harvested, and a “domestication”
phase during which mutants with desirable characteristics were selected. For most
major food sources, the domestication phase resulted in progressively better culti-
vars. The process of selection had begun, but it was slow and empirical. The first
documented hybrid was achieved by Thomas Fairchild, a “gardener in London”
who founded City Gardens, a commercial venture in which he planted and bred

1
https://un.org/development/desa/en/news/population/world-population-prospects-2019.html.
Accessed 8/31/2019.
3 Open Innovation and Value Creation in Crop Genetics 73

fruits and flowers. He collaborated with botanists and plant collectors through
which he was able to obtain plants from around the world. In 1717, he successfully
crossed a carnation pink (Dianthus caryophyllus) with a Sweet William (Dianthus
barbatus), and the resulting plant, described as Dianthus caryophyllus barbatus,
became known as Fairchild’s Mule. Significant revolutions in breeding took place
in the nineteenth century, starting with Austrian monk Gregor Mendel from Brno
(today a historic town in the Czech Republic) who, between 1856 and 1863, formu-
lated what is known as the three principles of Mendel’s laws of inheritance, on
which modern genetics is based. Mendel focused on seven clearly identifiable traits
of pea plants: seed shape, flower color, seed coat tint, pod shape, pod color, flower
location, and plant height to elaborate the law of segregation, the law of independent
assortment, and the law of dominance (Mendel 1866) which form the basis of
Mendelian inheritance patterns, where a trait is controlled by a single locus in an
inheritance pattern. Mendel postulated the existence of discrete “factors” (today
known as genes) that are passed along from generation to generation. William
Bateson, an English professor of biology at Cambridge University and the first
director of the John Innes Centre, a leading plant and microbial genetics research
organization based in Norwich, United Kingdom, coined the word genetics in 1905.

3.2.1 Modern Breeding Approaches

Mendel’s laws of inheritance remain the solid foundation upon which modern
breeding techniques were developed. For many years, breeding was based on the
selection and crossing of the best individuals of a population. The advent of hybrid
crops, spearheaded by the development of hybrid maize in the early twentieth cen-
tury, started a revolution which resulted in a significant acceleration of the incre-
mental yield gain curve in those crops which where amenable to the new breeding
techniques. The “Green Revolution” emerged in the 1950s and 1960s, from collabo-
rations and the transfer of technologies between nations, scientists, and farmers.
Norman Borlaug, the “Father of the Green Revolution,” tirelessly promoted the
development of high-yielding grain cultivars and the adoption of improved manage-
ment techniques, including the use of fertilizers and pesticides and the deployment
of irrigation. The selection of cultivars with greater requirements for nitrogen, but
also vastly increased yield potential, is credited for saving over a billion people from
starvation. The Green Revolution started in Mexico, in collaboration with the US
Government, the United Nations, the Food and Agriculture Organization (“FAO”),
and the Rockefeller Foundation. From there, the breeding and management tech-
niques expanded to other Latin American countries, Asia, and Africa. One of the
great successes of the Green Revolution is rice cultivar IR8, which was derived, in
the Philippines, from a cross between the Indonesian variety Peta and the Chinese
variety Dee-geo-woo-gen by scientists at the International Rice Research Institute
(“IRRI”). While IR8, which is a semidwarf variety resistant to lodging, required the
74 M. L. Müller and H. Campos

supply of fertilizer for optimal production, its harvested yield was almost ten times
that of traditional rice.
After the Green Revolution, a large number of innovations dramatically enhanced
the ability of plant breeders to accelerate breeding processes. Scientists used infor-
mation encoded in DNA to capitalize on the genetic diversity contained within cul-
tivars and to enhance the efficiency and effectiveness of plant breeding endeavors.
These innovations helped reduce the number of breeding cycles required to bring to
market a new variety and accelerated the development of novel elite parents and
improved cultivars, fulfilling the needs of humankind. The combined set of modern
breeding innovations enabled tremendous increases in genetic gain and resulted in
the development of maize hybrids which exhibit commercially relevant levels of
drought tolerance and contain stacked transgenic events conferring resistance to
insects and tolerance to herbicides, mediated by multiple modes of action. Table 3.1
describes some of the pivotal innovations which have enabled the development of
current breeding programs in crop species.

Table 3.1 Main innovations enabling current public and private breeding programs
Key reference/
Innovation Impact in plant breeding review article
Doubled haploid plants Reducing breeding cycles and facilitating the Kasha and Kao
expression of recessive traits (1970)
Transgenic plants Expanding the range of genetic variation Horsch et al. (1985)
available to plant breeders and farmers
Restriction fragment length First truly molecular marker available to gain Helentjaris et al.
polymorphisms insight on the organization of crop genomes (1986)
Linear mixed statistical Improved statistical analyses, increasing the Gilmour et al.
models genetic signal to environmental noise ratio (1997)
and the quality of phenotypic datasets
Quantitative trait loci Examining commercially relevant Paterson et al.
quantitative traits with molecular markers, (1998)
establishing the basis of molecular breeding
Genetic modelling Ex ante quantitative simulation of genetic Podlich and Cooper
models, genotype-to-phenotype (1998)
relationships, and breeding scenarios
Sequencing of the first Establishing the basis to understand the The Arabidopsis
plant genome, Arabidopsis molecular basis of plant variation Genome Initiative
thaliana (2000)
Genomic selection Using genome-wide, instead of discrete Bernardo and Yu
molecular markers information, in molecular (2007)
breeding
Gene editing Unprecedented precision to create and Wolter et al. (2019),
manage genetic variation and improve traits Chen et al. (2019)
in crops
3 Open Innovation and Value Creation in Crop Genetics 75

3.3 Collaborations

3.3.1 International Organizations

Innovations derived from collaborations have shaped the agricultural landscape

since the dawn of times. While passionate scientists, in academia or in the private
sector, often collaborated to advance their research (see Thomas Fairchild, who
documented the first hybrid crops), so did seed companies and equipment manufac-
turers. In some instances, collaborations between individuals allowed the most sig-
nificant progress; in others it was collaboration between institutions. Serendipity
often played a role. For example, consider the remarkable story of John Washington
Carver, who was born into slavery and became one of the most influential agricul-
tural scientists of his time. It is certainly his friendship with young Henry A. Wallace
that influenced the latter to experiment with cultivars of maize and later to bring
hybrid maize lines to Midwest farmers through the Hi-Bred Corn Company,2 which
he founded. Upon visiting Mexico as the newly minted US vice president under
Franklin Roosevelt’s administration, Henry A. Wallace discovered that, while maize
was an essential staple in Mexico, the yields obtained by local farmers were far
below those achieved in the United States. This recognition and his passion for
increasing the yields of crops to feed the world encouraged Wallace, with support of
the Rockefeller Foundation, to help set up an experimental station in Mexico, which
would encourage collaboration between local farmers and US scientists. Norman
Borlaug was one of the first scientists to join the station as a plant pathologist,
together with soil scientist William E. Colwell and potato breeder John Niederhauser.
The three are largely credited for being at the origin of the green revolution for
which Norman Borlaug eventually earned his Nobel Peace Prize in 1970. In the
middle of the twentieth century, rapid population growth triggered fears of wide-
spread global famine. The Mexican government had established the Office of
Special Studies (OSS) to coordinate the program initiated by the Rockefeller
Foundation. This in turn laid the groundworks for the establishment and support of
the International Rice Research Institute (IRRI) in 1960 and the International Maize
and Wheat Improvement Center (CIMMYT) in 1963. In 1970, the Rockefeller
Foundation proposed a broader coalition to support an international network of
agricultural research centers and, with the help of the World Bank, the FAO, and
UNDP, established the Consultative Group for International Agricultural Research
(CGIAR) to reduce poverty and achieve food security in developing countries.
Today, the CGIAR comprises 15 independent nonprofit research centers (Table 3.2),
conducting innovative research and collaborating on a global scale.

2
Which later became Pioneer Hi-Bred International, Inc., and is now part of Corteva Agriscience.
76 M. L. Müller and H. Campos

Table 3.2 Global network of CGIAR centers

CGIAR centers Headquarters location
Africa Ricea (West Africa Rice Development Association, WARDA) Abidjan, Côte d’Ivoire
Bioversity International Rome, Italy
Center for International Forestry Research (CIFOR)b Bogor, Indonesia
International Center for Tropical Agriculture (CIAT)c Cali, Colombia
International Center for Agricultural Research in the Dry Areas Beirut, Lebanon
(ICARDA)
International Crops Research Institute for the Semi-Arid Tropics Hyderabad, India
(ICRISAT)
International Food Policy Research Institute (IFPRI) Washington, D.C., United
States
International Institute of Tropical Agriculture (IITA) Ibadan, Nigeria
International Livestock Research Institute (ILRI) Nairobi, Kenya
International Maize and Wheat Improvement Center (CIMMYT) Texcoco, Mexico
International Potato Center (CIP) Lima, Peru
International Rice Research Institute (IRRI) Los Baños, Philippines
International Water Management Institute (IWMI) Battaramulla, Sri Lanka
World Agroforestry Centre (International Centre for Research in Nairobi, Kenya
Agroforestry, ICRAF)
World Fish Center (International Center for Living Aquatic Penang, Malaysia
Resources Management, ICLARM)
a
AfricaRice and IRRI joined efforts in 2018 to offer a pan-African, multi-focus rice program
b
On January 1, 2019, the Center for International Forestry Research (CIFOR) and World
Agroforestry (ICRAF) effectively merged
c
On December 2018, Bioversity International and the International Center for Tropical Agriculture
(CIAT) signed a memorandum of understanding to create an alliance

3.3.2 Public-Private Partnerships

The public sector has played an enormous role in agricultural innovations, particu-
larly in the United States within the system of land-grant colleges and universities,
whose mission, as set forth in the Morrill Acts of 1862 and 1890, was to focus on
teaching practical agriculture, science, military science, and engineering. Land-­
grant universities developed strong breeding programs which became the source of
germplasm for American farmers and local seed companies. Academic research was
pivotal in the development of hybrid seed programs which, in the case of maize,
resulted in the discovery of heterosis, the tendency of a crossbred individual (a
“hybrid”) to show qualities superior to those of either parent (“inbreds” in the case
of maize). The advent of hybrids, with their homogeneous growth across large
expanses of Midwestern lands, allowed for the mechanization of agriculture. The
deployment of hybrids led to major changes in the American farming system: farm
horses were replaced by tractors, and mechanical harvesting replaced labor-­intensive
3 Open Innovation and Value Creation in Crop Genetics 77

hand picking of hybrid corn. The transition from varietal breeding to double-cross
and eventually single-cross hybrids, combined with improvement in land manage-
ment techniques, crop protection products, and fertilizer programs, resulted in a
threefold increase in maize yields between the 1920s and 1980s (Crow 1998).
Today, public-private partnerships remain an essential foundation of innovation
and scientific advances, but the balance of resources devoted to research and devel-
opment is rapidly changing. While it is undeniable that the private sector benefits
greatly from investments made by the public sector in fundamental research and the
education of scientists, companies have committed enormous amounts of resources
to early stage discoveries to better serve farmers and seek an edge over their com-
petitors. Against a backdrop of proportionally more limited resources for the public
sector and innovations which require sophisticated (and expensive) infrastructure,
the private sector has invested massively in technology developments, with global
private spending on agricultural R&D rising from $5.1billion in 1990 to $15.6 bil-
lion by 2014 (Fuglie 2016), whereas the public sector increased at a slower rate. In
1980, the ratio of private vs. public investments was pegged at 0.54; by 2011, it had
increased to 0.81, coming close to parity (Pardey et al. 2015). But it is not only the
absolute amounts invested which have evolved over time, it is also the types of
investments, which are undergoing a dramatic transition, particularly in large-scale
agriculture.
Large companies in the agricultural sector compete with each other to deliver
ever better products and services to their customers, who are increasingly discern-
ing and sophisticated in choosing which products allow for sustainable returns.
With farmer productivity being the key driver of an industry, which has innovated at
a remarkable clip for close to a century, investments in research and development by
the private sector have become a condition of existence. With the collaboration of
James Watson and Francis Crick, which in 1953 led to the description of the struc-
ture of the double helix of deoxyribonucleic acid (“DNA”) (Watson and Crick
1953), plant agricultural research advanced to be conducted at the molecular level.
The second half of the twentieth century produced new and powerful scientific tech-
nologies, specifically based on recombinant DNA techniques, genetic engineering,
rapid gene sequencing, and synthetic biology.
At first, large-scale collaborations focused on elucidating the genetic material of
several plant species. The Multinational Coordinated Arabidopsis Genome Project
was first, including stock centers in the United States and in Europe orchestrated in
the United States by the National Science Foundation. After 10 years, the global
collaboration involving scientists from the United States, Europe, and Japan resulted
in a near complete Arabidopsis (commonly called thale cress) genome, published in
the year 2000 (The Arabidopsis Genome Initiative 2000). Collaborations between
academics and scientists from government and private industry were frequent and
productive. Databases were built and shared, including by the private industry, like
the single nucleotide polymorphisms and small insertions and deletions database
constructed from the Columbia and Landsberg erecta ecotypes and made available
by Cereon Genomics as a service to the community (Ausubel 2000). This spawned
78 M. L. Müller and H. Campos

a series of large-scale projects aimed at discovering the functions of the 25,000+

genes identified in Arabidopsis thaliana (Bevan and Walsh 2005).
In September of 2002, the National Science Foundation (NSF) announced the
launch of the Maize Genome Sequencing Project, but it was not until 2009 that a
multi-institutional effort, involving scientists at Washington University in St. Louis,
the Cold Spring Harbor Laboratory in New York, the Arizona Genomics Institute,
and Iowa State University, resulted in the publication of a series of papers in the
journal Science revealing the DNA sequence of maize B73 (Schnable et al. 2009),
while in Mexico, scientists published results derived from the ancient popcorn vari-
ety palomero (Vielle-Calzada et al. 2009).
But while these initial efforts were largely supported by the public sector, the
many billions of genotypic and phenotypic datapoints collected today by seed com-
panies, particularly in the development of hybrid crops, have forced them to invest
in infrastructure that dwarfs that of most academic institutions. Together with the
curation of proprietary germplasm collections by long operating seed companies,
this has allowed the private sector to become the major driver of the record yields
that are obtained today with hybrid seeds in the developed world. Even so, collabo-
rations between the public and the private sector remain essential for progress to be
made and new inventions to be developed in hybrid breeding and more so with
varietal crops, where the germplasm held and developed by universities remains the
prevalent source of seeds for many farmers. Furthermore, such collaborations
enable the spillover of technological progress to crops relevant in developing coun-
tries for which seed companies have not typically developed specific cultivars.

3.3.3  he Age of Genetically Modified Organisms (GMOs),

T
Technology Alliances, and Biotechnology Startups

With the advent of a rapidly cycling simple model plant such as Arabidopsis thali-
ana, where forward genetics allowed academics all over the world to characterize
genes with putative functions in plant development and the protection of yield,
interactions between the public and the private sector became frequent and sus-
tained, directed toward the elusive goal of extracting more yield from crop plants
under normal and stressed conditions through the application of recombinant tech-
niques. Startup companies spun off from universities and corporations and attracted
venture capitalists eager to engage in an industry which promised large revenue
potential. Calgene, founded in 1980 in Davis, California, was one of the first to
believe that genetic engineering could be applied successfully to plant agriculture.
Calgene’s first product, the Flavr Savr tomato, was engineered with an antisense
gene to downregulate the enzyme polygalacturonase which participates in the soft-
ening of the fruit and makes it susceptible to being damaged by fungal infections
and postharvest handling. As a result, Calgene’s Flavr Savr tomato could be har-
vested later and withstood storage and transport much better than conventional
3 Open Innovation and Value Creation in Crop Genetics 79

tomatoes. Calgene was also engaged in the development of herbicide-tolerant cot-

ton, and canola that was genetically engineered to produce laureate, a key raw mate-
rial used in the manufacture of soap, detergent, and personal care products.
Plant Genetic Systems (“PGS”), founded in 1982 by Marc Van Montagu and Jeff
Schell who, at the University of Ghent, Belgium, and the Max Planck Institute in
Germany, respectively, had developed a vector system for transferring foreign genes
into the plant genome by using the Ti plasmid of Agrobacterium tumefaciens, is
credited for significantly advancing the field of plant biotechnology. PGS was the
first startup company to engineer tobacco plants with a gene encoding the insecti-
cidal protein from Bacillus thuringiensis (Bt). DNA Plant Technology (“DNAP”)
was founded in 1981 by William R. Sharp and David A. Evans, in New Jersey,
before moving to California “to develop tastier, value-added plant-based products
for industrial and consumer markets”3 through the use of advanced plant breeding
systems, tissue culture, and later transgenic techniques. And with the advent of
Arabidopsis genetics, companies were founded to explore gene structure-function
relationships. Companies like Ceres Inc., founded in 1996 to explore gene expres-
sion patterns and functions; Mendel Biotechnology, Inc., founded in 1997 to under-
stand gene expression through the study of transcription factors; and Paradigm
Genetics, Inc., founded in 1997 to focus on functional genomics, became the new
breed of innovators trying to revolutionize the industry. The new startup companies
quickly formed strategic partnerships with major seed and trait developers such as
Monsanto, Bayer, and DuPont. The large investments made by these seed compa-
nies to finance collaboration with the startups, combined with the support of venture
capitalists, allowed for a golden age of small plant biotechnology companies which
emerged in Belgium, the San Francisco Bay Area, Southern California, the Research
Triangle Park of North Carolina, and progressively elsewhere in locations associ-
ated with major university centers.
For the next 10 years, further innovations involving recombinant techniques led
to ever more innovative companies. DNA shuffling (or directed molecular evolu-
tion), a method for in vitro recombination of homologous genes, was invented by
Dr. Willem (“Pim”) Stemmer while working at Affymax Inc. Stemmer’s invention
led to the foundation of Maxygen, Inc., a startup company, which further developed
the technology and innovated in the field of agronomic trait discovery and optimiza-
tion through its Verdia, Inc. subsidiary. Maxygen and Verdia4 formed several alli-
ances, including with Pioneer Hi-Bred, Syngenta, and Delta & Pine Land Company,
to “provide proprietary product solutions to important commercial problems in
plant-based businesses through the application of advanced trait optimization
methods.”

3
https://en.wikipedia.org/wiki/DNA_Plant_Technology
4
Author MM was employed by Maxygen and Verdia, Inc.
80 M. L. Müller and H. Campos

3.4 Closed Innovation

During most of the twentieth century, inwardly focused research and development
(R&D) in industry enabled substantial achievements and many commercial
successes.
In many countries, academic scientists were at the time more interested in the
process of scientific discovery to gain insights about the physical world than in put-
ting such knowledge into practical use. At that time, it was common among aca-
demic camps to dismiss researchers inclined toward applied applications of science,
on the ground that they were sold to corporate interests and therefore consid-
ered greedy.
Therefore, and with the benefit of hindsight, during most of the twentieth cen-
tury, pursuing R&D within a firm was one of the few options available to those
interested in practical applications of science, and it became the de facto dominant
design among large, multinational companies. Internal R&D divisions were consid-
ered a strategic asset that needed to be carefully nurtured and shielded from the
external world and competitors. The world knew little about corporate innovations
until scientific developments became launched and commercialized in the form of
products (Chesbrough 2003).
After the Second World War, the US government made increasingly large
amounts of funding available, not only to government labs but also to the large
number of independent universities being created. The availability of more research
grants and scholarships enabled a dramatic increase of the pool of talent educated at
the graduate level in many fields of science. In addition, during the 1990s, private
funding for R&D activities in developed countries caught up to public R&D bud-
gets. The combination of additional funding, both public and private, and a larger
pool of talent led to the golden era of corporate labs in firms such as DuPont, Bell
Laboratories, General Electric, IBM, RCA, Xerox in the United States, BASF,
Bayer, Roche, Nestlé, Unilever, Siemens, and Shell, among many others in Europe,
and “keiretsu” conglomerates such as Mitsui, Mitsubishi, Sumitomo, and Sanwa,
among others, in Japan.
The mindset was one of “closed innovation”, and was based on the principle that
companies were, by and large, on their own in terms of developing the technologies
needed to sustain and increase their market footholds. It is during this period that the
unfortunate “not invented here” motto was coined, reflecting an inward stance
where firms could simply not afford to rely on scientific developments created out-
side the corporation, be these of public or private nature. From a strategic stand-
point, internal R&D capabilities were seen as an entry barrier to discourage potential
competitors (Chesbrough 2003).
Closed innovation created a subtle, and sometimes not so subtle, tension between
research and development activities. For instance, while scientists in centralized,
corporate research labs were driven to move into the next wave of innovative proj-
ects, instead of delving deeper into commercially relevant work, researchers in
development felt the pressure to find out more about how to translate such research
3 Open Innovation and Value Creation in Crop Genetics 81

outputs into commercial products. In addition, while research usually represents an

SGA (selling, general, and administrative) cost item from a budgetary perspective,
development is typically allocated to business units and structured as part of profit
and loss statements. Therefore, a functional and financial disconnect between
research and development activities became more prevalent in many large corporate
R&D organizations (Chesbrough 2003).
In more recent years, the closed innovation mindset has found itself increasingly
at odds with the way that knowledge currently flows. There are several aspects
which have severely undermined and challenged closed innovation, the most rele-
vant being:
1. The availability of an increasingly more mobile pool of skilled researchers.
Companies can build upon others’ investments in a more effective way than
before, for instance, through hiring skilled staff from other companies or through
contracting consultants who provide advanced expertise in specific areas.
2. The availability of venture capital, which enables startups to pursue both research
and development activities in a nimbler way than larger corporations. Venture
capital has enabled independent startups within the agricultural domain with the
funding needed to make significant and fast progress. For instance, Inari, a next-­
generation seed company which develops traits and cutting-edge technologies
based on gene editing, raised $89 million in its series C financing round,5 whereas
Provivi, a company developing novel methods to control agricultural pests using
naturally occurring pheromones, has raised over $36 million through its series B
financing round.6
3. The increasing availability of external suppliers of R&D, both in numbers and in
terms of the expertise they provide. For instance, the success in the ability to
develop commercially effective Bt genes (used to develop biotech seeds with
intrinsic resistance to insect damage) by Dow (now Corteva Agriscience) and
Monsanto (now Bayer) can be traced back to the access of extensive libraries of
Bt genes developed by smaller, specialized companies with a strong expertise in
the field, such as Mycogen7 and Ecogen,8 respectively. While the development of
transgenic drought traits has fallen short of expectations, with only Monsanto’s
DroughtGard™ hybrid maize reaching project launch status, 20 years of R&D
and collaborations with startup companies such as Mendel Biotechnology, Ceres
Inc., or Evogene have significantly contributed to increasing the scientific com-
munity’s general knowledge of the molecular basis of drought resistance in
plants (Nuccio et al. 2018). In recent years, the trend of favoring early stage
discovery at startup companies has become the mainstream, since corporate ven-
turing has allowed a large number of startup companies to be created not only in

5
https://inari.com/wp-content/uploads/2019/08/PR_Inari-Raises-89-Million-to-Bring-Innovative-
Disruptive-Technologies-to-Growers-1.pdf
6
http://provivi.com/provivi-announces-expanded-series-b/
7
https://www.aphis.usda.gov/brs/aphisdocs/03_18101p_pea.pdf
8
https://pestweb.com/news/a2768/ecogen-confirms-monsanto-is-using-its-bt
82 M. L. Müller and H. Campos

the United States but also globally, some of which have become competitive in
research domains such as gene editing and digital agriculture, among others. In
2017 alone, agriculture-related startups raised over $10 billion in venture-backed
funding, and one of them, Indigo, has already reached unicorn9 status.
4. The limited predictability in the usefulness of the extensive intellectual property
portfolios companies have built over the years for the development of successful
new products. A case in point is that less than 10% of Procter & Gamble’s pat-
ents were used by any of its businesses for product development (Sakkab 2002).
While patents can represent an effective trade currency to obtain freedom to
operate (e.g., through cross-licensing) and keep litigation at bay, and if one
excludes the small number of patents which sustain product launch and com-
mercialization, the ability for a patent owner to translate a large number of them
into actual value in the market is, at best, questionable. It is thus likely that mak-
ing such intellectual property available to other organizations could increase the
odds of deriving tangible value from it.

3.5 Open Innovation

Agriculture and agrifood companies of all sizes are currently beset with increasing
competition and technological complexity, rising R&D costs, shortened product life
cycles, increased expectations from customers, more complex and expensive regu-
latory processes, and industry consolidation. With improved institutional markets
and stronger intellectual property rights, venture capital and technology standards
have enabled organizations to trade their knowledge and ideas.
The challenge facing the domain of agriculture and agrifood systems is daunting,
with current projections predicting the Earth’s population ballooning to 9.7 billion
by 2050, which is only 30 crop growing cycles away from today in the mid-2020.
Though certain vegetable crops sustain more than one growing cycle per year, and
while the climate in some countries such as Brazil and Paraguay also allows a sec-
ond growing cycle of main crops each year (safrinha), by and large, the global com-
modities (maize, rice, soybeans, wheat) are only harvested once a year.
To place this challenging problem in context, humankind is going to have to
produce as much food over the next 30 years as during the previous 10,000 years,
with the added complexity of a reduction in available land per capita; the unpredict-
ability brought about by climate change; an increasing concern by the public about
the way crops and food are being produced, packaged, distributed, and commercial-
ized; and the unsustainable fact that a large proportion of the food produced is
being wasted.

9
A privately held startup company with a current valuation of at least US$1 billion is referred to as
a unicorn.
3 Open Innovation and Value Creation in Crop Genetics 83

One consequence of the above-described conundrum is that even for large, mul-
tinational companies, the problem to solve is so large that it becomes untenable to
maintain in-house all the expertise, infrastructure, and human talent needed to cover
the continuum of activities ranging from fundamental research to those develop-
ment activities leading to commercial launch inside the organization. Moreover, as
described in Frans Johansson’s fascinating book The Medici Effect, true innovation
has the stubborn habit of coming from beyond your realm of expertise and from
what he refers to as the “intersection of ideas.”
In today’s environment, regardless of their size, firms are quickly evolving from
a closed into an open innovation mindset to remain competitive, since the previ-
ously successful closed mindset has become a factor stifling progress and reducing
the likelihood of innovation success.
Henry Chesbrough from the University of California at Berkeley, who first
coined the term open innovation (referred to thereafter as “OI” through this chap-
ter), defines it as “a distributed innovation process based on purposively managed
knowledge flows across organizational boundaries, using pecuniary and non-­
pecuniary mechanisms in line with the organization’s business model” (Chesbrough
and Bogers 2014). The main tenet of OI is that, in order to thrive in an increasingly
competitive market and in a more complex society, firms should open up their
boundaries and leverage inflows and outflows of knowledge and technology. In
other words, companies should not only establish outside-in channels to source
external knowledge but also develop inside-out processes to leverage external paths
to novel markets which would otherwise remain off-limits. Figure 3.1 provides a
current working model of open innovation. One of the major departures from a
closed model is that companies practicing OI explicitly feed their innovations fun-
nels with both, in-house and external developments. This allows them to evolve
from the previous “not invented here” syndrome to a “proudly invented elsewhere”
framework. In addition, OI enables not only the exploitation of current, known mar-
kets but also the exploration of novel ones, which brings about accelerated benefits
for society at large, since under a closed model such developments and value cre-
ation activities would either never occur, or would take place several years later.
Another benefit of OI, when it is linked with corporate entrepreneurship, is that OI
efforts can create encouragement, opportunities, and incentives for staff development.
One of the underpinnings of OI is the realization that the knowledge needed to
innovate is becoming more widely distributed in the economy and that there is an
increased scattering of the sources and providers of such knowledge. Under these
premises, the two main working models of OI, namely, outside-in and inside-out
innovation, where firms are open to adopting all kinds of external inputs and contri-
butions, while simultaneously allowing some of their technological assets to be
used by others, makes sense. In coupled modes of open innovation, outside-in and
inside-out modes are combined.
OI can be implemented through several approaches such as in- and out-licensing,
spin-ins (or acquisitions) and spin-outs, co-conception and co-development,
84 M. L. Müller and H. Campos

Fig. 3.1 Open innovation

research joint ventures, crowdsourcing, community innovation, and online market

places. In some cases, a company implementing OI can also enable employees to
exploit a given technology in noncompeting areas or in areas not yet ripe for product
development. Furthermore, OI efforts can develop hitherto non-exploited markets
through corporate entrepreneurship efforts, as already mentioned. Regardless of the
approach, all forms of OI enable a quicker and nimbler flow of knowledge between
different actors at the supply and demand ends of the market.
From a conceptual innovation standpoint, OI embraces the “jobs to be done”
perspective described in Chap. 1 in this volume, since it aims to reduce satisfaction
gaps which create both frustrations in customer and business opportunities for firms
that would likely otherwise go unnoticed, or be exploited by competitors.
OI represents the explicit recognition that even for very large companies, it is not
in their best interest to attempt to internally address all R&D aspects to remain com-
petitive but also that for some of their R&D outcomes, there are unchartered mar-
kets previously untapped from which value can be captured by making such
outcomes available to other organizations.
In order to understand how diverse organizations create the paths to both engage
and benefit from OI, authors such as Linus Dahlander and David Michael Gann
have elaborated a capability perspective, which considers the organizational culture
and the mechanisms that need to be developed to create innovations (Dahlander and
Gann 2010). Differences in capabilities will determine the extent to which a firm
3 Open Innovation and Value Creation in Crop Genetics 85

implements OI and its ability to create value. Furthermore, a capabilities’ perspec-

tive helps to design OI systems able to become a competitive advantage in a world
where technical knowledge doubles every 2 years and where more and more knowl-
edge is either easily distributed or is made available as a public good in the public
domain. At the most fundamental level, OI is embedded in the notion that the
sources of knowledge for innovation are widely distributed in the economy.
Embracing OI modifies the mindset that companies take to the development of
new products. Christensen (2006) points out that to maximize the benefits of OI,
companies need to not only possess deep expertise and technological ability but also
combine the ability to integrate sourced innovations or intellectual property, man-
age relationships with different partners, and sometimes adopt a dual, possibly
simultaneous role, as both provider and seeker of technology.

3.5.1 Open Innovation and Intellectual Property

Open innovation is not open source. Patents are important as they encourage firms
to invest in R&D and to disseminate technical knowledge within the economy. They
are granted to a holder by the appropriate national or regional authority and provide
limited rights to the patent holder to exclude others from commercially exploiting a
given invention over a set period of time, unless the patent holder authorizes them
to do so.
Patents are present throughout all the steps of the open innovation process as a
structuring element. Initially, they facilitate knowledge inflows through signaling
and in-licensing contracts. Then they help to coordinate the production of knowl-
edge by collaborators and competitors, starting with their use as bargaining chips
and ending with their potential as contract enforcers. Finally, they help manage the
outflows of knowledge and the distribution of profits by enabling either out-­licensing
strategies or by ensuring the maintenance of exclusivity and its associated profits.
As such, in open innovation, firms are not only producers but also active users of
patents and other means of intellectual property rights (IPRs) (Pénin and Neicu 2018).
A recent study analyzed the 100 largest R&D spenders among Swedish national
and binational firms, as well as the 100 largest R&D spenders among Swedish small
and medium enterprises, to shed light on the relationship existing between patenting
and OI. Patenting with protection (technology protection and safeguarding, block-
ing competitors from certain technology areas, obtaining freedom to operate (FTO),
and creating retaliatory power) and bargaining motives (enabling licensing, cross-­
licensing, and R&D collaborations) were positively related with the importance of
open innovation strategies. However, the positive relationship between protection
motives and open innovation was stronger than that between bargaining motives and
open innovation. According to the study, patenting acts as an enabler of open inno-
vation for the individual innovating firm (Holgersson and Granstrand 2017).
Though the abovementioned study used patents, there are additional mechanisms
of intellectual property protection. A large study conducted in Spain with over 2,800
86 M. L. Müller and H. Campos

SME firms concluded that, while SMEs do not directly benefit from open innova-
tion or from patenting in the same way as larger firms, they nevertheless profit from
alternative ways of protecting the intellectual property associated with their propri-
etary technologies (Brem et al. 2017).
Regardless, the proper management and availability of IPRs in a general sense
exert a positive influence on OI efforts.

3.6 Open Innovation Comes of Age in Crop Genetics

The expenses and complexities associated with the development of transgenic traits
have kept the development of GMO crops out of reach of most but for the largest
companies supplying large scale agriculture with maize and soybean seeds. Because
model plant systems were, by and large, unable to predict the effects of multigenic
traits affecting yield and other quantitatively inherited traits of importance to farm-
ers, the seed industry relied on an innovation model that became increasingly closed
in areas such as transgenic trait development and predictive breeding. However,
with the recent consolidation of the industry and the resultant restructuring and
focus on product development, a compelling argument can be made that the next
decade will see a more open form of innovation, centered around early stage discov-
ery. The phenomenon is not unlike what the pharma industry experienced over the
past two decades, with the integration of technologies developed by startups becom-
ing their major source of innovation.
Large, medium, and small seed and plant breeding companies have much to gain
from embracing an open innovation model, due to the types of innovations which
will be needed by the farming community in the next decade or two and the cost of
developing these innovations. Firms in the precision farming sector, which rely on
the confluence of many disciplines from the high tech, data management, computer
vision, and agronomy sectors, will benefit as well.
The successful deployment of new technologies is dependent not only on farmer
adoption but also on the appropriate regulatory framework, which in turn is contin-
gent on the acceptance of such technologies by consumers, the general public, and
society at large. Past experience with transgenic traits has shown that in the absence
of obtaining a social license to practice the new technologies, consumer acceptance
may be difficult or even impossible to obtain. This argues for the large developers
of genetics in commodity crops to make their technologies and know-how available
broadly to stimulate entities more focused on academic pursuits and the develop-
ment of public goods to become early adopters and independent champions of such
technologies. For example, smaller fruit and vegetable seed companies and non-
profit organizations can harness CRISPR-Cas9 genome editing and associated tech-
nologies to develop disease resistance traits creating the potential for more
sustainable, nutritious, and affordable products, for both developed and developing
3 Open Innovation and Value Creation in Crop Genetics 87

countries. To enable such a model and also advance its philanthropic aims, DuPont
Pioneer (now part of Corteva Agriscience) developed, in 2017, a joint licensing
framework with the Broad Institute of Harvard University and the Massachusetts
Institute of Technology (MIT) to provide access to CRISPR-based gene editing
technologies in plant agriculture. Under the joint licensing structure, the parties
made their combined portfolio of over 40 patents available for free to support
research conducted by academics, governmental agencies, and nonprofit organiza-
tions, as well as for the development of agricultural products destined to small-
holder farmers, while also retaining the freedom to license their individual patent
portfolio to others. For other licensees, they apply financial terms that are adapted
to the licensees’ size and revenue prospects.
The long and arduous path that often accompanies the establishment of research
and commercial licensing agreements provides additional support for a more open
form of innovation. Early stage technologies are highly uncertain, and many remain
untested, either due to failure to reach a satisfying win-win situation during negotia-
tions or simply because the negotiation process constitutes a hurdle that the parties
are not willing to face. As Fig. 3.1 shows, the likelihood of success of technologies
at a very early stage of development is, at best, slight. Settling for simpler, research-­
only licensing relationships can open the floodgates that keep less mature technolo-
gies from being tested while deferring the negotiation of commercial terms to a time
when initial proof of concept is confirmed. Under a closed innovation mindset, such
technologies might never be tested. Though this approach might not be adequate for
all technologies, it represents an option that both sides of a negotiation might
consider.
A further reason for encouraging a more open form of collaboration and innova-
tion is the highly interconnected and interdependent nature of technology develop-
ments among many participants in the agricultural technology development sector.
Technological and commercial developments rarely happen in isolation but rather
derive from the development of networks of agricultural technologies, in which
components interact and co-evolve to become increasingly interdependent. One of
the reasons for such interdependency is the establishment of separate dominant
designs, which create network externalities, complementing each other and lower-
ing the costs of absorbing and mainstreaming new developments.
This creates multitiered hierarchical structures where end-user technologies
become dependent upon infrastructure technologies which underlie the solutions
stack. This in turn leads to the establishment of platform technologies of increasing
relevance in agriculture, not only in commercial terms but also because of their abil-
ity to create additional value for customers and to integrate digital, biological, and
financial solutions in a more efficient and/or affordable way.
While startups and academics have vast innovative abilities and venture capital-
ists have resources that can be assigned to the development of new technologies,
only the large, international seed companies have the scale and the development
resources to bring some of these innovations to market in production agriculture.
88 M. L. Müller and H. Campos

3.7 The Role of Venture Capital (VC)

The 1980s and 1990s saw a flurry of entrepreneurs developing their proprietary plant
biotechnology innovations through newly formed startup companies. Venture capitalist
investment followed the successful strategic partnerships that startups formed with
major seed companies, and the first wave of successful exits resulted in acquisitions by
the multinationals who became keen to internalize the innovative discovery programs of
the startups. However, by 2010, plant biotechnology startups had thinned, venture capi-
talists had become wary of the long development timelines associated with transgenic
crops, and the multinationals had taken advantage of the historically high seed prices of
2008, 2011, and 2012 to invest in and develop their own formidable internal programs.
Another realization started to set in: beyond the initial biotech traits conferring herbicide
tolerance and insect resistance, agricultural biotechnology’s holy grail of increased
drought tolerance, yield, and fertilizer use efficiency would require harnessing complex
multigenic traits. Model plant systems were largely inadequate to tease out the complex
requirements that would result in a successful trait without pleiotropic effects. Interests
shifted, and new areas of innovation started to make it to the foreground. The soil and
plant microbiomes became an innovation target.
For millions of years, plant and soil microbes have coexisted and benefitted from
each other. Microbes decompose organic matters and make nutrients such as nitrogen
and phosphorus available to the plants, and the plants supply the carbon needed by the
bacteria to survive. In 2009, Bayer Crop Science announced its new VOTiVO™ bio-
logical seed treatment, which makes use of beneficial Bacillus firmus bacteria to pro-
tect maize, soybeans, and cotton against nematodes. In 2012, Syngenta acquired the
startup Pasteuria Bioscience, with which it had partnered since 2011. This was fol-
lowed in 2013 by the launch of Clariva pn, Syngenta’s first biological nematicide seed
treatment, which contains spores of Pasteuria nishizawae, an obligate parasitoid of
soybean cyst nematodes. The race was on! Bayer acquired California-based AgraQuest
in 2012; Monsanto announced a deal with Torrey Pines, CA-based Synthetic Genomics
and formed the BioAg Alliance to commercialize microbial products for agriculture
with Denmark based Novozymes, the world’s largest enzyme producer, both in 2013.
The next few years were a golden age for VC and startups in the biological space.
Bayer purchased Argentinian Bioagro Group in 2014 and announced a research col-
laboration with St. Louis, MO-based Elemental Enzymes in 2015. DuPont acquired
Taxon Bioscience, a Tiburon, CA-based startup focusing on industrial microbes; and
Dow AgroSciences entered a collaboration with UK-based Synthace Ltd., both in
2015. In 2016, Monsanto’s corporate venture group invested in California-based Pivot
Bio and North Carolina-based AgBiome; in 2017 it led a financing round in St. Louis-
based NewLeaf Symbiotics. In 2017, Bayer announced a new partnership with Ginkgo
Bioworks to develop microbial products that would stimulate nitrogen fixation in
plants, and DowDuPont announced a collaboration with Arysta LifeScience and a
multi-year collaboration with Israel-based Evogene, to develop microbial seed treat-
ments for maize.10

10
http://www.etcgroup.org/sites/www.etcgroup.org/files/files/info_brief_microbial_and_bayer-
monsanto_0.pdf - Accessed 8/25/2019.
3 Open Innovation and Value Creation in Crop Genetics 89

Another area of intense innovation and startup activity in the last 5–10 years is
that of precision agriculture. Further details on this topic are provided by Sonka in
Chap. 8 of this volume. At the convergence of big data management, satellite imag-
ery, remote sensing, computer vision, and precision input application technologies,
startups and venture capitalists are hustling to develop the technologies that will
make farming more data driven, productive, and sustainable. Precision agriculture
is not a new concept, as farmers adopted GPS-connected equipment in the 1990s to
increase productivity; but with the advent of remote sensing, unmanned aerial vehi-
cles (UAVs, aka drones), high-speed internet, and other technological advance-
ments, precision agriculture is becoming the mainstream.11 As it happened with
other technologies, the large seed companies invested heavily to develop their digi-
tal agricultural services’ platforms. The most notable exits in this space are the
Monsanto’s acquisition of the Climate Corporation in 2013 and DowDuPont’s
acquisition of Granular in 2017.
Today’s farmers have access to an enormous amount of data. But data without
integration and management recommendations are of little use. Some of the chal-
lenges facing precision agriculture are the integration of big data into a single plat-
form, interpretation of remote sensing and scouting data through crop consultants or
apps that make use of artificial intelligence, and the implementation of recommen-
dations about planting decisions and application of inputs across entire farms.
But the area which has perhaps attracted the most interest from scientists, inves-
tors, and the public alike is that of genome editing. With the discovery of CRISPR-­
Cas9 genome editing technology in 2012, published almost simultaneously by
scientists at the Vilnius University, Lithuania (Gasiunas et al. 2012), on one hand,
and by scientists at the University of California at Berkeley, the University of
Vienna, and Umea University (Jinek et al. 2012) on the other, the field immediately
triggered a flurry of entrepreneurial activity, with the founding of multiple startups
and massive investments by the venture capital community. The world of plant
genetic innovations was once again coming into focus. While genome editing wasn’t
new in itself, since it had been pioneered through the use of zinc finger nucleases as
early as the 1980s and by using meganucleases and TALENs thereafter, CRISPR
technology made the precise editing of genomes an affordable and facile endeavor.
Before CRISPR, most companies had to resort to using transgenes to bring genetic
improvements to market, a process which took in average 13 years and cost $130MM
for existing products12 and was increasingly becoming more costly and taking lon-
ger, as the regulatory path became gradually more complicated. This limited trans-
genic improvements only to major crops such as maize and soybeans, where
companies could envision making a return on their investment. With CRISPR tech-
nology and the prospects of an appropriate regulatory framework in the United
States and other countries recognizing that CRISPR-edited crops are not transgenic
crops, the field opened widely to academic researchers and startups.

https://agfundernews.com/what-is-precision-agriculture.html - Accessed 8/25/2019.

11

https://croplife.org/wp-content/uploads/pdf_files/Getting-a-Biotech-Crop-to-Market-Phillips-
12

McDougall-Study.pdf - Accessed 9/2/2019.

90 M. L. Müller and H. Campos

There is no doubt that AgTech innovations are experiencing a golden age and
that the current venture system represents its lifeblood. Investments funding AgTech
startups reached an all-time high in 2015, with $4.6 billion committed, followed by
$4.2 billion in 2016.

3.8 Mergers and Acquisitions

Consolidation in the seed and crop protection industry over the past decades led to
the formation of large organizations uniquely positioned to exploit increasingly
complex molecular breeding and transgenic trait development programs. During the
golden years of high seed prices, substantial capital investments into large internal
discovery engines were made by the multinationals.
Nevertheless, while transgenic input traits, including herbicide tolerance and
insect control traits, translated into increased revenues for the seed companies and
efficiency gains for farmers, investments committed to the development of trans-
genic agronomic traits such as intrinsic yield increase, or increased fertilizer effi-
ciency, have yet to deliver value.
With yields increasing steadily and seed stocks in the developed world attaining
record highs, commodity prices collapsed and so did the growth of company reve-
nues. This led to yet another round of consolidation resulting in the acquisition of
Syngenta by ChemChina, the merger of equals between Dow and DuPont, and the
acquisition of Monsanto by Bayer.
The merged firms have consolidated development pipelines which, for years to
come, will require large amounts of resources to drive product concepts toward
commercial launch. Combined with the need for these firms to reduce their mar-
ginal costs, this could put pressure on their investments in early stage discovery,
which will result in an opportunity for the startup sector and academics alike to
regain an important role in supplying the industry with the cutting-edge technolo-
gies of tomorrow.

3.9 Closing Comments

Collaborations between the private and public sector have brought about steadily
increasing yields. Incredible productivity gains have been obtained by a sophisti-
cated industry that has successfully incorporated advanced technologies. Since the
advent of hybrid maize, yields in the United States have increased sevenfold!
Corteva Agriscience has built a maize germplasm collection that goes back over
90 years, with phenotypic data that was collected from the start and associated
genotypic data built over time. Such continuity in data collection and the coherence
of the germplasm pools are unmatched in the private or the public sectors. Combined
with an ability to precisely correlate phenotype to genotype for the past two decades,
3 Open Innovation and Value Creation in Crop Genetics 91

the accumulated data allows for increasingly accurate predictions in support of the
breeding process, allowing modern breeders to cross inbreds chosen from the germ-
plasm pools to obtain high-performing hybrids that respond to specific biotic and
abiotic stress conditions while maximizing yield for the targeted maturity zone.
That is the strength of the large agricultural input multinationals. But we are enter-
ing an era of complementarity with developers of early stage technologies, whether
they are in the public sector or at startups, where the diverse models of open innova-
tion are expected to play a larger role than in the past. The convergence of innova-
tors in a highly technological sector of enormous breadth and scale has the potential
to shape the future of agriculture into one that can feed the world’s nine billion
people in a sustainable and environmentally friendly way.

Acknowledgments Innovation is about people’s connections, and we would like to wholeheart-

edly thank Dr. David Meyer (Corteva Agriscience) for connecting us. Without David’s willingness
and generosity to put us in touch, this chapter would not have been possible. Hugo Campos
acknowledges the financial support of the CGIAR Research Program on Roots, Tubers and
Bananas (RTB), supported by CGIAR Trust Fund contributors (https://www.cgiar.org/funders/),
and is also very grateful to the support of a Bill & Melinda Gates Foundation investment
(OPP1213329) awarded to the International Potato Center.
We would also like to thank Prof. Henry Chesbrough (University of California at Berkeley) for
granting permission to use, and modify, Fig. 3.1.

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Chapter 4
Rethinking Adoption and Diffusion
as a Collective Social Process: Towards
an Interactional Perspective

Cees Leeuwis and Noelle Aarts

4.1 Introduction

While many scholars and practitioners use the term ‘agricultural development’, the
meaning of the concept is ambiguous, as there exist different views on the desired
model of agriculture. For example, some associate ‘agricultural development’ with
an ‘agro-ecological’ future, while others make a plea for ‘sustainable intensifica-
tion’. Regardless of such view, agricultural development is somehow associated
with changes in agricultural practices, including the so-called adoption of techno-
logical and other types of innovation that are congruent with a proposed agricultural
development trajectory. The term adoption has a long tradition and has been used in
many studies (Rogers 1962; Loevinsohn et al. 2012, 2013). Frequently, such studies
assess the adoption of new practices and technologies as part of an effort to deter-
mine the success or failure of development interventions. At the same time, several
scholars have pointed to difficulties with regard to such a use of the term ‘adoption’
in research and development practice (Loevinsohn et al. 2012, 2013; Glover et al.
2016). It is argued that it is far from clear when someone can be regarded as having
actually ‘adopted’ a practice or technology; should we speak of adoption when
someone uses a new practice on a small portion of a farm, for a short period of time,
or for merely opportunistic reasons (e.g. to get access to a service or network)?
Another critique is that the term obscures the socio-technical character of change,
as well as emergent forms of creolisation, making and redesign that frequently

C. Leeuwis (*)
Knowledge, Technology and Innovation group at the Section Communication, Philosophy
and Technology, Wageningen University, Wageningen, The Netherlands
e-mail: [email protected]
N. Aarts
Socio-Ecological Interactions group at the Institute for Science in Society, Radboud
University, Nijmegen, The Netherlands
e-mail: [email protected]

© The Author(s) 2021 95

H. Campos (ed.), The Innovation Revolution in Agriculture,
https://doi.org/10.1007/978-3-030-50991-0_4
96 C. Leeuwis and N. Aarts

occur when farmers engage with new technologies (Glover et al. 2016). In other
words, that what is supposedly adopted may actually have changed and become
contextually adapted. Such critiques are valid and indeed render the concept of
‘adoption’ to be rather ambiguous.
In this chapter, we do not focus on the issue of how to precisely define or mea-
sure adoption, nor on the processes of adaptation that are likely to be involved.
Instead, we focus on theories and modes of thinking that have been used to explain
and understand why people do or do not ‘adopt’ a novel practice. This regardless of
how sizable, durable or adaptive such changes may be. Such theoretical explana-
tions include two interrelated dimensions: (a) factors or variables that are seen to
influence whether people adopt or not and (b) the kinds of dynamic processes that
are seen to be at work in shaping such factors. In relation to these, we will argue that
adoption theories and technology uptake models have tended to regard adoption as
a largely individual process and that they have thereby overlooked critically impor-
tant interdependencies in the process of adoption. Subsequently, we complement
individualist models for explaining adoption with sociological variables and then
work towards an interactional perspective on the adoption process. Eventually, we
will briefly highlight relevant conceptual and practical implications of our perspec-
tive with regard to some topical issues in development intervention, notably the idea
of ‘scaling’ and the wish to support adoption and scaling with the help of informa-
tion and communication technology for agriculture (ICT4Ag).

4.2 Adoption Seen as an Individual Argumentative Process

4.2.1 Everett Rogers’ Seminal Work

In 1962, Everett Rogers made a synthesis of more than 500 studies in his famous
book ‘diffusion of innovations’ in which adoption is a central theme. At this point
in time, adoption is regarded as a process of individual decision-making, even
though it is recognised that individuals are part of a broader system (Rogers 1962).
Rogers argues that adoption (or rejection) of an innovation arises from a process in
which individuals go through several stages (see Table 4.1). The process is essen-
tially seen as a cognitive process in which various sources of information may play
an important role. In line with this, provision of particular information was seen as
a key activity in supporting individuals in the process of arriving at an adoption or
rejection decision (Van den Ban 1963; Van den Ban and Hawkins 1996).
According to Rogers, the way an adoption process evolves is further shaped by
the antecedents of the individual involved (his or her values, status, cosmopolite-
ness, etc.), his or her perception of the situation and the perceived characteristics of
the innovation. This includes how individuals view the relative advantage of the
innovation, the extent to which the innovation is regarded as compatible with exist-
ing practices and the perceived complexity of using the innovation in the context at
4 Rethinking Adoption and Diffusion as a Collective Social Process… 97

Table 4.1 The adoption process according to Rogers 1962 (and 1995) linked to information that
is relevant per stage (Van den Ban 1963; Van den Ban and Hawkins 1996; Leeuwis 2004)
Stages in the adoption process
(below in brackets: renaming of Nature of knowledge and information required and/or
stage in Rogers 1995) searched for
Stage 1: Awareness Information clarifying the existence of tensions and
of the existence of a new problems addressed by the innovation or policy measure
innovation or policy measure
(Knowledge)
Stage 2: Interest Information about the availability of promising solutions
collecting further information that may be relevant in the prospective user context
about it
(Persuasion)
Stage 3: Evaluation Information about relative advantages and disadvantages of
reflection on its advantages and alternative solutions
disadvantages
(Decision)
Stage 4: Trial Feedback information from one’s own or other people’s
testing innovations/behaviour practical experiences
changes on a small scale
(Implementation)
Stage 5: Adoption (or Rejection) Information reinforcing the adoption decision made
applying innovations/behaviour
changes
(Confirmation)

hand. Some of these perceptions are in fact reconfigured during the adoption pro-
cess; based on information acquired, a person’s perception of the situation and/or
the perception of the relative advantages of the innovation may change.
Rogers seminal synthesis has been amended and developed further since its
appearance in 1962 (see Rogers 1995). Moreover, the overall perspective and largely
linear paradigm that it reflects have been criticised sharply (see, e.g. Leeuwis 2004).

4.2.2 Social-Psychological Follow-Up

Rogers’ focus on individual decision-making has inspired many scholars to apply

social-psychological theories and models to the issue of adoption (Taherdoost
2018). Such models include the theory of reasoned action (TRA, Fishbein and
Ajzen 1975), the theory of planned behaviour (TPB, Ajzen 1985, 1991), different
versions of the technology acceptance model (Davis et al. 1989; Venkatesh and
Davis 2000), social cognitive theory (SCT, Rana and Dwivedi 2015) and uses and
gratification theory (U&G, West and Turner 2010). Several such models were inte-
grated in the unified theory of acceptance and use of technology (UTAUT) by
Venkatesh et al. (2003).
98 C. Leeuwis and N. Aarts

While these models differ from each other in several respects, they tend to
include a number of perceptual, cognitive and/or mental variables, often labelled as
‘determinants’ of adoption behaviour. Some key categories of determinants are
listed below (see Table 4.2). As shown in Fig. 4.1, such determinants are often
regarded as being influenced by personality traits and demographic variables.

4.3  onsiderations Related to Interdependence: Towards

C
an Interactional View on Reasons for (Non)adoption

The individualist perspective on adoption has been criticised for its simplistic notion
of adoption (see the introduction), its pro-innovation bias, its linear connotations
and its lack of attention for social and institutional dimensions of innovation (see
Leeuwis 2004). Similarly, it has been argued that the kind of social-psychological
theories referred to above overemphasise cognitive and rational processes and do
not sufficiently acknowledge limitations in our cognitive capacities (Kahneman
2011) and the importance of heuristics, routine and/or impulsive triggers for behav-
iour and behaviour change (Petty and Cacioppo 1986; Baumeister et al. 2007).
While these are all valid critiques, we would like to discuss less clearly elaborated
shortcomings that arise from years of experiences in studying the uptake of technol-
ogy. To highlight these, we continue to assume situations where individuals are
indeed explicitly considering to some degree whether or not to adopt some kind of
practice or technology. We first point to the issue of interdependence as an impor-
tant omission in the thinking about adoption and then propose additional factors and
variables that may explain why people do or do not adopt a new behaviour or
technology.

4.3.1 The Issue of Interdependence

An issue that tends to be insufficiently acknowledged in the individualist behav-

ioural perspective on adoption is that the performance of a specific behaviour is
always linked with (and dependent on) the performance of other behaviours (Aarts
2018a). Several types of interdependence can be distinguished, labelled below as
vertical, horizontal, intra-individual and time-related interdependencies.
Vertical interdependencies When considering whether or not to adopt a behaviour
or technology, people frequently depend on the behaviours of dissimilar others.
Farmers, for example, are embedded in several value chains and will consider a new
practice in the context of what others in a value chain may do or not do. When con-
sidering whether or not to adopt a new crop variety, they may take into account
whether or not local traders will actually be interested to collect and buy the pro-
duce, whether the agro-dealer will be willing to provide necessary pesticides on
4 Rethinking Adoption and Diffusion as a Collective Social Process… 99

Table 4.2 Overview of categories of determinants that are seen to influence adoption behaviour
(similar terms used instead of ‘adoption behaviour’ include actual use, usage behaviour, behaviour,
adoption)
Category of determinants
(Similar terms used in
literature) Description
1. Intention In many models, it is assumed that adoption behaviour is preceded
(behavioural intention, by an overall predisposition to perform the behaviour. This is the
intention to use) weighed resultant of several other components in this table (notably
2, 4 and 7)
2. Attitude Intention is supposedly shaped by a variable that relates to an overall
(perceived usefulness, feeling that individuals have towards a behaviour or technology,
relative advantage, which can be positive, negative or neutral. Attitude is seen to arise
attitude towards use) from two sub-variables, one relating to knowledge and the other to
values (see 3. and 4.)
3. Knowledge Several models explicate that the attitudinal component (see 2.) is
(behavioural beliefs, influenced by what actors perceive to be the consequences of
outcome expectation, adopting the behaviour: ‘if I adopt this technology/behaviour, then
performance expectation, X, Y, Z is likely to happen’. In essence, this is about predictive
behavioural knowledge and understanding
consequences, belief
about outcomes)
4. Values Several models explicate that the likely consequences of adoption
(outcome evaluation, (see 3.) are weighed against people values, that is, those matters that
aspirations, goals) they find more or less important in a given context. It is in light of
such values that outcomes are interpreted as positive or negative (see
2.)
4. Social influence Intention is also seen to be shaped by how individuals perceive the
(subjective norm) wishes and norms of relevant others. Social influence is seen to arise
from two sub-variables, one relating to norms and the other to
motivation (see 5. and 6.)
5. Normative beliefs This sub-component of social influence relates to the perceptions
that individuals have with regard to how relevant others would
evaluate adoption or non-adoption. Would they approve or
disapprove if they would perform specific behaviour?
6. Motivation to comply This sub-component of social influence relates to whether or not
individuals are inclined to follow what others would like them to do
(see 5.). This involves an evaluation of how important and relevant
the views of others are
7. Ability Many models include one or more variables that relate to whether or
(perceived self-efficacy, not individuals perceive that performing the behaviour (or adopting
perceived behavioural the technology) is easy or difficult in light of their own abilities,
control, perceived ease of capacities and self-confidence. Similarly, some models refer to the
use, complexity, existence of (real or perceived) external barriers or facilitators that
facilitating factors, effort may enable or disable individuals in performing the behaviour. This
expectancy, barriers) ability component is mostly regarded as a third influence on
intention (see 1.) or as a factor that directly influences adoption
behaviour (thus explaining the frequently observed ‘intention-­
behaviour’ gap)
100 C. Leeuwis and N. Aarts

Fig. 4.1 Relationships between main categories of determinants influencing adoption behaviour,
as synthesised from various models (see Table 4.2 for related terminology)

credit and/or whether farm labourers will be able to make themselves available at
the required time of harvesting. If indeed the variety is new, it is likely to require
adapted behaviours of actors along the value chain, which means that adoption of
the variety by the farmer is dependent on the simultaneous adoption of complemen-
tary behaviours by others in the value chain.

Horizontal interdependencies There are many practices in farming that farmers

can only sensibly adopt when other farmers adopt them as well or where adoption
is otherwise dependent on the behaviour of other farmers. There exist many crop
protection strategies, for example, that are only effective when implemented by the
large majority of farmers. If not, sources of infection and disease will continue to
exist, rendering adoption useless. Similarly, the growing of new varieties or crops
may only be profitable when sufficient farmers in the region join, as buyers may
require a certain volume meeting specific quality requirements. Or somewhat differ-
ently, farmers in an irrigation scheme or catchment area may only be able to grow a
new variety or crop if upstream farmers refrain from using all the water that is avail-
able. Again, we see that adoption by one farmer is dependent on the simultaneous
adoption of the same or complementary behaviours by other farmers.

Intra-individual interdependencies The adoption of a specific behaviour or tech-

nology by an individual often presupposes the acceptance and/or implementation of
complementary behaviours by the same individual at more or less the same period
in time. Adopting the use of sanitary gloves when milking cows requires several
‘preparatory behaviours’ such as buying the gloves and instructing family members
how to use them. Similarly, adopting a new crop variety may necessitate an earlier
or later planting or harvesting date, as well as a different spacing of plants in the
field. In other words, in actual practice, ‘adoption’ involves a plurality of behav-
iours, and all of these are shaped by the kinds of ‘determinants’ mentioned in
4 Rethinking Adoption and Diffusion as a Collective Social Process… 101

Table 4.2. This raises the difficult question of precisely which behaviour one should
focus on when aiming to understand why people adopt something or not.

Temporal interdependencies Whether or not people are interested to adopt a

behaviour or technology may well depend on adoption decisions that have occurred
in the past or on decisions that are anticipated in the future. A farmer who has made
considerable investments in chemical spraying equipment may not be interested in
switching to biological pest control. Similarly, someone who is anticipating to shift
from milk to meat production in the long run may not be prepared to consider new
approaches to enhance animal welfare for dairy cattle.
Clearly, in view of these interdependencies, the adoption of a particular behav-
iour by an individual cannot be understood in isolation from a plurality of behav-
iours and decisions in the broader environment and context of that person (Leeuwis
2004; Van der Ploeg 1990). Therefore, we propose that adoption must be regarded
as a relational issue – as something that takes place within a network of relation-
ships between people in time and space. Since considerations related to interdepen-
dencies and relationships are not well represented in the individualist and somewhat
rationalist perspective on adoption, we will now explore relevant factors and vari-
ables that need to be included in an alternative model for explaining reasons for
(non)adoption.

4.3.2 Adding Complementary Variables

Issues pertaining to social relations and interdependency may enter into an indi-
vidual’s reasoning in various ways. Below we translate these into several additional
perceptual variables.
Trust The insight that people are faced with vertical and horizontal interdependen-
cies when considering adoption can in part be captured by the notion of trust (De
Vries et al. 2015), more specifically the expectation that others can be trusted to
perform the necessary complementary behaviours and/or provide conducive condi-
tions that enable the adoption of a technology or behaviour. Thus, this variable has
connotations of perceived collective ability or perceived environmental effective-
ness (Leeuwis 2004). In the context of agriculture, this may relate to whether actors
in the agro-support environment or value chain are expected to behave in a condu-
cive manner (‘vertical trust’) or whether colleagues, household and community
members will demonstrate the complementary behaviours on which adoption
depends (‘horizontal trust’). Another type of trust that may play a role relates to
whether the people who are seen to promote the adoption of something are seen to
be trustworthy in terms of their expertise, honesty, credibility and legitimacy (‘trust
in the source’).
102 C. Leeuwis and N. Aarts

Responsibility In the context of social relationships, people may well consider

whether indeed they are and/or should be responsible for addressing the issue at
hand. There are many issues in agriculture where such considerations play a role. In
the management of pest and diseases, for example, farmers may refuse to adopt
certain pest control practices because they regard it as a government responsibility
to organise spraying gangs (Dormon 2006). Similarly, farmers may not want to
adapt their farming in a manner that saves the environment because they find that
others should take their responsibility first.

Social pressure While the dominant social-psychological models typically include

a variable related to social influence, the issue of power and enforcement is not very
explicit. From a relational perspective, it is important to acknowledge that some
people may be seen to have power over others and can impose sanctions or provide
rewards to ensure that others behave in a particular way. For example, female farm-
ers may be discouraged from adopting a cash crop because their husbands forbid it
and threaten them to reduce their access to land. Alternatively, people may adopt a
new variety purely because they expect to face negative consequences from their
community leaders if they refuse. Thus, social pressure is a form of social influence
that involves dynamics of power, which make it meaningfully different from how
individuals perceive the wishes and norms of relevant others (as considered in
social-psychological models).

Trade-offs The observation that adoption involves multiple practices and activities
further clarifies that adoption may be considered vis-a-vis a range of goals and aspi-
rations. Clearly, people aim at realising a range of goals in life (including in farm-
ing). Hereby, different activities and behaviours may serve different goals, but it is
also clear that one and the same behaviour may have implications for different val-
ues and aspirations. Buying a tractor for ploughing may be economically attractive
but may also damage relations with neighbours and/or farm labourers who were
involved in ploughing before the arrival of mechanical ploughing. While social-­
psychological models involve value-based evaluation of a specific behaviour, it is
less clear and explicit that adoption normally involves many behaviours and multi-
ple values at the same time, leading to the likelihood of trade-offs, that is, situations
where adoption works out positively for some goals and negatively for others,
resulting in the need to make choices and accept certain trade-offs. Different types
of goals and aspirations may play a role in the consideration of trade-offs, including
economic goals (e.g. high profit or stable cash flow), technical goals (e.g. high milk
yield or low water run-off), cultural goals (e.g. showing respect for life), relational
goals (e.g. maintaining good relations with neighbours), emotional goals (e.g. safe-
guarding peace of mind) or ethical aspirations (e.g. ensuring fair and equitable out-
comes). The balancing and weighing of multiple perceived outcomes and goal
orientations deserve to be made more explicit in models to explain adoption.

Identity It is important to consider that the salient identity that people have or take
on when considering something may differ according to the relational setting.
4 Rethinking Adoption and Diffusion as a Collective Social Process… 103

People tend to have several roles and identities (e.g. be a consumer, a producer,
entrepreneur, a father, a husband, a citizen), and they may reason and think differ-
ently in different capacities. For example, as a citizen, someone may be all in favour
of sustainable agriculture and vote for a green party that proposes a tax on meat or
fertiliser, but as a consumer, the same person may have different considerations and
buy the cheapest meat available, while as a parent he/she may insist on buying the
most expensive meat when their grown-up children come home for dinner. From the
perspective of an outsider, such behaviours may be regarded as ‘inconsistent’, but at
the same time, one could argue that they are consistent with the salient identity that
is evoked by a certain interaction setting. Thus, the salient identity can be seen to
shape the kinds of knowledge, values and social influences that are taken into
account when deciding to adopt something or not. Arguably, identity can be impor-
tant in another way as well, namely, an important motivator for action in specific
situations. When people feel that their identity is threatened or treated disrespect-
fully (e.g. their religious, national or racial identity), they may respond strongly. In
this sense too, identity may play a role in adoption of technologies or behaviours.
For example, people may resist re-allocation of land in the context of a land consoli-
dation or resettlement scheme because they feel it undermines their identity as land-
owners who have been custodians of the land for many generations.

Risk and uncertainty The existence of numerous interdependencies in relation to

adoption only amplifies and underscores that people may well experience uncertain-
ties or risks in relation to several of the variables discussed so far. They may actually
wonder what the consequences of one practice may imply for other practices and
outcomes or have doubts about how relevant others might respond to their adoption
behaviour. Clearly, people are not all knowing about the world around them and
may neither be fully convinced about the adequacy of their beliefs, the level of their
capacities and/or the importance of competing aspirations. It is likely that such
uncertainties and/or risk perceptions have an impact on people who actively con-
sider the adoption of something, but this is not well represented in the domi-
nant models.

Institutions While the complementary variables mentioned so far relate to people’s

mindsets and mental considerations, it is useful to introduce another type of concept
from a rather different academic tradition: the idea that practices or behaviours are
shaped by ‘institutions’. Institutions can be seen as the formal and inform rules and
arrangements to which people orient themselves in their (inter)action (North 1990).
We may think of the regulations that govern interactions in markets and value
chains, the informal standards and norms regarding appropriate social behaviour,
the formal legal rules that people take into account when deciding how to deal with
a conflict and/or the procedures that are in place to arrive at democratic decision-­
making. Clearly, such rules and arrangements (in some literatures called ‘structures’
or ‘regimes’) can have an important influence on what people do or do not do. As
mentioned, institutional explanations of behaviour stem from a completely different
tradition than social-psychological and individualist explanations but certainly
104 C. Leeuwis and N. Aarts

merit attention when discussing interdependencies in the context of adoption. In

fact, we see that more recent perspectives on innovation than the traditional view
described by Rogers (1995) pay considerable attention to issues pertaining to insti-
tutions. Currently dominant institutional configurations (or regimes) are often
regarded as an obstacle to change and innovation (Geels and Schot 2007); for exam-
ple, prevailing flat price setting arrangements in the value chain may obstruct the
use of quality-enhancing technologies by farmers. At the same time, the existence
of such obstacles leads to a call for ‘institutional innovation’ as an integral compo-
nent of socio-technical transformation, in this example, the introduction of quality
control and price differentiation arrangements to enable farmers to invest in quality-­
enhancing practices and technologies (Leeuwis 2013). Moreover, innovation pro-
cesses themselves are seen to be influenced by institutional set-ups that govern
interaction between actors in an ‘innovation system’ or ‘innovation ecology’ (Hall
et al. 2007; Leeuwis et al. 2017), for example, the reward systems in universities
may hinder conducive interaction between researchers from different disciplines
and/or prevent scholar to engage actively with societal stakeholders.

4.4  inking Institutional Explanations

L
to Individual Explanations

The question then is how institutional explanations and more individual consider-
ations relate to each other and how the former may be taken into account in a model
that complements (but also still builds on) an individualist perspective. We would
propose that institutions tend to create resources and (dis)incentives that may enter
people’s considerations in several ways.
Clearly, rules and arrangements can be seen as shaping the ways in which social
influence and social pressure may be exerted or experienced. For example, the stan-
dards and rules implied in certification and pricing systems may be used by traders
as a leverage to negotiate prices and/or provide (or deny) access to certain market
channels and thus operate as an (dis)incentive for farmers to produce in a certain
manner. At the same time, such (dis)incentives are likely to affect people’s aspira-
tions and alter the balance in assessing trade-offs between different goals. Moreover,
the existence of community by-laws and accompanying control and sanctioning
systems may affect the extent to which farmers trust their neighbours in adhering to
preventive measures against diseases. Institutions may also shape the knowledge
and beliefs that people have about the world and/or about the outcomes of specific
behaviours. The belonging to certain scientific disciplines, religious groups or cul-
tural communities, for example, impinges on how people consider their relation
with nature (Douglas 1970) and also on agricultural knowledge and beliefs. Organic
farmers, for example, tend to have a very different belief system regarding the con-
trol of diseases and/or the management of soil fertility than so-called ‘regular’
4 Rethinking Adoption and Diffusion as a Collective Social Process… 105

farmers. Similarly, such cultural belongings and identities may relate to what people
feel responsible for and what not.
Thus, in a setting where multiple people interact and depend on each other, insti-
tutions can be seen to orient actors’ ways of thinking, that is, their beliefs, experi-
enced influence or pressure, aspirations, trust, risk perceptions, abilities,
responsibilities, etc. This should not be interpreted in a deterministic manner as
actors can have considerable agency and space for manoeuvre (Long 1990; Giddens
1984) to interpret what rules and arrangements apply to the situation at hand.
Figure 4.2 captures what we have discussed so far:
Figure 4.2 provides what one could call a ‘sociologically enhanced’ overview of
the reasons that people may have for adopting or rejecting an innovation (consisting
of a package of behaviours A, B, C). When compared with Fig. 4.1, it includes a
range of additional relational variables and considerations that have to do with how
other people are looked at: whether they exert power and pressure, whether they can
be trusted to (be willing and able to) perform complementary behaviours and/or
whether proposed responsibilities and identities are meaningful to the situation. The
figure also captures the role of salient identities and institutions as well as the role
of time; it makes clear that previous behaviours and experiences play a role and that
the adoption of a set of new practices generates responses in the agro-ecological and
social world that are being interpreted, leading to changes in people’s ‘mindset’. For
example, growing a new variety may go along with a variety of experiences which
are likely to influence peoples’ reasoning with regard to future activities: Did it
grow well?, Was it resistant to diseases?, How much effort was needed?, Was I able
to sell the crop against a good price?, Did my family members like the taste?, etc.
Once behaviours associated with an innovation have been adopted (and often
adapted), they are likely to become a routine or habit, that is, a regular practice that
is no longer actively deliberated every time it is enacted. This is why the concept of
‘intention’ has been omitted from Fig. 4.2; while behaviours may continue to be
rationalised ex-post (e.g. when asked about in an interview setting), it is not accu-
rate to assume that everything people do is preceded by careful deliberation.
However, at some point in time, routines may become subject to active reflection
again, for example, when a relatively stable situation is disrupted and/or when
longer-­term negative consequences become visible.

4.5 An Interactional View

Whereas Fig. 4.2 still gravitates towards an individualist perspective as it includes

only one relatively isolated ‘mindset’, Fig. 4.3 is an attempt to correct that to
some degree.
While Fig. 4.3 refers to the same parameters as Fig. 4.2, it highlights that adop-
tion occurs in an interactional context where several people (in reality more than
two) depend on each other in their performance. This interaction evokes salient
identities of participants and is oriented by the formal and informal institutions that
106 C. Leeuwis and N. Aarts

Fig. 4.2 Reasons for (non)adoption: complementing individual determinants with variables aris-
ing from interdependence and institutional influences

actors draw upon. The ‘mindsets’ of the actors (their ‘reasons for (non)adoption’,
see Fig. 4.2) are influenced by the exchange that takes place, by the elements in the
institutional setting that are deemed relevant as well as by contextual conditions,
personality traits and previous experiences. At any point in time, the participants are
likely to have meaningfully different ‘mindsets’ and/or priorities in their reasoning,
which are bound to change and evolve during the process. As an outcome of the
interaction, the people involved may or may not adopt complementary practices (A,
B, C and X, Y, Z), or enable or constrain each other to move in a given direction.
The image makes clear that in order to move towards the adoption of a specific
package of interrelated practices (say prevention of diseases through integrated pest
management practices in a community), the actors involved must somehow develop
‘mindsets’ that are congruent with each other. This may be in the form of jointly
agreed upon rules or by-laws (institutions), overlapping aspirations (values), shared
understandings of what will happen if A, B, C and X, Y, Z are performed (knowl-
edge and beliefs) and mutual recognition of the rewards and sanctions that will be
applied (social pressure). Arriving at such mutual adjustment and understanding
involves different (or at least additional) processes than the individual decision-­
making processes portrayed in Table 4.1. As argued and elaborated elsewhere
4 Rethinking Adoption and Diffusion as a Collective Social Process… 107

Fig. 4.3 An interactional view of reasons for (non)adoption

(Leeuwis 2004; Leeuwis and Aarts 2011; Aarts 2018b), mutual adjustment typically
involves processes of social learning, negotiation and conflict resolution. Such pro-
cesses may be facilitated by ‘innovation intermediaries’ that play broader roles than
providing individual advisory services and/or applying persuasive strategies geared
towards changing individual behaviour (see for details Leeuwis 2004; Klerkx and
Leeuwis 2008; Klerkx et al. 2009).

4.6 I mplications for Development Practice: Rethinking

Scaling and Information Provision Through ICT4Ag

As indicated at the start, fostering agricultural development in one direction or

another always involves changes in human practices and hence the ‘adoption’ of
new technological and/or social-organisational behaviours. From the perspective of
development practitioners, it is relevant to ask what the practical implications are of
our ‘interactional’ and ‘sociologically enhanced’ perspective on ‘reasons for (non)
adoption’. Below, we will apply our perspective to two topical issues that actors in
the field of agricultural development tend to struggle with in different contexts. The
first issue involves the idea of achieving development impact through the ‘scaling’
of innovations, and the second issue relates to information provision through
‘ICT4Ag’ (information and communication technology for agriculture) as a means
of supporting processes of adoption and scaling.
108 C. Leeuwis and N. Aarts

4.6.1 Sharpening Our Thinking About ‘Scaling’

While the term ‘scaling’ has some broader connotations (Wigboldus 2018;
Wigboldus et al. 2016), it is often used in a way that resembles the older terminol-
ogy of ‘adoption and diffusion of innovations’ as used by Rogers (1962). Both ter-
minologies often express a normative desire to ensure that something that is
considered to be good and desirable spreads across a greater number of users and/or
across a larger geographical area, in order to achieve some kind of societal impact.
‘Scaling’ is seen as a critically important process and frequently also as an enor-
mous challenge. Our model of ‘reasons for (non)adoption’ may help in several ways
to sharpen our thinking about ‘scaling’.
The plurality of scaling: thinking in terms of assemblages The ‘reasons for (non)
adoption’ model is a response to the existence of several types of interdependencies
in a development setting (see above). These interdependencies imply that one can-
not usefully consider the scaling of one particular practice in isolation from other
practices, including practices that are performed by other people than the originally
perceived ‘users’. Similarly, the ‘upscaling’ of one practice is likely to require the
‘downscaling’ of other practices that are being replaced or affected. Hence, it is
important to think about scaling in terms of multiple practices in an assemblage that
are simultaneously scaling up or down (Leeuwis and Wigboldus 2017; Sartas et al.
2019). Identifying the interdependent practices in a network of interdependent
stakeholders (and in time) provides useful insights in the complexity of a particular
scaling ambition (see Fig. 4.4 and Sartas et al. 2019; Sartas et al. 2020).

Targeting ‘bottleneck’ or ‘leverage’ practices as entry points Having insight in an

assemblage of interdependent practices begs the critically important question of
which practice(s) could or should be the focus of attention in a development effort
(Sartas et al. 2019). While the original entry point might be the wish to ‘scale’ a
drought-resistant variety, a consideration of the broader assemblage of practices
involved may well lead to the identification of more relevant entry points for inter-
vention. The use of the variety by farmers may, for example, be constrained by
prevailing policies that prevent the release or distribution of the variety, thus shifting
the attention to interventions that may help to overcome such policy bottlenecks
rather than simply promote the variety. Alternatively, one may conclude that the use
of the variety can be leveraged by the creation of specific price incentives offered by
a dominant trader or wholesaler. In a complex environment of interrelated practices,
it is an illusion to think that one can bring about change by focussing on one particu-
lar issue or practice, while at the same time, it is unrealistic and inefficient to target
interventions on everything that matters. Thus, interventionists need to somehow
identify the critical interdependencies and leverages in the system in order to
develop an effective scaling strategy (Sartas et al. 2019; Vellema and Leeuwis 2019).

Diagnosing with the help of the model Finding the leverage or bottleneck prac-
tices requires an understanding of stakeholders’ (interactional) rationale in relation
4 Rethinking Adoption and Diffusion as a Collective Social Process… 109

Fig. 4.4 Fictitious example of multiple practices scaling ‘up’ and ‘down’ simultaneously in an
assemblage

to existing and/or alternative practices. In other words, what are the reasons that
underpin current practices and interaction patterns and/or what are the reasons that
actors have for rejecting alternative practices and courses of action? The ‘reasons
for (non)adoption’ model (Figs. 4.2 and 4.3) offers several entry points of investi-
gating and diagnosing these.
First, the model offers a more elaborate overview of relevant variables than
social-psychological models, which can be used to describe and analyse people’s
rationale. For example, if one wants to understand why farmers refuse to spray
against a disease, one may consider how this relates to their knowledge (how do
they understand the disease dynamics?), their feelings of responsibility (do they feel
responsible for combating the disease?), their values (how important is the crop for
them?), the social influence or social pressures experienced (what do others expect
and what sanctions or incentives are in place?), their trust in others (are farmers
confident that others will spray as well and/or that the agro-dealer sells the right
chemicals?) and their individual abilities (are farmers confident that they have the
right skills and equipment for spraying and/or can they afford to obtain these?).
Disentangling people’s rationale in relation to several practices in an assemblage
helps to understand what the most important bottlenecks or leverages may be.
Simultaneously, this offers entry points for intervention: if farmers refuse to spray
because they do not understand the dynamics of the disease, then it makes sense to
invest in interventions that foster awareness raising and learning. However, if farm-
ers do not feel responsible or do not trust that their neighbours will also spray, then
other types of strategies will have to be considered.
A second entry point for diagnostic analyses offered by the model is to focus on
the formal and informal institutions that orient people’s considerations and ways of
thinking. When the purpose is to develop a scaling strategy, such analysis of peo-
ple’s rationales and underlying institutions needs to be combined with an assess-
ment of which critically bottlenecks and leverages may be(come) amenable to
change and what types of interventions (ranging from persuasive campaigns to
110 C. Leeuwis and N. Aarts

participatory design in a multi-stakeholder process) may be conducive to achieving

this (Sartas et al. 2019). As already hinted at, the realisation that scaling involves
many interdependencies and a plurality of practices and stakeholders implies that
approaches that allow for multi-stakeholder learning and negotiation are likely to be
relevant in many instances (Leeuwis and Aarts 2011).
Responsible scaling Thinking in terms of interdependent practices between stake-
holders also highlights that scaling a particular practice may trigger and/or result in
the scaling of other practices and phenomena that were not initially considered.
Thus, new practices may yield positive or negative consequences for those directly
involved and also generate outcomes that occur at other levels of aggregation. The
use of a new drought-resistant variety may, for example, make households depen-
dent on credit for buying seeds, which – in case of high interest rates – may nega-
tively affect households’ resilience or ability to pay school fees. Similarly, the
application of new oil palm production systems at a large scale may have negative
consequences for biodiversity in a region, or put farmers in another region out of
business. Investigating and anticipating these kinds of interrelations is part and par-
cel of a broader approach that Wigboldus has labelled ‘responsible scaling’
(Wigboldus 2018) – the careful consideration of possible positive and negative con-
sequences of scaling with regard to diverse societal values and categories of people,
as well as principles of ethics and democracy. Thinking in terms of interdependen-
cies between practices is a useful way of starting such a process (see for more elabo-
ration and guidance Wigboldus and Brouwers 2016).
The kind of thinking presented here about scaling has been further translated into
tools and methods that may support the development of scaling strategies elsewhere
(Sartas et al. 2019).

4.6.2  ethinking Information Provision Through ICT4Ag:

R
The Example of Disease Control

The early work of Rogers (1962) and Van den Ban (1963) already highlighted the
importance of communication and information provision (see Table 1) in supporting
adoption and scaling processes. In the current age of enhanced mobile phone and
internet connectivity in developing countries (Dey et al. 2016; De Bruijn and Van
Dijk 2012), there is a lot of attention to how digital ICT platforms may be leveraged
to enhance scaling. Therefore, a relevant question is how our ‘interactional’ and
‘sociologically enhanced’ understanding of ‘reasons for (non)adoption’ may
impinge on communicative intervention and information provision through ICT (or
other media).
First of all, it is relevant to note that the individualist and rationalist perspective
on adoption has greatly inspired and influenced communicative interventions geared
towards agricultural development, as exemplified in the practice of agricultural
4 Rethinking Adoption and Diffusion as a Collective Social Process… 111

extension (Van den Ban and Hawkins 1996). Typically, agricultural extension hand-
books and extension professionals identify strongly with the idea that individuals
need to be provided with relevant information that guides them through the adoption
process, that is, provision of information about problems, solutions, pros and cons
associated with alternative options, etc. geared largely towards changing people’s
beliefs and attitudes (see Table 4.2) in favour of specific behaviours. Classically,
such information was communicated through a mix of mass media and interper-
sonal media. While the media may have changed, it is interesting to note that ICT
applications in agricultural extension may still tend towards provision of similar
kinds of information to farmers. Recent inventories of ICT4Ag indicate that exten-
sion organisations use virtual platforms to enhance organisational processes through
better registration of farmers, recording of activities and internal reporting and also
to provide farmers with up-to-date weather and market information (Munthali et al.
2018). When it comes to technical advice that is explicitly geared towards influenc-
ing adoption, we see that ICTs are frequently used to provide information about
‘best practices’ through, e.g. repositories, voice messages, text messages, video
clips and alerts. While the channel and speed through which information is provided
may have meaningfully changed, such information arguably is still directed at indi-
vidual farmers and contains similar messages as in traditional extension regarding
the existence of problems and solutions and the pros and cons of different courses
of action.
If indeed ICT4Ag continues to be geared towards influencing beliefs, attitudes
and individual adoption decisions, it is likely to fall short in similar ways as pre-­
existing forms of decision support in that these do not directly address interdepen-
dencies between people and practices. Thus, it is worthwhile to think about what
ICT4Ag might have to offer in terms of supporting processes of collective decision-­
making on farmer-level agricultural issues. Phrased differently, how may ICT4Ag
help to anticipate influential interactional processes, and be used to shape the more
relational variables in our ‘reasons for (non)adoption’ model, including social pres-
sure, power, trust, responsibility, salient identity and institutions?
To explore this further, it may help to think of an important farmer-level issue in
which interdependencies among farmers tend to play an important role: the preven-
tion and control of pests and diseases. There exist numerous plant diseases whereby
the efficacy of control measures on one farm depends on what other farmers in the
vicinity do. If farmers in the immediate environment do not take sufficient preven-
tive or curative measures (e.g. disinfect tools, prevent water run-off, remove and
burn diseased plants, apply spraying at the right time, install insect traps, buy clean
planting materials, etc.), it becomes almost futile for a farmer to invest in disease
control on his or her own, since the field will continue to become infected by the
disease. In such cases, diseases can be seen as a ‘public bad’, while effective disease
control strategies can be regarded as a ‘public good’ that is only created if sufficient
farmers contribute to it (Cieslik et al. 2018; Leeuwis et al. 2018). In these kinds of
situations, it is clearly insufficient to only provide individuals with technical advise
on how to prevent and control the disease; even if farmers come to belief that such
measures are likely to be effective and develop a positive attitude towards them,
112 C. Leeuwis and N. Aarts

they are unlikely to perform them unless they are reasonably sure that their neigh-
bours will take proper action as well.
In connection with these kinds of situations, Ostrom (1990, 2009) has identified
several communicative and informational conditions and strategies related to the
interaction between interdependent actors that are conducive to creating a ‘public
good’ (e.g. an effective community-based disease management strategy). Below, we
briefly discuss these conditions and how they link to our ‘reasons for (non)adoption’
model and the possibilities of ICT4Ag.
Typically, the effective maintenance of a common pool resource and/or the cre-
ation of a public good requires the existence of certain rules (institutions) with
regard to how people in a community of actors should behave. In relation to pest and
disease management, such rules could be ‘to remove and burn diseased plants as
soon as possible’, to ‘build ditches around diseased fields to prevent infection
through run-off water’, to ‘apply preventive spraying after the first rains have
passed’ and/or ‘to make a monthly contribution to cover maintenance costs of col-
lective spraying equipment’. Ostrom (1990, 2009) concludes that in order for such
rules to be effective, it is important that most individuals in the community are able
to participate in making and modifying them. Clearly, this requires intensive com-
munication between interdependent actors in the community. Similarly, fostering
adherence to such rules depends on the availability of various kinds of information.
According to Ostrom, members of the community need an up-to-date information
about the condition of the resource that is relevant and actionable in view of the
prevailing rules, in this case, information about the agro-ecological conditions of
the field and the actual presence of the disease. In addition, community members are
more likely to conform to the rules if they have information about the behaviour of
others on which they depend, for example, information with regard to whether or
not others are fulfilling their obligations or not and whether or not sanctioning sys-
tems operate effectively. Clearly, the generation and distribution of such informa-
tion requires the operation of a monitoring system that captures both agro-ecological
conditions and human behaviour and makes them available to those belonging to the
community.
Clearly, the kinds of communicative and informational functions mentioned
above can potentially be supported by ICT. Social media applications may, for
example, support interaction within a community of actors during the process of
designing rules and even help enlarge the boundaries of effective community forma-
tion and identity building (Cieslik et al. 2018; Bennett and Segerberg 2012).
Similarly, mobile phones can serve to record, report and process decentralised
observations as part of a community-based monitoring system for pest and disease
management and help to share such information with participating farmers. In this
manner, communicative and informational services may help to foster conducive
conditions for collective action in response to agricultural pests and diseases. It
must be noted that such types of ICT applications would differ markedly from those
oriented towards disseminating ‘best practices’ and/or persuading individual farm-
ers to adopt them. Rather than focussing on influencing ‘determinants’ for individ-
ual behaviour (e.g. knowledge, attitudes, ability), they are geared towards supporting
4 Rethinking Adoption and Diffusion as a Collective Social Process… 113

collective identity formation, design of institutions, maintenance of trust and the

effective use of power and sanctioning systems in a community of actors. Thus, our
‘interactional’ and ‘sociologically enhanced’ understanding of ‘reasons for (non)
adoption’ helps us to imagine different kinds of ICT4Ag applications than those that
just provide regular extension services through a different medium.

4.7 Concluding Remarks

While recent critiques of the notion of adoption emphasise the shortcomings of the
technocentric and binary thinking that is often implied, this chapter has focussed on
the limitations in dominant thinking about the process side of adoption and has
broadened the scope by providing an interactional perspective. For a long time,
adoption has been portrayed as a largely individual process that could be understood
and influenced with the help of social-psychological models. We have argued that
this kind of thinking ignores the existence and importance of vertical, horizontal,
intra-individual and time-related interdependencies between practices, leading to
the conclusion that in many instances, adoption must be regarded as a collective
rather than an individual process. We have indicated how interdependencies may
enter into an individual’s reasoning about adoption in various ways and have trans-
lated this into several additional variables that need to be considered when the aim
is to explain adoption and behaviour change or the lack of it. Consideration of these
variables has led us to develop an ‘interactional’ and ‘sociologically enhanced’
model for understanding ‘reasons for (non)adoption’. Subsequently, we have
explored the practical implications of this mode of thinking by linking them to topi-
cal issues such as ‘scaling’ and the use ‘ICT4Ag’ in stimulating adoption. This
exploration reveals that we can sharpen our thinking about scaling considerably by
realising that scaling always involves an assemblage of different interdependent
practices across a network of stakeholders in time and space, which necessitates
critical thinking about points of leverage and issues of responsibility. Similarly, our
exploration of the role that ICT4AG may play in the management of agricultural
diseases has revealed that the enhanced model for understanding reasons for (non)
adoption solicits the design of novel kinds of ICT applications and services that may
support the creation of conducive conditions for collective action. Thus, moving
beyond individualist conceptualisations of adoption not only represents a theoreti-
cal advance but also helps us to re-imagine and re-orient the kinds of interventions
needed to shape adoption processes in support of realising a desired future.

Acknowledgements This research was undertaken as part of, and funded by, the CGIAR
Research Program on Roots, Tubers and Bananas (RTB) and supported by CGIAR Trust Fund
contributors as well as by NWO and Wageningen University.
114 C. Leeuwis and N. Aarts

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Chapter 5
Development of Sustainable Business
Models for Innovation in the Swedish
Agri-­sector: Resource-Effective Producer
or Stewardship-Based Entrepreneur?

Per-Ola Ulvenblad

5.1 Introduction

This chapter focuses on the development of sustainable business models for innova-
tion in the Swedish agri-sector. This is important for several reasons. At the global
level, many of society’s challenges are linked to social, environmental and eco-
nomic aspects of agriculture. Worldwide food production must increase by 70%
from 2009 to 2050, and in developing countries, the increase needs to be 100%
(FAO 2011). However, productivity growth has fallen and remains below potential
in many countries (OECD 2019). Simultaneously, the negative climate impact of
agriculture has to be reduced. The recently released IPCC Special Report on Climate
Change and Land highlights the interconnection between climate change and the
agri-sector (including forestry). At the same time, as some parts of the agri-sector
are drivers of climate change, sustainable agriculture and forestry can reduce cli-
mate change (IPCC 2019). Further, research has suggested that investment in agri-
culture is an effective strategy to achieve many of society’s development goals, like
poverty and hunger, nutrition and health, education, economic and social growth,
peace and security and preserving the world’s environment (Dobermann and
Nelson 2013).
The IPCC report also states that climate change represents a threat to the agri-­
sector (IPCC 2019). As research has identified, there is a need to focus R&D on how
to improve agricultural adaptation to climate change, especially in food-insecure
human populations (e.g. Lobell et al. 2008). Furthermore, sustainable food produc-
tion will have to address aspects such as the nutritional quality of diets and positive
health effects (Benbrook et al. 2013; Średnicka-Tober et al. 2016).

P.-O. Ulvenblad (*)

School of Business, Innovation and Sustainability, Halmstad University,
Halmstad, Sweden
e-mail: [email protected]

© The Author(s) 2021 117

H. Campos (ed.), The Innovation Revolution in Agriculture,
https://doi.org/10.1007/978-3-030-50991-0_5
118 P.-O. Ulvenblad

Agricultural research has made important contributions to poverty reduction and

food security over the last 40 years (Thornton et al. 2017). Research has also identi-
fied investment in R&D as an important driver of growth in agricultural production
efficiency (Alston 2010, 2018; Fuglie et al. 2017). Regardless, European Union’s
Research and Innovation Programme “Horizon 2020” (European Commission
2011) and United Nations’ “The 2030 Agenda for Sustainable Development”
including the 17 sustainable development goals (SDG) (Griggs et al. 2013; United
Nations 2015; European Commission 2016) call attention to the need for more
research and innovation on food security and sustainable agriculture.
At the firm level, many agri-companies often struggle with low profitability. In
order to be able to produce, distribute and sell more food, they need to achieve profit
goals. The majority of agri-companies have focused on their role as producer at the
beginning of the food value chain and, consequently, have focused on becoming
more effective and being able to produce more with the same, or less, resources.
However, the issue of profitability remains an issue for agri-companies (Dobermann
and Nelson 2013; Ulvenblad et al. 2016), and they face increasing demands from
governments, local authorities, other companies in the agri-value chain and end
customers regarding quality and sustainability issues.
The focus on efficiency, economies of scale and growth has been an effective
approach for the agri-sector (Alston 2018). Over time, many of the small coopera-
tives and networking firms in the agri-sector have either joined or become large
multinational companies through mergers and acquisitions. Though this trend has
led to cost-effective production and distribution systems, has it also built barriers for
sustainable business model innovation in the agri-value chain?
In recent times, small agri-companies have often been reduced to a subcontractor
role without any real influence (Ulvenblad et al. 2016). It is known that power asym-
metry combined with low-quality business relationships can lead to suboptimiza-
tion and a reduced ability to identify and meet end-consumer needs (Benton and
Maloni 2005; Schulze-Ehlers et al. 2014). Large companies mainly look for stan-
dardized products that suppliers produced at low cost, and innovations developed by
smaller companies along the food chain making products better but different can be
difficult to integrate into big companies’ business plans and delivery systems.
These are important issues, because of the increased worldwide competition,
advanced technological developments and large-scale production existing in the
agri-sector, and with a resulting general trend towards fewer and larger farms
(OECD 2016), it remains to be seen whether the global goals of sustainable agricul-
tural development can be met.
The agri-sector is different from other industries for several reasons: food from
living things, animals and plants, must meet specific welfare, health and safety
requirements. Furthermore, production and often distribution are generally con-
nected to a specific geographic area, where nature and climate may have important
influence and establish constraints to production and distribution. OECD (2019)
highlights the need for more responsive agricultural innovation systems, since cli-
mate change and weather-related production shocks are expected to increase the
challenge of improving productivity, sustainability and resilience on farms.
5 Development of Sustainable Business Models for Innovation in the Swedish… 119

When increasing productivity, efficiency and economies of scale have become

very important in the agri-sector, small- and medium-sized agri-companies engaged
in business model innovation focusing on sustainability must take a more strategic
and innovative perspective. A strategy for these companies can be to expand their
business not through traditional growth, but rather by diversifying activities and
focusing on cooperation. Research have shown that small- and medium-sized agri-­
companies that have been able to overcome the challenges of the agri-sector have
developed sustainable business models based on a diversified approach (Ulvenblad
et al. 2016), a network approach (Lawson et al. 2008) or a value-net approach
(Kähkönen 2012). These sustainable business models often generate value not only
for customers but also for other stakeholders, the community and the environment
(Barnett and Salomon 2012; Kiron et al. 2013; Schaltegger et al. 2016).
Previous research regarding agri-companies have, in general terms, focused on
production and cost-efficiency (Alston 2010, 2018). Further, research regarding
business models has often addressed industries other than the agri-sector (Tell et al.
2016) such as media, information technology and biotechnology industries
(Johnson 2010).
Schaltegger et al. (2016) state that “The business model perspective is particu-
larly interesting in the context of sustainability because it highlights the value cre-
ation logic of an organization and its effects and potentially allows (and calls) for
new governance forms such as cooperatives, public private partnerships, or social
businesses, thus helping transcend narrow for-profit and profit-maximizing models”
(p.5). This is line with Boons et al. (2013), who conclude that business models are
useful for the creation and study of sustainable innovation. Lambert and Davidson
(2013) and Zott et al. (2011) have shown that a sustainable business model is a use-
ful tool when studying how a single company or an entire value network achieves
sustainability in terms of environmental, social as well as economic value. However,
the existing research on sustainable business models in the agri-sector has often
been limited to and addresses developing rather than developed countries (e.g. the
United States and European countries) (Beuchelt and Zeller 2012). Even though a
structured literature review reveals an increasing number of research articles that
examine sustainable business model innovation in the agri-sector, there is a need for
more research on this topic (Tell et al. 2016).
To summarize, businesses in the agri-sector face difficult challenges – but have
also unique opportunities to develop sustainability-oriented innovation and sustain-
able business models which create value in other ways than low-cost production.
However, even if the needs at the global and firm levels are large, research regarding
the development of sustainable business models within the agri-sector is limited.
This is a significant issue, since profitable agri-companies, which develop sustain-
able business models and advance along the agri-value chain, need to become part
of the solution at a moment in history when the world needs more food, which is to
be produced and distributed in sustainable ways.
In order to reduce the research gap identified, the aim of this chapter is to illus-
trate and analyse how Swedish agri-companies strive to develop sustainable busi-
ness models to innovate their business activities. I will illustrate, map, categorize
120 P.-O. Ulvenblad

and analyse the orientation of the practices of sustainability innovation and the
development of sustainable business models. The research questions are: (i) “How
do Swedish agri-companies apply sustainable innovation practices?”, (ii) “Which
sustainable business models do Swedish agri-companies use?”, and (iii) “How can
these innovation practices and sustainable business models be understood?”
The remaining of this chapter is organized as follows: A conceptual framework
will be articulated, and, subsequently, the methodological research approach will be
presented. Later on, eight Swedish cases including companies and cooperatives will
be illustrated and analysed. Once these cases are discussed, some aspects of theory
development will be developed. Finally, based on the most salient learnings from
the research, guidelines for agri-entrepreneurs will be provided as well as sugges-
tions for future research.

5.2 Conceptual Framework

The theory section is organized as follows: sustainability in the agri-sector,

sustainability-­oriented innovation, sustainable business models and eight types of
sustainable business models.

5.2.1 Sustainability in the Agri-sector

The field of sustainability is a relatively new discipline that has developed over the
last 15–20 years (Coad and Pritchard 2017). Nidumolu et al. (2009) showed a
decade ago that sustainability became innovation’s new frontier. They stated that
sustainability is a fundamental layer of organizational and technological innova-
tions that yield both bottom-line and top-line returns. This has only escalated further
during the last decade. The majority of businesses are now well aware of the impor-
tance of sustainability, which represents a key driver for innovation and a challenge
in many aspects at the same time. The challenges include not only obvious aspects
such as products, processes, technologies and business models but also more
abstract dimensions like cognitive, psychological and organizational challenges
(Sharma 2017).
Sustainability in the agri-sector is of vital importance since this large sector uses
over 37% of the total land area of the world and 21% of the land area of the European
Union. If forestry is included, the area used reaches 68% of the world and 46% of
the European Union (FAO 2019). Further, the agri-sector represents a significant
component of the EU economy, accounting for about 7% of its total exports. The
agri-sector also accounts for 4.3% of the total labour market in the European Union
(Eurostat 2018).
Many businesses in the agri-sector are small companies with primary production
as the dominating aspect of their business. These companies need new ideas and
5 Development of Sustainable Business Models for Innovation in the Swedish… 121

approaches to become more profitable at the same time as they are exposed to both
internal and external pressure to become more sustainable. Internal pressure to build
a business on sustainable values may arise from the board, management, sharehold-
ers, family and employees. External pressure can be derived from competitors, cus-
tomers, special interest groups and governmental regulation-legislation (Tell
et al. 2016).
There are also actors and forces working in the opposite direction, contributing
to an increasing “unsustainability” of the agri-food sector. Bernard et al. (2014)
have identified actors whose impact can lead to decision-making in the agri-­
company which leads to unsustainability: (i) loss-making investors and credit pro-
viders who abandon farms due to low economic returns; (ii) angry neighbours and
environmental activists engaging in silent or active conflict, because they are nega-
tively affected by farming activities; (iii) dissatisfied customers at the endpoint of
value chains who do not trust the quality of products or disapprove of production
conditions; and (iv) overacting regulators who over-regulate farm activities. Even
though each actor perceives their actions as sustainable, they can influence agri-­
companies’ management path towards unsustainability. Further, Fritz and
Matopoulos (2008) have identified forces that can lead to unsustainability, such as
(i) globalization of the agri-food industry resulting in increased imports and exports;
(ii) consumer changes in consumption, resulting in a larger demand of food prod-
ucts, often out of season, that are transported long distances; (iii) the concentration
of the sector, which has resulted in an ever-increased power imbalance in favour of
retailers; and, finally (iv) major changes in delivery patterns with most goods now
routed through supermarket regional distribution centres using larger heavy goods
vehicles.
Despite the pressure to raise efficiency and lower costs from strong actors in the
food value chain, many agri-food companies strive to conduct a sustainable busi-
ness from social and ecological perspectives as well as from an economic one.
Recent research (Cagliano et al. 2016) has identified three main integrated chal-
lenges for sustainability in the agri-food sector: first, the interdependency between
food production and environmental, human and physical resources; second, the
important role – sustainability and health aspects – of food for humans; and, third,
the special characteristics of the food supply chain, with companies of different size
and different sustainability focus.
The mindset and awareness of the owners and/or the managers of agri-­companies
can be an important factor for the development of sustainability-oriented innovation
(Cagliano et al. 2016). Walker has identified this as a values-based driver (Walker
2012, 2014). Further, Barth et al. (2017) have found that many agri-food producers
have a strong “value intention” to conduct their agri-business in a sustainable way.
Explanations for this could be that many agri-companies are family businesses,
rooted in their communities and strongly connected to the land of the ancestors. The
owners/managers have experienced the effect of their actions on their land and pro-
duction. They have accepted a responsibility for coming generations (Ulvenblad
et al. 2016; Barth et al. 2017).
122 P.-O. Ulvenblad

5.2.2 Sustainability-Oriented Innovation (SOI)

During the recent decades, the use of concepts connected to sustainable innovation,
such as green innovation, environmental innovation and ecological innovation, have
grown (Schiederig et al. 2012). In recent years, circular economy (Korhonen et al.
2018) and circular innovation (Guzzo et al. 2019) have also emerged as concepts.
Bigliardi and Bertolini (2012, p 400) offer three explanations for this growing inter-
est: “it may confer legitimacy, enhance competitiveness, and highlight ecological
responsibility in an environment of both regulatory and consumer sensitization”.
However, the connection between innovation and sustainability has still to be devel-
oped further (Neutzling et al. 2018). Adams et al. (2016) have, after conducting a
structured literature review of both academic and grey literature, identified four
shortcomings with previous work. There is uncertainty regarding what sustainabil-
ity actually means and how it can be achieved, because of the large variety of differ-
ent conceptualizations. Previous work also tends to treat sustainability dichotomously
(sustainable/not sustainable), rather than as a dynamic, unfolding process that is
achieved over time. Further, previous work often overlooks the social dimension.
Finally, many reviews of environmental management and sustainability exclude
contemporary grey literature.
Based on their literature review, Adams et al. (2016) developed a framework of
sustainability-oriented innovation. Their perspective is that “sustainability-oriented
innovation involves making intentional changes to an organization’s philosophy and
values, as well as to its products, processes or practices to serve the specific purpose
of creating and realizing social and environmental value in addition to economic
returns” (p. 181). The framework starts as regulatory compliance with incremental
change at the firm level and culminates with radical change at the large-scale sys-
tems level. The researchers claim that moving through the framework requires a
step change in philosophy, values and behaviour, which will be reflected in the
innovation activity of the company.
The framework is divided into three dimensions (from diminishingly unsustain-
able to increasingly sustainable). The first dimension, technical/people, is about a
movement in the literature from a focus on technology, i.e. a “set of tools”, to a
recent focus on people-centred innovation. The second dimension, stand-alone/inte-
grated, is internal and describes how “innovation for sustainable manufacturing has
moved from end-of-pipe, stand-alone solutions to modes of practice that require
sustainability to be more deeply embedded in the culture of the firm” (p. 183). The
third dimension, insular/systemic, reflects the firm’s view of itself in relation to a
wider socio-economic system beyond the firm’s immediate boundaries and
stakeholders.
These three dimensions represent three sustainability-oriented approaches on the
journey to a sustainable business, operational optimization, organizational transfor-
mation and system building that a firm can have when it comes to innovation objec-
tive, outcome and relationship, defining the sustainability of the business (Table 5.1).
5 Development of Sustainable Business Models for Innovation in the Swedish… 123

Table 5.1 A simplified model of SOI

Operational Organizational System building: doing
optimization: doing transformation: doing good by doing new things
Approach more with less good by doing new things with others
Innovation Compliance, Novel products, services Novel products, services
objective efficiency or business models or business models that
“Doing the same “Doing good by doing are impossible to achieve
things better” new things” alone
“Doing good by doing
new things with others”
Innovation Reduces harm Creates shared value Creates net positive
outcome impact
Innovation’s Incremental Fundamental shift in firm Extend beyond the firm to
relationship to improvements to purpose drive institutional change
the firm business as usual
Taken from Adams et al. (2016)

5.3 Business Models

Business models are descriptions of how companies create value through exploita-
tion of business opportunities (Rosca et al. 2017). Business models can be regarded
as structured management tools, which are considered especially relevant for suc-
cess (Magretta 2002). The research regarding business models has been growing
since the mid-1990s (Osterwalder and Pigneur 2012). In recent years, research has
put a steadily increasing focus on business models (Wirtz et al. 2016).
Most of this research addresses the importance of business models for compa-
nies’ competitiveness, renewal and growth (Chesbrough and Rosenbloom 2002;
Johnson 2010; Lambert and Davidson 2013; Teece 2010). Companies can apply
several business models simultaneously, regarding, e.g. different products or mar-
kets (e.g. Aspara et al. 2013; Casadesus-Masanell and Tarziján 2012).
Researchers have used a variety of business models’ definitions and settings in
their studies, from the single company to the entire value network (Johnson 2010,
Zott et al. 2011, Osterwalder and Pigneur, 2012). Even though empirical research on
business models in 1996–2010 has focused on media, information technology and
biotechnology industries (Lambert and Davidson 2013), a newly conducted struc-
tured literature review shows that the number of articles published regarding busi-
ness models in food production has grown during the last 5 years (Tell et al. 2016).
However, Wirtz et al. (2016) state that the growing field of research for the business
model is in a consolidation phase, which still contains research gaps and thus offers
possibilities for future research. The researchers suggest that research about busi-
ness models’ forms and components should be empirically validated, since a certain
heterogeneity regarding this research area’s focus has been determined.
Several researchers have discussed the central building elements of a business
model: (i) value proposition, (ii) value creation and delivery and (iii) value capture
(Bocken et al. 2014; Richardsson 2008; Osterwalder and Pigneur 2005). The value
124 P.-O. Ulvenblad

proposition is typically concerned with the product and/or service offering to gener-
ate economic return (Boons and Lüdeke-Freund 2013). Value creation and delivery
is at the centre of any business model, and companies create and deliver value by
seizing new business opportunities, new markets and new revenue streams
(Beltramello et al. 2013; Teece 2010). Value capture is about considering how to
manage cost structure and create revenue streams from the provision of good, ser-
vices or information to users and customers (Teece 2010); see Table 5.2.

5.3.1 Sustainable Business Models

This interest in social and environmental sustainability is not new. Thirty years ago
the Brundtland Report called for sustainable development that meets “the needs of
the present without compromising the ability of future generations to meet their
needs” (WCED, p. 43). Many researchers argue that more leadership is still needed
around the issue of social and environmental sustainability (e.g. Kurucz et al.,
2017). Researchers have also stated that a narrow focus on profitability without
more attention paid to social and environmental sustainability can even limit a com-
pany’s achievement of its economic goals (Kiron et al. 2013; Schaltegger et al. 2016).
Regarding the development of the sustainability-oriented innovations field, an
increasing number of scholars frame it as a business model challenge (Rohrbeck
et al. 2013). Several researchers have stated that the business model concept is a
productive way to study the creation and use of sustainable innovation, both in prac-
tice and in theory (Boons et al. 2013). Further, researchers have called for more
studies of business models oriented towards sustainable development (Boons and
Lüdeke-Freund 2013; Boons et al. 2013; Breuer et al. 2016; Stubbs and Cocklin
2008; Upward and Jones 2016). They have proposed alternatives to the traditional
business model with its focus on maximizing growth and revenues and on minimiz-
ing costs. One alternative model is sustainable business models based on the net-
work approach or the value-net approach (Breuer et al. 2016; Boons and
Lüdeke-Freund 2013; Kähkönen 2012; Lawson et al. 2008).
Boons and Lüdeke-Freund (2013) state that research on sustainable innovation is
lacking conceptual consensus, which is needed to further develop the field. Based
on a review of previous research, the authors propose a generic business model
concept with four key elements:

Table 5.2 Conceptual business model framework

Business model Value
building element Value proposition Value creation and delivery capture
Focus Product/service Key activities, resources, Cost
Customer segments and channels, partners, technology structure
relationships Value
streams
From Bocken et al. (2014), Richardsson (2008), Osterwalder and Pigneur (2005)
5 Development of Sustainable Business Models for Innovation in the Swedish… 125

(i) Value proposition: what value is embedded in the product/service offered by

the company.
(ii) Supply chain: how upstream relationships with suppliers are structured and
managed.
(iii) Customer interface: how downstream relationships with customers are struc-
tured and managed.
(iv) Financial model: costs and benefits from (i–iii) and their distribution across
business model stakeholders.
These four business model elements, when combined with a perspective on social
and environmental sustainability, describe a sustainable business model (Boons and
Lüdeke-Freund 2013). Organizations committed to such sustainability integrate
their social, environmental and economic activities in order to create value for their
customers and for society. The sustainable business model analyses not only how
organizations produce and deliver goods and services but, at the same time, how
they contribute to the improvement of society – environmentally and socially. A
company, cooperation or other organization with a sustainable business model is
often part of, to a greater or lesser extent, a community or region that highly values
the sustainable society and the sustainable environment.
Because of this increased focus on social and environmental sustainability, many
companies worldwide have taken a greater interest in sequential business model
innovation in which they refine an existing business model or launch a new one. The
business model canvas framework (Osterwalder and Pigneur, 2012) has been devel-
oped for companies to envision and implement sustainable business models in prac-
tice. One of the new tools promoted for this work is the strongly sustainable business
model canvas (Jones and Upward 2014; Upward and Jones 2016). In practice, a
stewardship style of leadership is required for use of sustainable business models in
which leaders understand their role as temporary custodians of power. Such leaders
are committed to achieving value for all organizational stakeholders, including soci-
ety (Bocken et al. 2014; Harvey 2001).
When focusing on sustainable business models, Barth et al. (2017) have pro-
posed that a fourth building element should be added to the previously defined
building elements of business models, (i) value proposition, (ii) value creation and
delivery and (iii) value capture (Bocken et al. 2014; Richardsson 2008; Osterwalder
and Pigneur 2005), namely, (iv) value intention. Many agri-companies are owner-­
managed family businesses. The owners regard themselves as stewards or custodi-
ans of the company, the property and the environment, with a responsibility for
living and non-living things (Ulvenblad et al. 2016, Barth et al. 2017). Research
regarding sustainability-oriented innovation also stresses the importance of inten-
tional changes to the philosophy and values of the organization (Adams et al.
2016). Including value intention of the owner-manager in the conceptual frame-
work could present important insights of potential trade-offs and barriers when
addressing growth ambitions based on social, environmental and economic aspects
(Table 5.3).
126 P.-O. Ulvenblad

Table 5.3 A conceptual sustainable business model framework including the value intention
Business model Value Value creation and Value
building elements intention Value proposition delivery capture
Focus Mindset of Product/service Key activities, resources, Cost
owner/ Customer segments channels, partners, structure
manager and relationships technology Value
streams
Developed by Barth et al. (2017), based on a framework developed by Bocken et al. (2014),
Richardsson (2008), Osterwalder and Pigneur (2005)

5.3.2 Eight Sustainable Business Model Archetypes

The research framework, which was used to address the research questions stated
above, namely, (i) “How do Swedish agri-companies apply sustainable innovation
practices?”, (ii) “Which sustainable business models do Swedish agri-companies
use” and (iii) “How can these innovation practices and sustainable business models
be understood?”, is also based on Bocken et al.’s (2014) eight SBM archetypes. In
turn, they build their archetypes on the nine business model “building blocks” of the
business model canvas (Osterwalder and Pigneur (2012), Boons and Lüdeke-Freund
(2013) reference. Among the blocks most relevant to our study are value proposi-
tions, key activities, key partnerships and revenue streams. Building on this key tool
for the analysis of business models, Bocken et al. (2014) add sustainable social and
environmental activities. They (p. 44) define SBMs as follows:
Innovations that create significant positive and/or significantly reduced negative impacts for
the environment and/or society, through changes in the way the organisation and its value-­
network create, deliver value and capture value (i.e. create economic value) or change their
value propositions.

Table 5.4 presents Bocken et al.’s (2014) eight SBM archetypes. These archetypes
can be used in order to identify patterns and attributes that facilitate the categoriza-
tion of the business model innovations for social and environmental sustainability.
The archetypes can constitute a base for the development of a common language for
the development of sustainable business models in research and practice.

5.3.3 A Combined SOI and SBM Archetypes Framework

In this chapter, the framework developed by Adams et al. (2016) focusing on

sustainability-­oriented innovations (SOI) is integrated with the framework contain-
ing eight different SBM archetypes developed by Bocken et al. (2014) (see
Table 5.5). The idea behind combining these two frameworks, which was developed
by Ulvenblad et al. (2019), is to categorize the business model innovations and
study the organizational development (the sustainability-oriented innovation prac-
tices and processes) taken by agri-companies in Sweden.
5 Development of Sustainable Business Models for Innovation in the Swedish… 127

Table 5.4 Eight SBM archetypes

Sustainable
business model
archetypes Description and operationalization
1. Maximize Do more with fewer resources, generating less waste and emissions and
material and energy fewer pollutants
efficiency
2. Create value Eliminate “waste” by turning waste into useful and valuable input in other
from waste production activities, making better use of underutilized capacity
3.Substitute with Reduce the environmental impact and increase business resilience by
renewables and addressing resource constraints associated with renewable resources and
natural processes man-made artificial production systems
4.Deliver Provide services that satisfy the users’ needs without having to own the
functionality, rather physical products
than ownership
5. Adopt a Pro-actively engage with all stakeholders to promote their long- term
stewardship role health and well-being
6. Encourage Identify solutions that will reduce consumption and production
sufficiency
7. Repurpose the Prioritize the delivery of social and environmental benefits rather than
economic benefits (i.e. shareholder value) through close integration
business for society/
environment between the company and local communities and other stakeholder
groups. Recognize that the traditional business model in which the
customer is the primary beneficiary may shift
8. Develop scale-up Deliver sustainable solutions on a large scale to maximise benefits for
solutions society and the environment
Taken from Bocken et al. (2014)

Table 5.5 A combined SOI and SBM archetypes framework

Operational Organizational System building: doing
optimization: doing transformation: doing good by doing new
Approach more with less good by doing new things things with others
Sustainable 1. Maximize material 4. Deliver functionality, 2. Create value from
business model and energy efficiency rather than ownership waste
archetypes 5. Adopt a stewardship 3. Substitute with
role renewables and natural
6. Encourage sufficiency processes
7. Repurpose the
business for society/
environment
8. Develop scale-up
solutions
128 P.-O. Ulvenblad

5.4 The Case of Sweden

Sweden is often categorized as a country leading sustainable agri-production in

many areas such as environmental awareness, animal welfare, low use of antibiotics
and access to high-quality natural resources (Bucht 2016). The Swedish Ministry of
the Environment presented as early as 2003 a vision for sustainable development
that strongly recommends all policy decisions take into account the longer-term
economic, social and environmental implications (Swedish Ministry of the
Environment 2003). This is a vision that applies to food producers in Sweden.
The OECD report regarding Innovation, Agricultural Productivity and
Sustainability in Sweden (OECD 2018) identifies Sweden as one of the earliest
OECD countries to raise awareness of environmental issues and develop environ-
mental policies. The result has been that the negative environmental impact has
decreased, although agricultural production in Sweden has remained stable. OECD
(2018, p. 12) states that: “Swedish legislation, which reflects consumer and citizen
preferences, sets norms and standards for food safety, environment and animal wel-
fare that is well above EU requirements in many areas of agriculture and horticul-
ture. Swedish consumers and citizens have a high level of confidence for the
Swedish agricultural and food system”. The majority of Swedish agri-companies
regard social and environmental issues as part of their goals, besides economic rev-
enue (Ulvenblad et al. 2019).
However, the agri-sector in Sweden is facing challenges as well. The Swedish
agri-sector has undergone significant structural changes in the last 20 years. The
surviving food producers have become larger through internal growth and/or merg-
ers and acquisitions (Swedish Board of Agriculture 2018). Others have been forced
into subcontractor roles with diminished managerial influence on production goals
and activities. This power asymmetry, combined with low-quality business relation-
ships, can lead to suboptimization of resources and a reduced capacity to identify
and satisfy consumer needs (Benton and Maloni 2005; Schulze-Ehlers et al. 2014).
Furthermore, some larger companies in higher positions in the food value chain may
not share smaller companies’ interest in social and environmentally sustainable
innovation. Even when such sustainable innovation (sometimes in response to con-
sumer pressure) improves a product’s quality, these larger companies may be disin-
clined to adopt the innovations for use in their production activities, delivery systems
and product portfolios. They hesitate primarily because of fear of greater logistics
complexity and higher costs. In some instances, however, these structural changes
in the agri-sector have resulted in more cost-effective production and distribution
systems, although with survival and profit still greater concerns than social and
environmental issues. Thus, many stakeholders (e.g. consumers, consumer rights
organizations, the media and citizens) are asking for healthy food and more sustain-
able social and environmental innovation in the agri-sector.
This pressure from stakeholders combined with the situation with declining prof-
its in spite of production efficiency and economies of scale has led many agri-­
companies to develop their business models towards sustainability and high-quality
products. Further, many agri-companies try to advance in the agri-value chain and
get closer to the final customer.
5 Development of Sustainable Business Models for Innovation in the Swedish… 129

To summarize, it seems likely that Sweden, as one of pathfinders in the world

regarding sustainability and innovation, can contribute in the strive towards an inno-
vative and sustainable agri-sector. Considering the global needs and challenges, it is
important to deepen the international cooperation regarding the development of sus-
tainable business models in the agri-sector. Hence, by studying the Swedish context,
we can identify barriers, challenges and possibilities that can be relevant in other
countries as well.

5.5 Methodology

In this paper, I will present, discuss and analyse eight different agri-companies/agri-­
cooperatives connected to agriculture in Sweden. Since forestry is an integrated part
of agri-companies of Sweden and often an important part from cash flow and solid-
ity perspectives, I have also studied one organisation, a large cooperative, from the
forestry sector. All the companies/cooperatives are presented in Table 5.6.
The empirical data consists of both primary and secondary data, which have been
collected by a set of different methods. The primary data consists mainly of inter-
views with owners/managers or other representatives of the companies and visits on
the company/farm. Initially, the respondents were asked to tell their story of the
companies in their own words. A semi-structured interview guide with open-ended
questions was also used. It covered subjects like company history, past and current
business activities, customers, partnerships, networks, goals, culture, values, sus-
tainability, innovation and business models.
The secondary data has been gathered through document studies (official eco-
nomic records, printed material and Internet pages). This multi-method approach
has been used in previous research on business models (Täuscher and Laudien
2018; Zott and Amit 2008). In the study presented in this chapter, multiple methods
have been used for each case, but not all methods have been used for all cases. The
collected data, including the interviews, have been analysed through categorizations
and content analysis (Täuscher and Laudien 2018).

5.5.1 Högared Milk Farm

Högared’s main business is to produce and sell milk to a large milk distributor
higher up in the value chain. Currently, there are 190 milk cows at the farm. The
company is owned by two brothers with their families. Besides the two owners,
there are six employees at the company. The company has historically experienced
few possibilities to develop and change the business model. However, during the
last decade, the owners/managers have prioritized their competence building
through several leadership and management courses and have now formulated a
new vision for the company:
130 P.-O. Ulvenblad

Table 5.6 Companies/cooperatives in the empirical study

Turn Operating
Main Other Organizational Employees over profit
Company business businesses form Number Euros Euros
Högared Milk farm Machinery Limited 10 1. 5 0.15
leasing company million million
Farm shop Family-owned
(milk)
Gäsene Dairy DairyCheese Farm shop Cooperative 35 18.0 0.9
(milk and Owned by 28 million million
cheese) farmers
(23 active milk
producers)
Gudmund Farm shop Restaurant Limited 12 1.6 0.24
Farm Charcuterie Educational company million million
Pig farming courses family-owned
Ästad Vineyard Restaurant Limited 39 4.6 0.43
Vineyard Hotel Adventure company million million
tracks Family-owned
Wapnö Farm Milk Restaurant Limited 85 14.6 1.6
Cattle Hotel company million million
Family-owned
The South Forestry Bioenergy Cooperative 3,500 2.1 0.19
Forest Owners 51,000 forest billion billion
(Södra) owners
Green Farms Cattle Distribution Limited 7 2.0 −0.9
farming and sale from company million million
Charcuterie associated Family-owned
cattle farms
The Farmers Cereals Sales of Cooperative 9,850 4.0 62.8
(Lantmännen) Agri-food machinery 35,000 farmers billion million
and vehicles
Bioenergy

Our vision is to be a well-functioning farm for animals and humans, a modern machine
station with the customer in focus. As a company, we want to build a good reputation in our
district.

They have diversified their business model and activities in several directions; they
have started a mechanical workshop and a custom for hire service. In the workshop,
farming companies and other companies can buy services as maintenance and repair
of vehicles and farming machinery. In the custom for hire service, the customer can
buy services such as harvesting, applying fertilizers and pesticides, etc. Recently,
the company has diversified even more, starting to sell a small fraction of its milk
production directly to end consumers in their farm shop and in some of the larger
groceries in the neighbouring city.
The owners have developed the sustainability focus of the company step by step.
They started their journey towards sustainability according to the archetype
5 Development of Sustainable Business Models for Innovation in the Swedish… 131

“maximize material and energy efficiency”, which still remains as the dominating
archetype. It also means that from a sustainability-oriented innovation perspective,
they are focusing on operational optimization (“doing more with less”).
The development of their sustainable business model is underway. A minor part
of their business model fits the archetype “deliver functionality, rather than owner-
ship”. Further, the managers have continuously developed their stewardship role
over the last years (which could be seen in the vision of the company). The com-
pany’s sustainable business model is moving towards organizational transformation
(“doing good by doing new things”).

5.5.2 Gäsene Dairy

Gäsene Dairy is a dairy cooperative company owned by 28 small- and medium-­

sized milk farms (between 30 and 500 milk cows on each firm). The dairy’s main
business is production and selling of high-quality cheese.
The dairy was founded in 1930, when milk prices were low and it was difficult
for the producers to get good enough prices. Farmers in one neighbourhood devel-
oped a new business model before the concept was even conceptualized. They
joined together in a cooperative association and started their own dairy, which pro-
duced and sold milk, cheese and other dairy products. The vicinity was important
for the founders of the dairy, and it is still important today. All the milk are produced
on farms which are situated within 25 minutes travel time from the dairy. Most of
the milk and cheese are sold in groceries in southern Sweden. A minor part is sold
directly to end consumers at the dairy. The quality of their products, based on sus-
tainability and closeness, has made their brand well-known. Last year, the dairy had
over 100 bus loads with visitors, exceeding 23,000 visitors. The dairy has recently
decided to use biofuel for heating its premises. The surplus heat will be used for
heating of the neighbouring municipality senior housing.
Since the dairy products create larger value for end customers than the products
sold by large international processing companies, the dairy company can sell their
products at higher prices. Consequently, the farms owning the dairy have larger
revenues than other farms which deliver to the large international processing
companies.
The business model of the company as such has not changed much since the
company was founded, but the development of society has renewed it. From the
start, the business model was based on economic necessity but also on the founding
farmers’ stewardship perspective. A business that was regarded as out of date has
now become both modern and sustainable. One of the owners says:
We have been out of fashion for 70 years, but now we are modern and in the front again.

Since sustainability became an important societal concept during the last decade,
the company focuses even more on sustainability. The investment decision regard-
ing the biofuel heater, which will benefit both the company and the senior housing,
132 P.-O. Ulvenblad

is one indication of the sustainability focus. Further, the company has changed its
communication with customers and emphasized values as quality, vicinity and
sustainability.
The founding and succeeding farmers have over time acted based on a “steward-
ship perspective”. Due to the societal change, the dairy matches the SBM archetype
“repurpose the business for society/environment”. It also matches “substitute with
renewables and natural processes”.
From a sustainability-oriented innovation perspective, their company has cov-
ered all three dimensions. Even though the dairy was founded in order to reach
operational optimization (doing more with less), the stewardship perspective with
focus on vicinity and sustainability in combination with societal change has led to
organizational transformation and system building.

5.5.3 The Gudmund Farm

The Gudmund Farm is a farm charcuterie, which also conducts pig breeding and
production. The company was founded in 1998 and produces high-quality sausages
and other meat products. Fresh and processed meat products are sold in the farm
shop, in other farms’ shops and in the groceries in the city. The meat comes from the
farm or from subcontractors, farms in the neighbourhood. The company has long-­
term spoken agreements with the subcontractors, based on trust and a handshake.
The sausages are handcrafted by old methods and have no additives other than natu-
ral spices and herbs. The company has diversified its products and activities con-
tinuously over the years. The company develops new sausage varieties and other
meat products. Some of the new products have been developed by the employees of
the company. Recently, the owners have also started to provide courses in sausage
craftsmanship, food waste minimization and nutrition. Even though one goal of
courses is to generate some revenue, the main reason is to educate customers. The
company has also started a restaurant at the farm, where they serve lunch and
arrange conferences. In order to get closer to the end customers and to learn their
needs and expectations, the company opened a shop in the city close to the farm
charcuterie, in 2005.
An important part of the business model is to develop and nurture long-lasting
cooperation with customers, other companies, subcontractors and neighbours. The
owner is also explicit regarding sustainability:
Our company and our farm will stay where it is. Of course, we have to take good care of our
land, our employees, our neighbours and our animals. We also want to create win-win rela-
tionships with customers, sub-contractors and other companies.

The company matches three SBM archetypes: (i) encourage sufficiency, (ii) substi-
tute with renewables and natural processes and (iii) adopt a stewardship role.
From the start, the company has been run by the owner with a clear and explicit
stewardship perspective, where sustainability is a central theme. The owner stresses
the importance of local and professional networks. The company was the first to
5 Development of Sustainable Business Models for Innovation in the Swedish… 133

apply this perspective when it started the business 20 years ago. Since then other
companies have followed suit. From a sustainability-oriented innovation perspec-
tive, the company is conducting system building through the strategy of working in
networks with a win-win focus.

5.5.4 Ästad Vineyard

Ästad Vineyard used to be a traditional farm, with 100 hectares of fields, meadows
and pastures, producing milk and grain. The previous owner, and father of the cur-
rent owners, changed to ecological milk production in the mid-1980s in order to
raise the low profitability of the farm. That was the starting point for a continuous
and ongoing sustainable business model development. The next step was to invite
school classes with fifth graders to come and have an experience of the farming
activities. It developed into a team-building concept, where companies could bring
their employees to the farm and solve intellectual and practical problems together.
The current owners, three siblings, improved the old farm buildings and built
some additional buildings, which they used to develop the business model with a
spa integrated with the small river, a restaurant, a conference centre, a hotel and a
winery/vineyard. Today, they have 15,000 vines, and the wine is sold to distributors
and directly to end consumers at the restaurant. An important and explicit building
block of their business model is to use and develop the resources of the farm, the
small river, the buildings, the vegetables, the wine, etc. The owners claim that:
By experience we know that every challenge we meet also leads to new opportunities.

The family was conducting a traditional farm business from its inception. A desire
to increase profitability and catch opportunities led to diversification and continuous
business development. The sustainability aspect was based on partly an identifica-
tion of the farm and land as a key asset from a business perspective and partly on a
stewardship perspective. The company matches three SBM archetypes: (i) deliver
functionality, rather than ownership, (ii) substitute with renewables and natural pro-
cesses and (iii) adopt a stewardship role.
From a sustainability-oriented innovation perspective, this firm is at the organi-
zational transformation level (“doing good by doing new things”).

5.5.5 Wapnö Farm

Wapnö Gård is an estate with an old history. It has been one of largest farming
estates in Sweden since the fourteenth century. The current owner’s family has
owned Wapnö since 1741. Today, Wapnö is organized as a limited company and has
about 85 employees.
134 P.-O. Ulvenblad

Wapnö Farm used to be an ordinary, although large, farm producing milk. The
owners and management regarded the farm as a producer at the onset of the agri-­
food value. The milk was delivered to a large organization, which now has become
an actor on the international market. Over 20 years ago, the owner and the manage-
ment decided to start developing a diversified sustainable business model. They
choose to advance in the agri-food value chain and get closer to the end consumer.
Wapnö focused on sustainable environment and the preferences of the end custom-
ers, e.g. taste and flavour experiences. Today, the management of Wapnö talks about
“sustainability into the future”. Wapnö has been working actively towards a sustain-
able environment for many years. The manager states that:
the present generation should take care in using natural resources reasonably and being
environmentally responsible so that we leave the environment as untouched as possible for
future generations.

Wapnö is developing a circular economy with a diversified sustainable business

model. Wapnö call themselves an open farm, which means that consumers can come
to the farm to get a closer look at the animals, the barns and the dairy. Wapnö also
has a restaurant, which uses ingredients from the farm.
The company has established a farm brewery, and the beer is brewed from the
farm’s water and grain. The cattle are moving freely and never given antibiotics.
The cattle are not given soy products, but rather pressed canola. Wapnö is also pro-
ducing biofuel from canola oil. The milk flows directly in a tube from the barn to the
dairy 30 meters away. Wapnö also has a large greenhouse, where they grew vegeta-
bles for sale in the farm shop and for the farm restaurant. The greenhouse is heated
with renewable energy generated on the farm.
Wapnö farm biogas, produced from cattle manure, contributes to renewable
energy in the form of electricity, heat and cooling, which is needed year-round in the
food premises. Wapnö only uses manure from animals on the farm for biogas pro-
duction and has cut the energy consumption with more than 90%. The biogas plant
also provides fertilization, which improves the fertility and value of the farmland.
Through the development of a sustainable diversified business model, Wapnö has
climbed the value chain, got closer to the end consumer and developed a very strong
brand. Therefore, it is able to sell its products at a higher price, which reflects the
value end customers put on the products.
As many other farms, Wapnö used to be a traditional, although large, farm busi-
ness in the start of the agri-value chain. Over the last 20 years, Wapnö has developed
a diversified sustainable business model, and the development is still ongoing.
Today, the company matches several business model archetypes. Wapnö maximizes
its resources, creates value from waste and substitutes with renewables and natural
processes. Further, the company has repurposed the business for society/environ-
ment since the sustainability and circular economy are in focus. Finally, and not
least, the stewardship role is very clear and articulated.
From a sustainability-oriented innovation perspective, Wapnö is a good example
of a company which has developed sustainability as a process. The company has
developed from operational optimization to organizational transformation: doing
5 Development of Sustainable Business Models for Innovation in the Swedish… 135

good by doing new things. It could also be argued that the company has developed
to system building. Although the company is mainly working as an entity, the farm
is large and has advanced to a form of system building, where one part of the farm
is supporting – and getting support – from other parts of the farm.

5.5.6 Green Farms

In the beginning, Green Farms used to be run as a traditional farm by the current
owner’s father. When the son, the current owner, took over the company, he wanted
to focus on sustainability and converted it to organic production in 1989. At first,
sales did not go according to plan and the cash flow was below expectations. He
could not afford to feed the cattle with expensive concentrate, so he had to feed the
cows with cheaper roughage, grass in different forms. This meant that his cattle
grew slower and were older than normal at slaughter. The owner expected that the
meat would then be of low quality and hard to sell at a good price. However, he soon
realized that the meat was of very high quality. Since it also was produced in a more
sustainable way than before, it could be sold to a premium price to customer want-
ing high-quality meat.
Twelve years later, in 2001 he started Green Farms. The business model was to
create a network of farms that raised and feed cattle in the same way as the first
farm. A new farm can get into the network after a trial period, if they meet the sus-
tainable production requirements of Green Farms. The farms have to focus on ani-
mal health, sustainability and meat quality. The network members deliver their meat
to Green Farms, which sells, through the Internet, and distributes high-quality meat
to the end customers, restaurants, public kitchens and individuals. Green farms
cooperate with around 40 sustainable cattle farms in the southwest of Sweden.
When the present owner took over the farm from his father, he wanted to trans-
form it into a sustainable farm. He took a stewardship role from the start and substi-
tuted the production processes to more sustainable processes. From a
sustainability-oriented perspective, he had developed his company through all three
phases. Today, the company has developed into system building, since the company
has developed a scale-up solution and engaged other companies in the system.

5.5.7 The South Forest Owners (Södra)

The farmers who owned forest began to organize themselves as a forest owner asso-
ciation in the beginning of the twentieth century. The southern and middle part of
Sweden was almost a deforested country at that time, due to bad forest management
and short-sighted profit-maximizing forest companies. In the beginning, the forest
association provided advisory services regarding forest management. However, one
significant issue for the small forest farmers was that the market was dominated by
136 P.-O. Ulvenblad

few large forest companies. Hence, the small forest farmers could not get fair prices
for their product or for their forests. As a response to this situation, their cooperative
soon developed to coordinate distribution, sales and processing of timber and other
forest-based products. Over the years many small forest cooperatives merged, and
the large cooperative association Södra was formed in 1938.
Today, Södra has 51,000 small forest owners as members/owners. A large major-
ity of these forest owners are very engaged in sustainable forestry. Many of them
have been engaged even before sustainability was a concept in research and regula-
tion. In fact, over time some of the forest owners have refused to manage their for-
ests the way the authorities required, since the forest owners believed they could
manage their forests in more sustainable ways. Södra states that:
the overall mission of the owners is to secure the provision for the members’ forest raw
material and promote forestry profitability through advice and support, so that the mem-
bers’ forests can be managed responsibly and with sustainability and to contribute to a
market-based return on the forest raw material.

The timber from the forest farms is refined in Södra’s industries for sawn and planed
timber products, interior wood products, biofuel and pulp for the market in the mar-
ket. Södra runs one of Europe’s largest sawmill operations and is one of the largest
producers of softwood pulp. Södra also produces textile pulp of hardwood. Their
three pulp mills have almost fossil-free production and generate a large energy sur-
plus. This bio-based energy is sold, among other things, as green electricity and
district heating. Södra also owns manufacturing company, which produces one-­
family houses. Södra claims that they are focusing in innovation in order to develop
new products, based on the renewable wood raw material.
Södra is emphasizing sustainable forestry and a sustainable forest value chain.
This means, among other things, that efforts are taken to ensure that members’ for-
estry is conducted using methods that ensure the production capacity of forest land
and forests as well as conservation of ecosystem services and biodiversity. Södra
mainly uses biofuels for the industrial production processes. The energy surplus is
delivered in the form of electricity to the open market, district heating to places near
pulp mills and sawmills and solid biofuels for heating plants. Through the industrial
activities, the forest raw material contributes to the local community’s conversion to
a more sustainable energy use. Efficient use of the forest raw material from a mate-
rial and energy perspective creates new conditions for sustainable products.
Even though Södra is based on small-scale forestry with strong local roots and
local relations, it has ascended in the forest value chain and developed to a large
international actor. A large majority of the small forest farms are run by owners who
regard themselves as stewards. The stewardship perspective is also clearly commu-
nicated by their large cooperative Södra. Södra is applying several sustainable busi-
ness model archetypes besides stewardship, maximize, create value from waste and
develop scale-up solutions. Hence, Södra’s sustainability-oriented process is cover-
ing all three steps, encompassing system building.
5 Development of Sustainable Business Models for Innovation in the Swedish… 137

5.5.8 The Farmers (Lantmännen)

The Farmers in Sweden started to organize in the end of the nineteenth century, and
they founded the national association in 1905. Today, it is an economic cooperative,
owned by 27,000 Swedish farmers, and has grown to one of the largest actors in
agriculture, food and energy in Northern Europe.
The Farmers’ focus is to provide the members with seed, fertilizer, plant protec-
tion products and feed as well as to receive, store, refine and sell what farmers grow.
Other important elements of the business are sales of forest, construction and agri-
cultural machinery. The Farmers is the largest purchaser of grain in Sweden. They
claim that they protect the earth’s resources in a responsible manner and are included
in the entire value chain from farm to table. Their business model strives to deliver
sustainable products and new innovative solutions to customers while at the same
time creating value for our owners and contributing to a viable agriculture.
The visions and goals of The Farmers are closely connected to innovation and
sustainability.
In 2018, The Farmers (Lantmännen in Swedish) was named one of Sweden’s
most sustainable brands (Sustainable Brand Index 2018). The Farmers strive after
viable agriculture, greener energy and a sustainable food chain. The Farmers
state that,
Together we take responsibility from land to table…. we lead the processing of arable land
resources in an innovative and responsible manner for tomorrow's agriculture… we create
a viable agriculture.

The Farmers shares several aspects with Södra. Many of the small farm owners have
also sustainability priorities and have stewardship perspectives. The Farmers has
also developed applying several sustainable business model archetypes besides
stewardship, maximize, create value from waste and develop scale-up solutions.
From a sustainability-oriented perspective, The Farmers are also involved in system
building.

5.6 Analysis

The eight companies and cooperatives will be positioned in the combined frame-
work of sustainability-oriented innovations (SOI) and different sustainable business
model archetypes. See Table 5.7.
All of the companies analysed share a stewardship perspective on the business.
All of them are also regarding themselves as entrepreneurs and business leaders, not
only producers. Further, all of companies have over time developed and moved
closer to customers in the agri-value chain. Another relevant aspect of their sustain-
able business models is that they have diversified their business models. Since these
companies are depending on natural resources and often connected to one place, it
is hard for them to develop scale-up solutions. However, one way to develop
138 P.-O. Ulvenblad

Table 5.7 The combined framework of sustainability-oriented innovations (SOI) and different
SBM archetypes
Sustainability-­ Operational Organizational System building: doing
oriented innovation optimization: doing transformation: doing good by doing new
Approach more with less good by doing new things things with others
Sustainable 1. Maximize 4. Deliver functionality, 2. Create value from
business model material and energy rather than ownership waste
archetypes efficiency 5. Adopt a stewardship 3. Substitute with
role renewables and natural
6. Encourage sufficiency processes
7. Repurpose the
business for society/
environment
8. Develop scale-up
solutions
Högared Maximize Stewardship
Deliver functionality
Ästad Vineyard Functionality (experience) Repurpose
Stewardship
Gudmund Farm Stewardship Substitute with natural
Deliver functionality processes
Wapnö Farm Maximize Stewardship Create value from
waste
Substitute
Repurpose
Green Farm Stewardship Substitute
Develop scale-up
solutions
Gäsene Dairy Stewardship Repurpose
The Farmers Maximize Stewardship Create value from
(Lantmännen) waste
Develop scale-up
solutions
The South Forest Maximize Stewardship Create value from
Owners waste
(Södra) Develop scale-up
solutions

scale-up solutions is to organize themselves into larger cooperatives, like Södra and
Lantmännen.
All companies are closely connected to the real estate where they are situated.
The companies, all of which are owner-managed, are family businesses in which the
families expect to retain ownership for the foreseeable future. As family businesses
strongly rooted in their communities, the owners are not concerned solely with
growth and revenues. The owners think of themselves as stewards or custodians of
the company, the property and the environment, with responsibility for living and
non-living things. Cooperation in network structures or cooperatives is important
for these companies. Trust, common values, other-orientation and win-win perspec-
tive are crucial concepts in the network structures.
5 Development of Sustainable Business Models for Innovation in the Swedish… 139

5.7  onclusions, Future Research Avenues

C
and Practical Implications

The research presented in this chapter builds on, and adds to, previous research regard-
ing sustainability-oriented innovation (Adams et al. 2016), business model archetypes
(Bocken et al. 2014) and building blocks of business models (Barth et al. 2017).
The sustainability-oriented innovation framework regards sustainability as a
continuous process that is developed and achieved over time (Adams et al. 2016).
Their study has also shown how organizations can develop to become more sustain-
able. Further, they suggest that the development of sustainability-oriented innova-
tion often starts with intentional changes to the values of the organization and as a
response to regulation.
The analysis based on the cases of the study presented in this chapter deepens the
knowledge regarding why agri-entrepreneurs develop the sustainability aspects of their
business model. This study shows that many agri-entrepreneurs have a stewardship
intention and want to develop and preserve their company, relationships and environ-
ment for the future and coming generations. Some agri-entrepreneurs applied the val-
ues of sustainability even before the concept was used in literature and discourse. The
agri-entrepreneurs who strive for sustainability are often ahead of, or even in conflict
with, legislation and policy when they develop their sustainable business models.
The aim of the eight sustainable business model archetypes developed by Bocken
et al. (2014) is to “develop a common language that can be used to accelerate the
development of sustainable business models in research and practice”. In the study
presented here, stewardship is a frequent and important sustainable business model
archetype. The stewardship archetype seeks to “maximize the positive societal and
environmental impacts of the firm on society by ensuring long-term health and well-
being of stakeholders (including society and the environment)”. According to
researchers behind such archetype, it can preferably be used in combination with
other archetypes. Based on the analysis in this study, the stewardship role is of para-
mount importance. However, it could be argued that stewardship should not be
regarded as a business model archetype. Rather, it is an explanation or an incentive
for developing sustainable business models.
The frequent use of adopting a stewardship role can be explained by the unique
characteristics of the agri-sector. As Cagliano et al. (2016) have shown, there is a
clear interdependency between agriculture and environmental, human and physical
resources. Walker 2012 and 2014 have also pointed on the awareness of the entre-
preneur as a value-based driver for sustainable business models. Ulvenblad et al.
(2016) and Barth et al. (2017) have elaborated on this relationship. The owners/
managers regard themselves as stewards or custodians of the company, the property
and the environment, with a responsibility for individuals, animals and growing
things. The company is often based on a farm, which has been owned by the ances-
tors before. The company is depending on the resources of the land, and it is going
to stay where it is. Relations to neighbours and other companies are also important
and have to be managed and maintained. The stewardship perspective is important
when developing sustainable business models in the agri-sector.
140 P.-O. Ulvenblad

Barth et al. (2017) have suggested that when studying the development of sustain-
able business models, the building block “value intention” should be added to previ-
ously developed building elements of the conceptual business model framework: (i)
value proposition, (ii) value creation and delivery and (iii) value capture (Bocken et al.
2014; Richardsson 2008; Osterwalder and Pigneur 2005). Sustainability-oriented
research also underlines the philosophy and values of the organization (Adams et al.
2016). Based on the cases presented in this chapter, the value intention is an important
base for a sustainable business model in the agri-­sector. Hence, it seems relevant to
include the value intention element into the conceptual business model framework as
well. Including the value intention of the owner-manager in the future theory building
could present important insights of potential trade-offs and barriers when addressing
growth ambitions based on social, environmental and economic aspects.
Future research might also examine how agri-companies innovate their sustainable
business models when they introduce new products and engage in new business activi-
ties. It would also be relevant to further deepen the understanding of the connection
with the special challenges in the agri-sector (Cagliano et al. 2016), the importance of
the value intention (Barth et al. 2017) and value-based drivers for sustainable innova-
tion (Walker 2012, 2014). The case study approach is well-suited for such studies.
Another relevant question to further investigate is a comparative analysis of the
sustainable business model concept among industries. “Literature indicates that a
wide range of traditional SMEs are still mostly focused on harvesting low hanging
fruits by engaging primarily in incremental innovation” (Klewitz and Hansen 2014).
The results from the agri-sector in Sweden show that there are companies in the
agri-sector that optimize their operation with doing more with less, but the majority
states that they focus on organizational transformation or even system building.
Further, many of the owners/managers of the agri-companies adopt a stewardship
perspective. Hence, many companies in other industries, and not only SMEs, can
gain inspiration, insights and experiences and learn from the agri-sector.

5.8 Practical Implications

If agri-entrepreneurs and society focus on added value higher up in the value chain
rather than only on efficiency at the inception of the value chain, it will be natural to
emphasize the importance of agri-businesses for a sustainable society. Instead of a
focus on the negative climate and environmental impact of production, focus can be
on creating added value from climate and environmental perspectives.
A growing awareness and understanding of these values increases the opportuni-
ties for agri-companies to obtain higher prices for their products and/or services.
Agri-companies can then focus more on how sustainable innovations can be devel-
oped. The climate and environmental perspectives will then become an opportunity
and not a limitation for agri-companies and society.
Extension services focused on the agri-sector should reinforce the concept of
agri-entrepreneurs as entrepreneurs instead of just producers. The efforts should
5 Development of Sustainable Business Models for Innovation in the Swedish… 141

focus on new, sustainable business models that encompass more links in the value
chain than primary production. This means that education and counselling to
businesses should focus on leadership, business development and innovation. The
dissemination of knowledge should be conducted through coaching, in order to
strengthen the competence and ability of the agri-entrepreneur.

5.9 Concluding Remarks

It is important for sustainable development to further emphasize the importance of

innovations in the agri-sector, not only for the agri-companies themselves but also
as a response to many of the challenges society faces. While social development has
benefited major cities and urban centres, rural areas and agri-companies have sub-
stantial opportunities and resources to contribute to the solutions to many of our
major social challenges today. These social challenges apply to several major and
comprehensive issues such as:
• Climate and environment
• Integration, diversity and gender equality
• Labour and employment
• Access to housing
• The degree of self-sufficiency of society
Agri-companies and agri-entrepreneurs are often situated in rural areas. They
can provide solutions to these challenges. Their owners are aware that their compa-
nies are connected to a village, a place. They are aware, sometimes intuitively, that
the family, the farm, the place and the company will exist in the future - even after
they leave business. Therefore, they have every reason to take care of relationships,
neighbours, companies, land and animals. Agri-entrepreneurs are aware of their
responsibility for future generations and have opportunities to contribute to environ-
mental and climate solutions, which are some of today’s major issues. Their mind-
sets and value intentions ought to be spread in society in general. These
agri-entrepreneurs are stewards in the best sense of the word.

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Chapter 6
Innovating at Marketing and Distributing
Nutritious Foods at the Base
of the Pyramid (BoP): Insights
from 2SCALE, the Largest Incubator
for Inclusive Agribusiness in Africa

Niek van Dijk, Nick van der Velde, Janet Macharia, Kwame Ntim Pipim,
and Hiwot Shimeles

6.1 A Brief Description of 2SCALE

The Netherlands-funded “Toward Sustainable Clusters in Agribusiness through

Learning in Entrepreneurship” (2SCALE) is an incubator program that manages a
portfolio of public-private partnerships (PPPs) for inclusive business in agri-food
sectors and industries and ultimately to improve rural livelihoods and food and
nutrition security. 2SCALE offers a range of support services to its business cham-
pions (small to medium enterprises [SMEs] and farmer groups) and partners in eight
countries across sub-Saharan Africa, enabling them to produce, transform, and sup-
ply quality food products. These products go to local and regional markets, includ-
ing to base of the pyramid (BoP) consumers.
Project support includes technology transfer, capacity strengthening, and market
linkages, as well as other key elements such as improving access to finance – vital –
but often sorely lacking in the smallholder sector.
Its implementing partners are (1) BoP Innovation Center (BoPInc) which sup-
ports companies and entrepreneurs to develop relevant products and services for and
with the base of the pyramid (BoP). Its mission is to develop commercially and
socially viable business models and activities which include the people in the BoP
as consumers, producers, and entrepreneurs. (2) The Inclusive Green Growth
Department (IGG) from the Ministry of Foreign Affairs of the Netherlands, which
aims to ensure universal access to and wise use of natural resources. IGG is respon-
sible for the Dutch foreign policy on the following themes: climate, water, food

We would like to sincerely thank Mahamane Toure and Maryse Ago da Silva who, along with
authors, generously provided pictures to this chapter.

N. van Dijk · N. van der Velde (*) · J. Macharia · K. N. Pipim · H. Shimeles

BoP, Inc., Utrecht, The Netherlands
e-mail: [email protected]

© The Author(s) 2021 147

H. Campos (ed.), The Innovation Revolution in Agriculture,
https://doi.org/10.1007/978-3-030-50991-0_6
148 N. van Dijk et al.

security, energy, raw materials, and the polar regions. (3) The International Fertilizer
Development Center (IFDC), a public international organization addressing critical
issues such as food security, the alleviation of global hunger and poverty, environ-
mental protection, and the promotion of economic development and self-sufficiency.
(4) SNV (Netherlands Development Organisation) is dedicated to a society in which
all people, regardless of race, class, or gender, enjoy the freedom to pursue their
own sustainable development. We focus on increasing people’s incomes and
employment opportunities in productive sectors like agriculture as well as on
improving access to basic services such as energy, water, sanitation, and hygiene.

6.2 BoP Marketing and Distribution in 2SCALE

In this section, we introduce the concept of base of the pyramid (BoP) and explain
why, from both a developmental perspective and a business perspective, it makes
sense to do business with and for BoP consumers. In ensuing sections, we explain
why 2SCALE focuses on marketing and distribution to the BoP, how pilots are
shaped within the program to introduce this way of working to business champions,
and, in turn, how we continuously learn from testing this particular approach.

6.2.1  he BoP as a Developmental Challenge and Business

T
Opportunity

The term “base of the pyramid,” or “bottom of the pyramid,” was first coined by CK
Prahalad in his groundbreaking publication entitled The Fortune at the Bottom of
the Pyramid: Eradicating Poverty Through Profits (Prahalad 2009). At that time,
much was unknown about this market segment, but the interest generated by
Prahalad’s book ensured that during the years thereafter, the BoP became a topic of
interest for many researchers and later for companies and nongovernmental organi-
zations (NGOs).
One of the main reasons the book gained so much attention was that it was the
first time a rationale had been built on why the BoP market was important. From a
business perspective, it was interesting to gain a deeper understanding of the global
economy’s lowest income segment – a segment of around 4 billion consumers who
live on less than US $1,500 per year.
One of the key findings of the book was that if and when companies and other
stakeholders want to engage with the BoP, it requires a completely different approach
in comparison to other market segments; even more so, it would “require radical
innovations in technology and business models.”1

1
https://www.strategy-business.com/article/11518?gko=9a4ba
6 Innovating at Marketing and Distributing Nutritious Foods at the Base… 149

To grasp a sense of how substantial the BoP market is from a financial ­perspective
and to better understand the breakdown of market potential per sector, the
International Finance Corporation (IFC) and World Resources Institute (WRI)
shared the results of a key study on the BoP in 2007. The study revealed that the
total consumer market size of the BoP, which remained largely untapped by compa-
nies at the moment, was valued at a staggering $5 trillion. The study placed the total
value of the BoP market for food products in sub-Saharan Africa at $215 billion.
This constitutes a huge new market potential for food-producing companies and
farmer organizations targeting the African market.
At the same time, most BoP consumers are a part of the same group as the
821 million people who are undernourished globally.2 Therefore, targeting low-­
income food consumers makes sense not only from a business perspective but also
from a developmental perspective. Undernourishment should not be tackled purely
by developmental interventions, such as food aid, but by using market-driven
approaches that build upon viewing this vast group of 821 million as BoP consum-
ers. These consumers, as Prahalad stated, are the “aspiring poor” – a group of con-
sumers with very little to spend but highly aspirational in their purchasing decisions,
making them also highly critical consumers.

6.2.2 Marketing Toward the BoP

As we described above, the BoP is quite a different consumer segment compared to

others and therefore requires a different approach – a different type of marketing.
Typically, in marketing, the 4Ps (product, price, place, promotion) approach is used.
Instead, at 2SCALE we use the 4As (acceptability, affordability, awareness, avail-
ability) to cater to the different challenges and opportunities companies face in mar-
keting their products to the BoP. The 4As approach also provides a better base for
analyzing the unique challenges that BoP consumers themselves face when, for
instance, making purchasing decisions. Altogether, the 4As approach provides an
opportunity for a more in-depth and consumer-centric analysis of what it means to
market products with and for the BoP. To have a successful marketing approach for
the BoP, all four dimensions must be taken into consideration:
• Acceptability: Ensuring that the product is accepted by the end consumer. It
requires an in-depth understanding of the consumer’s needs, dominant behav-
iors, and customs.
• Affordability: Offering products at a price point that meets the purchasing power
of the BoP. Interestingly, it has been proven that consumers at the BoP are w
­ illing
to pay a slightly higher price for nutritious foods, if they understand the prod-
ucts’ benefits.3

2
2018 FAO The State of Food Security and Nutrition in the World: http://www.fao.org/state-of-
food-security-nutrition/en
3
Hystra: http://hystra.com/marketing-nutrition, pages 17 and following.
150 N. van Dijk et al.

• Awareness: Making sure consumers know about the product and its benefits. In
the process of creating awareness, it is key to identify any trusted channels.
• Availability: Making the product available to the BoP by building specific distri-
bution channels, often requiring an innovative approach to reach remote and
more informally organized BoP markets.
The 4As are better suited for the position in which BoP consumers find them-
selves. Oftentimes they are located in areas farther from typical markets or com-
mercial centers than other market segments. Therefore, availability is important. As
the BoP is also less connected to “mainstream” media than other consumer seg-
ments, companies need to take extra steps to promote their products to BoP consum-
ers. In addition, BoP consumers have relatively lower purchasing power, so
affordability is even more important to them than to other consumer segments.
In relative terms, food represents for BoP consumers a much larger share of their
expenditure compared to other consumer segments – i.e., in Nigeria BoP house-
holds spend over 70% of their disposable income on food and beverages.4 Lastly,
companies will need to ensure that their products and services fit with the percep-
tions, traditions, and aspirations of BoP consumers, and these can often be quite
different from other consumer segments. Business champions will have to make a
greater effort, or take a different approach, in their marketing and communication to
ensure that BoP consumers also accept the product.
Even though the BoP market might be more difficult to reach and requires dedi-
cated effort, it also holds great potential. BoP marketing and distribution strategies
provide business opportunities to companies as well as an opportunity to improve
the food and nutrition security of an important population segment. BoP consumers
are usually not perceived or targeted as potential consumers. Companies often do
not perceive this market segment as an opportunity for generating profit due to their
relatively low purchasing power. On top of the huge untapped economic potential,
there is also a major development opportunity in providing nutritious food products
to BoP consumers.

6.2.3  oP Marketing and Distribution Within the Context

B
of 2SCALE

A common driver across all 2SCALE activities is the market, providing either sup-
ply chains with thousands of smallholder farmers as end buyers or food product
value chains targeting rural and urban food consumers. Value chain development
with specific attention to BoP consumers also must be market driven to be success-
ful. An important distinction is that the market opportunity offered by the BoP is not
always (fully) recognized by value chain actors. Many of 2SCALE’s partners have

4
https://blog.euromonitor.com/2017/03/top-5-bottom-pyramid-markets-diverse-spending-pat-
terns-future-potential.html
6 Innovating at Marketing and Distributing Nutritious Foods at the Base… 151

been serving high-end markets or business-to-business (B2B) markets in their coun-

tries or regions and therefore do not necessarily know how to reach BoP consumers.
In addition, the business case can be quite different, requiring the development of
specific or new product propositions for BoP consumers. While individual BoP con-
sumers may have little purchasing power and therefore be more inclined to buy
small quantities of product (sometimes referred to as “Kadogo Economy”),5 the
number of consumers and their market share are what drive economies of scale and
profits for value chain actors (Boxes 6.1 and 6.2).

Box 6.1 BoP Marketing and Distribution – Theme: Women’s

Empowerment
The empowerment of women within agribusiness value chains is one of the
main goals of 2SCALE. As discussed throughout this paper, developing BoP
marketing and distribution activities can create both entrepreneurship as well
as employment opportunities for women, beyond more “conventional” oppor-
tunities in agricultural value chains, such as factory workers and casual labor-
ers. Good examples of this are the Likie Ladies, micro-entrepreneurs who
have formed a network of last-mile distributors for business champion GUTS
Agro in Ethiopia, and the Danaya women’s processor cooperative, which built
a strengthened business network out of the BoP marketing activities in Mali.
In the future, 2SCALE plans to develop more activities that also empower
female BoP consumers, primarily the female heads of households, through
behavioral change campaigns and other activities.

Box 6.2 BoP Marketing and Distribution – Theme: Access to Finance

One of the challenging dynamics in BoP marketing pilots is access to finance
or, more specifically, access to working capital. For instance, the micro-­
entrepreneurs who are involved in the sale and distribution of BoP food prod-
ucts often have limited access to working capital, making it difficult for them
to buy stock. This can limit the demand for food products from business
champions. Also, BoP consumers do not always have a steady income, some-
times limiting their ability to buy food, and micro-entrepreneurs often are not
willing to sell food products on credit.

(continued)

5
http://corporatewatch.co.ke/wrigley-launches-smaller-sized-skittles-kadogo-economy/ provides
a Kenyan example.
152 N. van Dijk et al.

(continued)

In the near future, 2SCALE will look into opportunities related to working
capital needs of micro-retailers to keep stock and consumer finance opportu-
nities, among others, by learning from interesting initiatives in the same field,
such as the collaboration between Twiga Foods and IBM in Kenya.
Photo credit: USAID Ethiopia, Creative Commons Attribution-­
NonCommercial 2.0 Generic – creativecommons.org/licenses/by-nc/2.0/ –
Image cropped and brightened.

In 2SCALE in general, we work together with business champions to realize

their inclusive business ideas by setting up partnerships that involve different actors
across the broader value chain. Such a business champion is either a small to
medium enterprise (SME) or a farmer organization. Their business ideas can focus
on involving more smallholder farmers, doing more business with micro-­
entrepreneurs, reaching more BoP consumers, or any other ways to make their oper-
ations and their broader value chain more inclusive. By developing a partnership
that involves a broader range of actors (including financial institutions, input pro-
viders, and others), systemic change can be realized.6
Because the concept of BoP markets and the opportunities they hold are still rela-
tively new for most 2SCALE business champions, the BoP consumer segment is
always introduced in a pilot setting, within the broader context of a 2SCALE part-
nership. In this way, the business champion can be introduced to the potential of this
market segment and experiment with approaches on how to reach the BoP. In this
they are supported by 2SCALE to lower the risks that come with developing new
products or marketing approaches to reach a new consumer segment.

6
https://www.2scale.org/upload/7479bf_2SCALE_paper1.pdf
6 Innovating at Marketing and Distributing Nutritious Foods at the Base… 153

6.2.4 What Have We Achieved So Far

In the early stages of 2SCALE, the focus was mostly on developing and implement-
ing a market research methodology to gain market information and insights on BoP
food markets (focusing on specific crops) in different 2SCALE countries. Though
this research was quite detailed, it did not necessarily lead to direct, actionable
insights for 2SCALE business champions. The approach was therefore changed,
leading to a more action-oriented approach that eventually led to the implementa-
tion of 24 different BoP marketing and distribution pilots. These pilots were quite
diverse in nature, ranging from small pilots with small-scale groups in groundnut
processing to large pilots with established SMEs in packaged processed food prod-
ucts. In total, through different pilot activities (from market promotions to new
product development), 2SCALE delivered the following results:
• Thirty-seven new product propositions for the BoP were introduced by 24 differ-
ent business champions.
• In total, over a million of these new products were sold, often within a short pilot
time span, substantially increasing the turnover of the business champions.
• Close to 250,000 BoP consumers were reached through different market activa-
tions and communication campaigns.
• Business champions directly created over 200 new jobs through BoP marketing
and distribution activities (i.e., as sales agents, micro-distributors, and
marketers).

6.3  ow BoP Marketing Activities Are Developed Within

H
2SCALE

Thus far, BoP marketing activities have been implemented in 2SCALE in the form
of pilots. The process of designing and implementing a BoP marketing pilot always
takes place within the broader context of a 2SCALE partnership. For most 2SCALE
partnerships, a general notion of the relevance of BoP markets is included when the
partnership idea is developed and designed, and later it is described in more detail
in the partnership description.
Subsequently, when the partnership agreement is signed and the partnership is
ready for implementation, activities to implement the partnership are identified and
developed into an annual action plan. It is in this process of action plan development
that the BoP marketing activities also take shape in more detail.
The development of these BoP marketing activities, within the broader context
of partnership agreements and action plan development, roughly follows five steps
(Fig. 6.1) which are implemented together with the business champion. Even though
every BoP marketing pilot is different because of differences in markets, geography,
business partners, etc., the process of building a BoP marketing pilot follows a com-
mon path.
154 N. van Dijk et al.

Fig. 6.1 Five-step process of designing and implementing a BoP marketing pilot

6.3.1 Conducting Needs Assessments

The first step in the process is to deeply engage with the business champion to get a
joint and detailed understanding of his or her business and vision for targeting BoP
consumers with nutritious food products. For the business champion to get a realis-
tic understanding of what a BoP marketing pilot could look like in the context of
2SCALE, several cases of previous 2SCALE pilots are shared and described
throughout this chapter. These practical examples often resonate well with the
champion, since they include tangible learnings and also demonstrate the “busi-
ness” results of targeting the BoP.
Another important part of the assessment is visiting the business champion’s
premises to gain insight about the current conditions under which the business
champion is manufacturing products. There is not a formal assessment methodol-
ogy that is used. Instead, specific attention is paid to the features that are relevant to
designing the BoP marketing pilot. These features mainly relate to the champion’s
capacity in sourcing, production, marketing, distribution, and finance. For instance,
it makes a large difference if an operational processing and packing facility already
is in place. When such facilities are lacking, the 2SCALE teams know the implica-
tions in terms of required activities, timelines, and finance.

6.3.2 Market Research and Insight Gathering

The second step is to conduct market research and collect insights into consumer
behavior in the particular market (and on the particular food product) that the busi-
ness champion is active in.7 These insights can also help provide an understanding

7
http://www.bopinc.org/sites/www.bopinc.org/files/updates/bop_insights_publication.pdf, for an
account of the importance of gathering consumer insights.
6 Innovating at Marketing and Distributing Nutritious Foods at the Base… 155

of how a food product can improve the nutritional status of the targeted consumers,
for instance, by making critical nutrients available or by making certain nutritional
food products more affordable.8 In addition, it is important that the market research
and insights not become too generic and can provide actionable insights for the
business champion to design the BoP marketing pilot. For example, one could ques-
tion whether a small dairy cooperative that wants to develop affordable yoghurt
requires extensive data on the national dairy market. Instead, the cooperative might
be better off with a detailed understanding of the competitive yoghurt market in
their specific location.
Overall, there are three important areas that are covered during this phase. First,
there must be a general understanding of the market and the broader business envi-
ronment. This should not be too generic but rather limited in its scope. Second, the
competitive landscape will need to be understood in detail (e.g., which other com-
panies provide similar products, what are their characteristics and pricing). Lastly,
it is essential to have a detailed understanding of consumer characteristics, con-
sumption, and purchasing behavior.
The goal of 2SCALE is to make the research phase as actionable as possible.
Therefore, research is done in close collaboration with the business champion. The
results of this phase are also actively discussed during the strategy workshop (see
below), for instance, by purchasing and bringing along any competitive products to
the workshop. The research and insights phase helps champions develop their BoP
marketing strategy and design activities.

6.3.3 Strategy Workshop

After the research is finalized, all insights are brought together in a strategy work-
shop in which the key members of the business champion’s management team are
present. The most important aspect of this workshop is that it is co-creative, mean-
ing that all content is being developed by the business champion’s team together
with 2SCALE.
The general approach of the workshop is to start mapping out the business cham-
pion’s organization. To do so, 2SCALE uses the Business Model Canvas (BMC).
This is a convenient model that has proven to be well understood by various busi-
ness champions and provides actionable building blocks for a strategy. The most
important building blocks of the BMC are the customer persona, value proposition,
and marketing and distribution. For more information on these key components,
please refer to Sect. 6.2. During the workshop, each of these building blocks is
explained in an interactive way, ensuring that participants understand the content
and relevance. After this, workshop participants are asked to build specific strategies
for each building block in teams.

8
An example is the soya goussi in Benin. This byproduct of soybean processing is full of protein
and therefore a good alternative to poultry meat. Since the soya goussi is over 30% cheaper than
poultry meat, it makes protein more affordable for BoP consumers.
156 N. van Dijk et al.

Each workshop ends with a half-day discussion on planning the next key step:
implementation. Once the general BoP marketing strategy is defined, activities are
identified to implement the strategy, and a budget for these activities is established.
This is input that will be integrated into the broader annual action plan that forms
the main document for implementation of the overall partnership agreement.

6.3.4 Implementation

After intense discussions on market insights and strategies, time for action is due.
During and after the strategy workshop, all activities and responsibilities have been
formulated and formalized into the broader action plan and thereby form part of the
broader partnership. It is also for this reason that the respective partnership facilita-
tor9 is an active participant in the abovementioned strategizing.
The BoP marketing expert and the partnership facilitator work closely together
with the business champion in the implementation of activities. Sometimes there
might be a need for specific external experts or marketing agencies. In this case,
2SCALE facilitates the process of bringing in such parties. These types of experts
are often needed in technical product formulation (e.g., developing a recipe for
nutritional porridge), marketing material development, or product certification.
There are three key milestones throughout the implementation stage. The first is
to have the actual product ready. This sounds straightforward but, depending on the
situation, it might be challenging to get the right ingredients, product formulation,
machinery, or production setup in place. The second milestone is getting the pack-
aging finalized. This includes having a clear value proposition, brand, communica-
tion strategy, and actual packaging design and finding the right party that has the
right packaging material available. When these milestones are reached, the business
champion has an actual physical product that is ready to be sold in the market and
should suit BoP consumers’ aspirations in terms of affordability and acceptability.
The third milestone is to launch a market activation campaign. This step has
proven to be one of the most crucial components of implementation. Having an
actual product ready for sales and distribution at the factory gate is just the start.
There needs to be awareness among the consumers about the new product and it
needs to be available in the market. To achieve this, the business champion and
2SCALE develop a market activation campaign that follows the ATEAR (attention,
trust, experience, action, retention) framework that is highlighted in Sect. 6.2. In
short, awareness is created by organizing several activities to promote the brand and
product and engage local communities. Availability is created by working closely
with local shopkeepers, social networks, and possibly sales agents to get the product
to the consumer.

9
A partnership facilitator is a 2SCALE staff member who is responsible for facilitating the overall
partnership.
6 Innovating at Marketing and Distributing Nutritious Foods at the Base… 157

6.3.5 Evaluate and Follow-Up

The final stage of the process is to evaluate the pilot and to prepare the business
champion for follow-up, which often consists of a strategy to either scale active
marketing and distribution support by 2SCALE or exit the program and continue
independently. This stage often starts with a meeting, during which the business
champion reflects on the pilot, develops lessons learned, and shares ambitions
toward the future. Based on that, together a follow-up strategy is developed. Looking
back at the portfolio of pilots, there are four different outcomes of this stage:
• Optimization: The first outcome is when the business champion requests to con-
tinue to work together with 2SCALE to optimize the BoP marketing approach.
This, for example, happened in the soybean partnership in Ethiopia with business
champion GUTS Agro. During the evaluation, they realized that after successful
product development and marketing, the next challenge was to safeguard the
affordability of the product – a challenge that occurred mostly in their distribu-
tion model. Based on this workshop, GUTS Agro and 2SCALE designed a sec-
ond phase of the pilot focusing on last-mile distribution.
• Replication: The second outcome is when the business champion sees potential
to replicate the pilot activities in another geographical location but is not yet
ready to do this alone. For example, with Shalem Investments in the sorghum
partnership in Kenya, it was decided to replicate the pilot, which mostly focused
on product launch and market activation. The pilot was originally implemented
in Meru and was to be replicated in Thika.
• Financing: The third outcome is when the business champion sees opportunities
for scale but is lacking the capital to finance growth of the model. In this sce-
nario, 2SCALE supports the business champion in their business plan develop-
ment and making relevant connections with the finance sector. For example,
during our pineapple partnership with business champion Promo Fruits in Benin,
2SCALE supported Promo Fruits in developing a business plan to attract invest-
ments to scale its newly established micro-distribution model.
• Exiting: The fourth outcome is when the business champion feels sufficiently
capacitated to continue independently. Eventually, all business champions will
“exit” the program one way or another. However, that does not mean that all ties
are broken. On the contrary, the business champion remains part of the 2SCALE
network and often functions as a role model or mentor for other business
champions.

6.4 Key Tools, Approaches, and Implementation Strategies

In this section, we present the tools and approaches that we use in the steps men-
tioned under Sect. 6.2 to develop implementation strategies for the pilots.
Subsequently, we present the four generalized implementation strategies that we
have seen materialize in the different pilots implemented over the past years.
158 N. van Dijk et al.

6.4.1 Tools and Approaches

When building BoP marketing pilots together with the business champion during
strategy workshops, several tools have proven to be of crucial value. These tools
were adopted by 2SCALE from the Business Model Canvas and contextualized by
the 2SCALE team. All of the tools are hands-on, practical, and co-creative so that
they can be used in workshops and understood by low-literate participants. It is
interesting to see that the same tools have worked for vegetable farmers in Ethiopia
as well as for soybean processors in Benin.

6.4.2 Business Model Canvas

The Business Model Canvas (BMC) is a tool that maps out the various key compo-
nents of an organization and shows how the various components work together
(Osterwalder and Pigneur 2010). The primary value for business champions is that
the BMC shows the entire layout of their business. Moreover, it shows how an addi-
tional activity, such as targeting the BoP, can have implications for other parts of the
business. The goal is for business champions to understand their business, the impli-
cations of the pilot, and the required strategy to make a pilot successful.
The main components that are always used in workshops and that form the basis
for pilots are as follows:
• Persona: A persona is a fictional character that represents a typical consumer that
a business champion aims to target. Examples of features that are covered in the
persona include consumer demographics, pains, and gains. The purpose of build-
ing a persona is to have an in-depth understanding of the persona’s wants and
needs, which helps the business champion in designing the value proposition.
• Value proposition: A value proposition is an elaborated description of the prod-
uct or service that the business champion is selling to his or her consumer. More
specifically, it shows how a product or service creates gains or reduces pains for
the consumer. The overall goal is to create a product-market fit, ensuring that the
value proposition is relevant for the target consumer.

6.4.3 Product and Pricing Strategy

As mentioned in the previous section, it is crucial for a business champion to have

a clear and competitive product and pricing strategy in comparison to its competi-
tors. To get to such a strategy, it is helpful to visit sales points and purchase competi-
tive products. With the business champion, the competitive products are organized
in terms of price and value. Finally, the champion has to determine where to posi-
tion his or her (new) product. A good example comes from the sorghum partnership
6 Innovating at Marketing and Distributing Nutritious Foods at the Base… 159

in Kenya with business champion Shalem Investments, which positioned its brand
in the relatively lower segment in terms of pricing. However, Shalem used a pre-
mium plastic packaging material with a modern design and was able to do this at a
relatively low price point. This has made the brand distinguishable from its com-
petitors, which used more basic packaging with poorly designed product labels.
Even though it sounds straightforward, this interactive exercise has proven its value
in developing a clear product and pricing strategy.

6.4.4 ATEAR Marketing Model

This is one of the most important tools to build a BoP pilot and forms the foundation
for a business champion to build an entire marketing campaign. In summary, the
ATEAR model covers five crucial steps: attention, trust, experience, action, and
retention (Fig. 6.2). During the workshop, the team ideates on each of the steps and
builds a marketing campaign plan that follows all five steps in a structured way. The
ultimate goal is that the business champion develops a coherent and comprehensive
campaign instead of only focusing on one element of ATEAR.
• Attention: The first step is the most straightforward one – getting attention. If a
new product is launched in the market, consumers need to be aware of it. To cre-
ate this awareness, several activities can be organized. These can be common
above- or below-the-line marketing activities, such as radio advertisements, mar-
ket activations, or community messaging. In defining the activities, it is key to
understand which channels reach the target customer and which are seen as
trusted channels.
• Trust: Attention alone is not sufficient. Consumers need to trust a new brand.
There are many different brands out there that seek attention, so how do you
stand out and create trust? Trust takes time and can be built by consistently
“showing up” as a company and delivering quality products. Having the right
food safety certification or product endorsement by a public or trusted person
from the community can be a valuable asset to building trust.
• Experience: The proof of the pudding is in the eating. If a consumer cannot expe-
rience, or more specifically taste, the product, they will not immediately be
inclined to purchase a new product, because the “risk” of buying something that,
for instance, does not taste good or have the right texture will be too high. That
is why tasting sessions are often held during market activations, allowing pro-
spective consumers to try small samples of the product.
• Action: When the consumer is finally convinced to buy the product, he or she
sometimes needs a final push to actually make the purchase. It can help if a par-
ticular promotion action is available, for instance, buy three items and pay for
two, in which a consumer is rewarded for making a larger (and therefore more
economical) purchase.
160 N. van Dijk et al.

Fig. 6.2 ATEAR marketing model

• Retention: Getting new consumers to buy your product is essential, but in the
world of fast-moving consumer goods (FMCGs), it is much more important to
retain consumers and make sure they keep buying your product. Furthermore, it
is much more expensive to create a new customer than to keep an existing one.
Even though the short time span of BoP marketing pilots did not always allow for
implementation of retention activities, loyalty activities were sometimes imple-
mented, for instance, through cards that consumers can save to get a product for
free.
All business champions have to compete in the market with other brands.
Therefore, it is crucial that they come up with a brand and product that are distinct
and take up a competitive position within the market. For this, 2SCALE developed
a branding tool. In essence, the tool explains that a successful brand would need to:
• Resonate with the consumer
• Differentiate itself from competitors
• Express the internal values of the organization
For the first two criteria, the aforementioned persona and product and pricing
strategies are used. For mapping the internal values, the first step is to define the
core and aspirational values of the organization. These are summarized in the “brand
(wo)man,” having a single overview that captures the most important values of the
organization. Secondly, a brand-archetype model is used, featuring eight different
archetypes. An archetype is a typical representation of a certain set of personal traits
and summarized in a set of “emotional values.” After these steps are covered, the
organization has a clear sense of its brand and communication strategy. This s­ trategy
6 Innovating at Marketing and Distributing Nutritious Foods at the Base… 161

provides clarity on the development of the organization’s brand, packaging, and

marketing materials. At the end of the session, the team develops conceptual direc-
tions for their packaging design.

6.4.5 BoP Distribution Modeling

Especially for business champions that have not yet been actively selling products
in retail, distribution can be a key bottleneck to success. Distribution at the BoP
level is a challenge for both local SMEs and cooperatives as well as for large
­multinationals. The main reason is that distribution and retail are not well organized
at the BoP. BoP consumers are more difficult to reach and often remotely located
from conventional markets or retail outlets, not just in rural areas but also in urban
ones. This presents a serious challenge to reach the BoP consumer in an efficient
and cost-­effective manner. The majority of BoP consumers still make most of their
purchases at open markets, local kiosks, or mom-and-pop stores – often owned by a
single business owner. The BoP distribution model suggests three different
approaches that business champions can explore within their specific market. These
are as follows:
• Using existing channels and infrastructure (piggybacking)
• Creating hybrid partner-ships with nonprofit partners
• Setting up micro-franchised distribution models
The extent to which (a combination of) any of these three options can apply to a
business champion strongly depends on two types of trade-offs (Fig. 6.3). One is the
investment the business champion is able and willing to make in relation to the
power or control the champion wants to have over the actual distribution activities.
The second trade-off relates to the speed at which the business champion wants
to set up their distribution activities versus the level of competitiveness that the dis-
tribution model can bring to the actual product distributed.
The different characteristics of these three approaches are described in more
detail under the following section on implementation strategies.

6.4.6 Implementation Strategies

Even though each pilot is unique and dependent on local market circumstances, we
can distinguish four main implementation strategies for a BoP marketing pilot.
Sometimes a pilot only consists of implementing one particular strategy; in other
cases, several strategies are implemented in one pilot.
162 N. van Dijk et al.

Fig. 6.3 Key trade-offs in the BoP-focused distribution models

6.4.6.1 Product Development

In the development of a pilot with a business champion, we often notice that after
initial needs assessments and market research are conducted, the existing product
portfolio of the business champions does not match the needs and wants of the local
BoP consumer market. This means that 2SCALE will work with the business cham-
pion on developing a completely new product or will adapt the existing product in
such a way that better suits the needs and wants of BoP consumers.
These processes can be quite time consuming and require a significant invest-
ment of resources from the business champion. But equally, they can provide a
breakthrough for the company in entering the BoP market. In these cases, the mar-
ket insights collected are used to shape the idea for a new product, and the product
is subsequently further developed.
Sometimes this means that external expertise is needed, especially on the techni-
cal side. For example, a food technologist (i.e., through the Dutch “Programma
6 Innovating at Marketing and Distributing Nutritious Foods at the Base… 163

Uitzending Managers” [PUM] program10) was brought in to assist with one pilot.
Also, at this point, we use some of the tools and approaches mentioned above to
ensure that the product is appealing and aspirational to BoP consumers. Quite often,
several iterations of the product are done, based on tasting sessions that are held
with test panels of BoP consumers to better understand their appreciation of the
product. Eventually, the product is launched or introduced on the (local) BoP market.
GUTS Agro in Ethiopia is a good example of a pilot where a completely new
product was introduced (Box 6.3). In this example, the business champion was
already producing a blend of corn and soybean for the World Food Program and
other relief organizations. However, the company aspired to enter the BoP consumer
market directly. To do this, it had to develop the product completely from scratch,
based on the corn and soybean blend it was already producing in bulk. The market
insights gathered in Ethiopia were used to develop a porridge formula consisting of
corn and soybean and fortified with vitamins and minerals. This formula was devel-
oped in close collaboration with an expert from PUM. 2SCALE further supported
the business champion to develop a new product name, tagline, packaging, and pric-
ing strategy, leading to the introduction of the new “Supermom” product for the
BoP market in Ethiopia.

Box 6.3 Business Champions – Snapshot: GUTS Agro, Ethiopia

GUTS Agro Industry is an ISO 222000-certified food-processing company in
Ethiopia, producing a range of goods from cereal to table salt and baby food.
2SCALE has supported Engidu Legesse, CEO of GUTS Agro, to develop a
micro-franchise distribution model called “Likie.”

The Likie model is designed to effectively reach low-income consumers

while maintaining the affordability of the product. The model uses female
micro-franchisees to distribute a low-cost, high-protein, corn-soybean blend

(continued)
10
https://www.pum.nl/ for further information.
164 N. van Dijk et al.

(continued)
known as Supermoms, also developed with 2SCALE assistance. The Likie
distribution model is now operating in several areas in Ethiopia and is sup-
ported by marketing activities.
This five-day campaign featured three well-known musicians who led a
promotional campaign in schools, marketplaces, and low-income neighbor-
hoods. Every morning for a week, the musicians, accompanied by GUTS
Agro staff and saleswomen, would visit a school. The infotainment included
a quiz contest on nutrition, with GUTS Agro products as prizes.
Likie is not only about nutrition, but also about empowering women.
“Likie Ladies” are provided with uniforms, branded bags, and a tricycle to
transport their goods door to door. They receive training, business support,
and stocks on credit.
For GUTS Agro, Likie is more than a distribution network. It is also a way
to help improve health and nutrition among the poor while helping budding
women entrepreneurs create new businesses with very low start-up costs.

In other cases, adjustments were made to existing products so that these products
would better fit BoP consumer demands. In Benin, under the soybean partnership,
2SCALE worked with business champion Coopérative de Transformation,
d’Approvisionnement et d’Ècoulement de Soja (CTAE) on the BoP marketing of a
soybean-based product called soya goussi. CTAE was already producing and selling
soya goussi, but the packaging was unappealing, and the product was prepared
under unhygienic circumstances. Plus, the size of the product did not appeal to the
consumer. Based on these insights, CTAE and 2SCALE came up with an improved
way of producing the soya goussi, leading to a higher-quality product at the same
cost, which was better appreciated by the consumer. It was also sold in larger-sized
and higher-quality packaging, with a label that provided information on product
characteristics, which was missing previously. Consumers responded positively to
these changes, which contributed to a 15–20% increase in sales, compared to the
original product.

6.4.6.2 Branding

Even though branding could be seen as part of a product development strategy, we

describe it here separately, because the importance of good branding, particularly to
the BoP, is often largely underestimated. Companies tend to refrain from investments
in branding and use very basic packaging, promotion, and other branding materials –
or do not have the capacity in-house to develop such branding materials. At the same
time, the product itself not only needs to be of good quality or well priced, but it also
needs to look good, and the broader brand needs to appeal to BoP consumers to help
express the company’s values. A successful brand meets three key criteria:
6 Innovating at Marketing and Distributing Nutritious Foods at the Base… 165

• Appeals to the customer

• Is distinct from the competition
• Represents the values of the organization
The relevant tools for this strategy are the persona, value proposition, and brand-
ing. As an example, 2SCALE supported Shalem Investments in Kenya in product
and brand strategy, developing a nutritious porridge targeted at the BoP (Box 6.4).
The first step was to develop a product formula that met the nutritional needs and
taste palate of the Kenyan BoP consumer. Once the product formula was finalized,
the key challenge was to develop a brand strategy and packaging design. To ensure
the brand appealed to the customer, Shalem conducted consumer research. The key
conclusion from this work was that customers were highly aspirational and con-
cerned by the quality of the product. To meet these preferences, Shalem developed
a modern and colorful brand in quality, printed pouches – ensuring that the product
had a high sense of perceived quality. This strategy directly allowed Shalem to dif-
ferentiate itself from its competitors, who were mostly still using printed paper bags
with limited colors. Finally, Shalem had a strong vision for its organization that was
incorporated in the new packaging design: embracing an energetic and empowering
view on providing quality nutrition.

Box 6.4 Business Champions – Snapshot: Shalem, Kenya

Founder of Shalem Investments, Ruth Kinoti, is one of 2SCALE’s Kenyan
business champions. Prior to joining the 2SCALE program, Shalem focused
on the aggregation and sales of farmers’ produce, such as maize, beans, sor-
ghum, and soybeans. During the 2SCALE program, Shalem transformed into
processing and marketing goods under the brand name Asili Plus in the
Kenyan retail sector.

Over the course of 3 years, Shalem has passed all five steps of the 2SCALE
journey. At the core of this journey was the added value for sorghum targeted
to consumers. We facilitated co-creation workshops to identify gaps in the
market and consequently develop a branding and distribution strategy. The
outcome was a re-branded porridge flour that was affordable for BoP consum-
ers. The packaging was also designed and developed considering strict coun-
try regulations on plastic use.

(continued)
166 N. van Dijk et al.

(continued)
To promote it and make it available, a marketing and distribution strategy
was developed and implemented. In just a few short weeks after launching her
new marketing strategy, using a small pool of promoters, Kinoti reached 800
women in the community. For market activation, a tent was built at one of the
largest open markets in Meru, the Gakoromone market. There were music
events, talks on nutrition, and 10 brand ambassadors, young women and men,
who introduced the product to vendors and customers in the market.
Over 2000 people were reached during those market days, which took
place once a week for 3 weeks. The customers had the opportunity to taste the
Asili Plus porridge flour and received promotional items, such as free T-shirts,
after purchasing more than four packets of the porridge.
Shalem Investments plans to grow its business by replicating the marketing
and distribution strategy to other parts of the country, which will triple its
income. The women involved during the pilot will be part of the micro-­
franchising model, in which they will continue selling the Asili Plus fortified
flour as an income-generating activity.

Another example of brand development comes from our groundnut partnership

located in the Ivory Coast. The business champion, the Komborodougou Women’s
Cooperative, previously sold unbranded groundnut paste in simple plastic bags. By
selling the groundnut paste in this very basic packaging, it was difficult for consum-
ers to distinguish their product from other similar products. Eventually, together
with 2SCALE, a new type of packaging was selected – small plastic containers.
Along with a newly developed brand, which was applied to the plastic containers,
the brand concept characterized the region where the product was produced, making
the branding also easily applicable to any other products the cooperative would
develop in the future.

6.4.6.3 Market Activation

Earlier in this chapter, we introduced the ATEAR model as a critical building block
for BoP market activation activities. These market activations are meant to bring
(new) products to the attention of prospective consumers, and let them experience
the product, ideally in the presence of a recognizable, trusted role model, to increase
the likelihood that the prospective BoP consumers will trust the product. Market
activations are often held at locations where BoP consumers typically come to buy
their products (such as open markets during market days) or at places where peers
meet or trusted people can be found. Examples of these are activations in women’s
groups (like Chamas in Kenya) and around churches or community halls in the pres-
ence of local religious or community leaders. Sometimes, activations are specifi-
cally targeted at a particular audience. In the case of the soy kebab pilot in North-East
6 Innovating at Marketing and Distributing Nutritious Foods at the Base… 167

Ghana, part of the broader soybean partnership, we identified the significant

­potential of selling nutritious snacks (soy kebabs) through local schools, instead of
the sweets and cookies that were usually sold there. In this particular case, the mar-
ket activation fully focused on schoolchildren (Box 6.5).

Box 6.5 Business Champions – Snapshot: Banda Borae, Ghana

Banda Borae Cooperative is one of the more grassroots partners with which
2SCALE developed BoP marketing activities. It is a processing group of 20
women, who process and sell soybean kebabs in Kpandai, rural northern
Ghana. The cooperative initially marketed their soybean kebabs at the local
village market, without a branding or retail strategy.

Sales were seemingly effective, especially on market days in Kpandai,

when all the other villages came together to buy and sell goods. However,
sales remained stable and little growth was achieved.
Together with 2SCALE, the cooperative managed to expand its route to
market by introducing a branded container as a sales outlet in a number of
schools. This solution came about during the Business Model Canvas work-
shop and discussion on marketing issues. The strategy was supported by
stakeholder engagement with school authorities (school heads and teachers)
to directly target the schoolchildren for nutritional purposes.
The partnership also developed a mobile channel (containers) to enable
women to sell soybean kebabs in branded containers and attire in various
locations to enhance their appeal and visibility, which turned out to be the
most effective distribution strategy.
Over the course of a short six-month pilot period, these two marketing
channels increased sales of the kebabs on a daily basis, from an initial average
of 150 sticks to 500 sticks per retailer. The cost of a stick of kebab is 10 Ghana
pesewas (US $0.02) and provides a nutritious, protein-rich alternative to the
sugary snacks schoolchildren would otherwise purchase.
168 N. van Dijk et al.

During market activations, the product is often introduced in a playful and fun
way, for instance, in combination with dancing, singing songs, and playing music.
MCs ensure visitors are enthusiastic about what is happening and create a buzz.
Next to the physical location where the activation is held, vans or other motorized
vehicles tour the neighborhood to gather a larger crowd to the location of the market
activation. In Ethiopia, during the market activations with business champion
Family Milk, as part of the larger dairy partnership, locally celebrated singers were
involved in the market activation. In Nigeria, a market activation for a Tom Brown
product in Kaduna state greatly benefited from the visit of the governor’s wife to the
activation activities. And obviously, a critical element in all market activations is to
provide consumers the opportunity to taste the product.
Lastly, coupons or other actions are sometimes introduced to attract consumers
during the activation to buy the product at a discount (the Action in ATEAR). These
market activations are also the right moments to inform potential BoP consumers
about the importance of nutrition. In the aforementioned pilot on soy kebabs, activi-
ties were developed, together with school teachers, to educate the children on the
importance of a healthy diet and how that could improve their performance both at
home and in school. Combining the general benefit of such activities, the school-
children also better understand why it is more beneficial for them to buy a protein-­
rich soy product instead of sugary snacks; this will help drive demand for the soy
kebab sticks.

6.4.6.4 Last-Mile Distribution

Even when a product is available and properly marketed, there are no guarantees
that the product will actually reach BoP consumers. This was clearly the case in the
first pilot 2SCALE delivered with GUTS Agro, where together we developed the
Supermom product completely from scratch and ran an intensive marketing cam-
paign to promote the product. However, the product uptake was less than expected,
and distribution was a larger than expected part of the challenge.
As mentioned earlier, BoP consumers are typically removed from conventional
market outlets. This means that sales points have to be located closer to the con-
sumer, or distribution should be organized in such a way that it directly reaches the
consumer. Previously we referred to three strategies through which such “last-mile
distribution” can be organized in a way that does not become too costly and the end
product too expensive.11
• Use of existing channels and infrastructure: The first and easiest approach is to
use existing distribution channels, also referred to as “piggybacking.” To explore
such approaches, the business champion needs to investigate the existing chan-
nels in the BoP target market. For example, there could already be a distributor
active in the market that sells other, non-competing FMCGs such as bottled

11
http://bopinc.org/updates/publication/access-to-food-and-nutrition-at-the-bop
6 Innovating at Marketing and Distributing Nutritious Foods at the Base… 169

water. If this distributor has sufficient reach, the business champion could explore
a potential collaboration. The advantage is that such an approach may reduce the
business champion’s own investment in setting up a distribution system. Also,
this can be done quite quickly and easily. The disadvantage is that there is limited
control. Therefore, it is often suggested that business champions build initial
sales themselves before involving external distributors.
• Hybrid partnerships: The second approach is to explore hybrid partnerships. The
difference from the first strategy is that hybrid partnerships focus on organiza-
tions that are not primarily focused on selling FMCGs. These could be nongov-
ernmental organizations (NGOs), microfinance institutions (MFIs), self-help
groups (SHGs), or cooperatives. For example, an NGO that works on promoting
health messages in a BoP community might also be interested in promoting and
selling nutritious porridge. The benefit of such a hybrid partnership is that there
might be strong synergies, without any pressing business competition. The
downside is that hybrid partnerships can take quite some time to establish, and
they can be political in nature. These partnerships are not necessarily driven by
business acumen, limiting their commercial viability.
• Micro-franchise: The final strategy is the micro-franchise model, in which a
business champion works on setting up a network of individual micro-­
entrepreneurs. These micro-entrepreneurs can function as sales agents, either by
having a small shop or pushcart or going door to door. The product portfolio that
these agents sell can exclusively belong to the business owner or include other
FMCGs. Building such models requires significant investment. All the agents
need to be recruited, trained, and provided with marketing materials and stock.
After that, it requires thorough management to ensure the agents perform well.
The main advantage of this approach is that the business champion has better
control of aspects such as pricing, product placement, and more. It can take years
before the model is fully operational and has reached scale. It is often a model
that has high appeal among business champions; however, it is important to keep
these challenges in mind before adopting such an approach.
As mentioned above, GUTS Agro’s Supermom food product did not sell as fast
as we had expected. So, the business looked at a more direct distribution method
that utilized different wholesalers and increased GUTS Agro’s control over distribu-
tion. Ultimately this led to the setup of the Likie Ladies’ network, a network of
around 100 independent female sales agents that distribute GUTS Agro’s products
door to door.
Also, as part of the pineapple partnership in Benin, business champion Promo
Fruits set up a micro-franchised network of sales agents, as it wanted to have control
over the distribution and sales of its fruit juice. Additionally, it was an opportunity
to spark micro-entrepreneurship locally. It was also a good way to access firsthand
customer feedback through the agents that interacted with consumers daily. At the
same time, the model was relatively cost intensive, so Promo Fruits developed a
business plan for the distribution network to secure working capital to tackle cash
flow challenges (Box 6.6).
170 N. van Dijk et al.

Box 6.6 Business Champions – Snapshot: Promo Fruits, Benin

Back in 2000, a group of pineapple producers, led by Dieudonné Alladjodjo,
unsuccessfully tried to develop different trading relations with larger off-­
takers in Benin, Nigeria, and the European Union. The group decided that
processing pineapple juice for the local market was more commercially viable
and created the Pineapple Recovery Initiative (IRA) cooperative, with starting
capital of US $5,000 and a processing capacity of 200 kg of pineapple per day.
The IRA cooperative gradually increased its processing capacity to 5,000 kg
per day in 2009.

Then in 2011, the IRA cooperative was transformed into a company with
limited liability (SARL) and 100% of its shares distributed among IRA mem-
ber producers. The company’s processing capacity increased from 5 to 45
tons per day.
The business model of Promo Fruits is based on four pillars:
1. The company sources from small-scale pineapple producers in Benin,
including 2,580 producers grouped into nine professional organizations.
2. Promo Fruits produces 100% natural juice, for which the company has
been able to develop a national and sub-regional market.
3. The company offers producers a competitive and incentivizing price,
which motivates and retains producers and allows the factory to guarantee
its supply.
4. Promo Fruits intervenes upstream in the value chain by facilitating the
access of producers, who are members of the sourcing network, to an input
credit system.
Over the course of collaboration between Promo Fruits and 2SCALE, the
company’s management indicated the intent to focus more specifically on
BoP markets. Without changing the nature of the product (natural fruit juice),
new packaging was developed. Smaller SKUs were produced to increase
affordability, and a micro-franchise model was tested; initially, there were 15
sales agents, (five on cargo bikes, five with pushcarts, and five on foot, going
door to door), all selling not only the juice but also making combinations with
sandwiches. The agents performed well, and at the end of the collaboration
between 2SCALE and Promo Fruits, a business model was written to attract
funding to sustain the network independently.
6 Innovating at Marketing and Distributing Nutritious Foods at the Base… 171

In Ghana, via the soybean partnership, business champion Yedent Agro took
another approach by piggybacking off the existing networks of “koko sellers”12 –
through which the company decided to distribute and sell its Maisoy Forte Tom
Brown mix. This was a good channel for Yedent Agro to expand its exposure toward
BoP consumers. However, this strategy limited the company’s influence over the
final sales price of the product, which was determined by the koko sellers them-
selves. This became a beneficial strategy for Yedent Agro. They first wanted to test
this new model on a smaller scale and with limited resources before considering
scaling up. However, the first test with the koko sellers was so successful that the
company decided to continue with the model and scale it up.

6.5 Lessons Learned

During the program, the 2SCALE team collected different lessons learned, as this
rather pioneering work with African food-producing SMEs and farmer organiza-
tions did not always run smoothly. The following are a few lessons learned that
could help strengthen the potential for success of any programmatic approach to
BoP marketing.

6.5.1 The Opportunity Is Real

In the beginning of the design and implementation of the 2SCALE program, it was
not foreseen that the BoP marketing pilots would become a key intervention in sev-
eral of the partnerships. During the program, the value of the BoP marketing pilots
became apparent to the project partners and the business champions. Especially
when the first successful cases were established, other business champions were
motivated to follow a similar path. This development has shown us that the pilots
not only offer value for the program and champions involved but also that there is a
real market opportunity in terms of serving the BoP with nutritious quality foods.
BoP consumers have proven to be open to try, use, and repeatedly purchase the
products that were launched by the champions. So yes, the opportunity is real –
from yoghurt to porridge and soy drinks! For all pilots that were implemented, the
majority are still running and serving the BoP. This is the reason that for the second
phase of the 2SCALE program, the official target is to reach one million consumers,
necessitating that 2SCALE continues to support more business champions access-
ing local BoP markets and serving them with nutritious food products.

12
Koko is a common type of warm porridge that is produced on the spot by street vendors called
“koko sellers.” They run their preparation and sales out of simple stalls on the roadside across
Ghana.
172 N. van Dijk et al.

6.5.2  onsumer-Centered Approach Is New for Most Business

C
Champions

As explained in this paper, one of the first steps in building a pilot is to develop an
in-depth understanding of the market and the consumers. This consumer-centered
approach is sometimes considered as a default way of approaching new business
development. However, for most business champions in the 2SCALE program, this
was a novel and new approach. For some champions, it was a struggle to have to
first invest in research before being able to take action. Even though the business
champion could target its new products at local communities next to the factory, it
was still a big step to actually go out in the market and gain a deep understanding of
the end consumer. Ultimately, all successful champions did embrace this more lean,
consumer-centered approach. In the 2SCALE program, it has therefore been a criti-
cal step in all BoP marketing pilots and will be included in future partnership
development.

6.5.3 Actionable Insights as Catalyst for Progress

At the start of the 2SCALE program, significant time and resources were invested
in conducting general market research on the specific 2SCALE sectors in the vari-
ous countries. However, it became clear that this general market data provided little
use for the business champions. In short, market data is not the limiting factor for
champions to develop products and marketing strategies. Instead, business champi-
ons search for tangible product and market opportunities, applying a lean approach
in leveraging these opportunities. During the course of the program, 2SCALE tai-
lored its approach by conducting smaller market/consumer research activities that
were tailored to the specific business champions. This resulted in actionable insights
that the business champions actually could use, such as a practical way of mapping
local competitors, pricing, and understanding consumer desires and behavior. Once
it became apparent that these practical and actionable insights were useful for the
champions, this research approach was further integrated across the program.

6.5.4 Transformation of the Business Champion Is Needed

Particularly for business champions that have a business that is not (yet) dealing
directly with end consumers but rather with other businesses or governments, BoP
marketing (or any other direct consumer marketing) is a radically different type of
business. Instead of dealing with large volumes, contracts, and buyers, the BoP
market progresses in a slower and more gradual manner. In addition, a creative
approach is required to understand consumer needs and desires and, in turn, build
relevant products and marketing strategies. Suddenly CEOs need to make decision
6 Innovating at Marketing and Distributing Nutritious Foods at the Base… 173

on various “creative considerations,” such as what label designs, colors, and images
are needed. It also requires a different approach in distribution and sales, dealing
with many small volumes and a large number of cash transactions. All in all, work-
ing in the business-to-consumer (B2C) channels requires a specific set of qualities
and skills that many business champions did not have at the start of the partnership.
In some cases, the business champion did not manage to make this adjustment and/
or build a B2C team. However, those that did succeed made that adjustment and
transformed their business approach radically. For instance, GUTS Agro is now
working with over 100 sales agents that all require dedicated product supply, day-­
to-­day support, and training. Based on these experiences, the 2SCALE program
now aims to prepare business champions in more detail on building successful B2C
channels and its related transformation in thinking. Again, the lessons learned from
the first business champions have helped tremendously in preparing others. That is
why 2SCALE also promotes cross-learning between champions and organized field
trips to successful case studies for new or potential business champions. Perhaps
most importantly, the business champions are guided through this journey by the
2SCALE team.

6.5.5 Activating the Market Is a Must

Another key learning has been the crucial value of activating the market, from the
market product launch to the related promotional activities. Selling a new product
to the BoP is not easy and does not happen by itself. Introducing the product into
local supermarkets or simply selling it to wholesalers and sales agents is not enough.
It requires a clear and specific strategy, including which distribution channels will
be used (e.g., women groups) and which marketing activities will be organized (e.g.,
tasting sessions) in order to accelerate product sales. This approach is explained in
detail in this paper, and it has been proven repeatedly as a fundamental step to help
kick start a business. At the same time, both the business champion and 2SCALE
have to be cautious of the relatively high cost of such market activations and make
clear arrangements on how these costs can be shared to be as equitable as possible.
Now that there are several successful case stories on market activation, it becomes
easier for business champions to replicate certain approaches. Cross-learning
between champions is therefore facilitated in the program as well as promoting
learning and results via blogs and videos.

6.5.6 Getting Stuck by Missing or Broken Machinery

As mentioned in Sect. 6.2 under conducting a needs assessment, 2SCALE learned

that it is critical for the success of a pilot that a business champion has the right
machinery in place and is ready for production, especially when dealing with larger
174 N. van Dijk et al.

business champions that produce processed and/or packaged foods and rely heavily
on machinery to produce their food products. In several cases, pilots were heavily
delayed or did not progress further than the strategy phase, because the product
simply could not be produced due to the delayed procurement of the right machin-
ery (or the right volumes of raw materials) or lack of local technicians available to
service or fix machinery that broke down or did not function properly. This makes
all the preparatory work a waste of time and does not fit the context of piloting,
where approaches and strategies will need to be tested under a short time span.
Doing a proper assessment with the business champion on their “capacity to pro-
duce” is paramount, and one should be cautious with promises regarding bank loans
to be secured, grants to be received, or technical support to be available.

6.5.7 Adhering to Food Safety Regulation Is of Essence

In many of the pilots, the strategizing activities eventually led the business cham-
pion to come up with a completely new food product. However, if a company comes
along with a new product, especially when the company has finished “market test-
ing” their new product and wants to launch the product in a larger market, the new
product often will need to be tested by the food safety authorities and receive a
certification that it meets food safety requirements. In some instances, these pro-
cesses have proven to be very time and resource intensive; particularly with the
smaller business champions, management did not always have the right expertise or
capacities in place to deliver on the different requirements or requests for informa-
tion that these government agencies ask for. Therefore, in different instances, as part
of an exit strategy, 2SCALE has supported the business champion in meeting the
requirements to get their product approved and certified by food safety agencies.

6.5.8 Preventing Adverse Environmental Effects

In several of the BoP marketing pilots, new products were developed, or new stock
keeping units (SKUs) of products were introduced. Often, these developments also
cause larger volumes of packaging materials, often plastic, to be introduced to the
market. When not addressed properly, this increase in packaging materials could
lead to substantially more plastics to be dumped as garbage and affect the environ-
ment. This challenge is not just specific to 2SCALE and touches many different
market-led initiatives focusing on BoP markets. Large multinationals like Unilever
acknowledge the challenge and are looking at alternative, often biodegradable,
packaging options. In the future, 2SCALE will look at opportunities for introducing
more environmentally friendly packaging options or working with companies on
recycling of their own waste streams, bearing in mind at the same time that this
should not add prohibitive additional costs to the business model.
6 Innovating at Marketing and Distributing Nutritious Foods at the Base… 175

6.5.9 Measure the Impact of Activities on a Consumer Level

It was mentioned earlier that at the beginning of 2SCALE, it was not foreseen for
the program to undertake BoP market activities beyond doing market research and
sharing outcomes with business champions. When 2SCALE started to engage more
actively with business champions in BoP marketing pilots and implemented BoP
marketing activities, no system was put in place to measure their impact due to the
piloting nature of the activities. In many of the pilots, sales figures and other general
business information on the pilot’s performance was shared by the company.
However, there was little understanding to what extent the pilots actually contrib-
uted to a nutritious and/or more affordable diet for BoP consumers. The understand-
ing of the impact at the consumer level remained very generic and indirect. For
example, in Benin, we brought a soy-based product on the market that could substi-
tute white meat (containing around the same protein level as the meat) at a 30%
lower price, making nutritious food available at more affordable prices, an assumed
positive consumer impact. As 2SCALE is a program that strives to make a develop-
mental impact, it is critical that in the future, the program implements better systems
to measure the effect of BoP marketing activities at a consumer level.

6.6 Looking Ahead

Since January 2019, a second phase of the 2SCALE program commenced, offering
new opportunities to take a more extensive approach toward BoP markets and nutri-
tious food products. This translates into an additional program target that is different
from the first phase, namely, a target focused on consumers. The second phase aims
to improve affordable access to a nutritious diet for one million BoP consumers. To
reach this goal, the lessons learned described in this section will be used to create a
more rigorous approach to BoP marketing. There are several approaches that
2SCALE will take to create a bigger impact for BoP consumer markets, in compari-
son to the impact achieved during the earlier phase.
First, the results of BoP marketing pilots from the first phase will be used to
showcase to new business champions, helping to clearly demonstrate that the mar-
ket opportunity at the BoP is real. We expect that the success of business champi-
ons – Shalem Investments in Kenya, Promo Fruits in Benin, Yedent in Ghana, and
the more grassroots business champions, such as the Danaya cooperative producing
attieke in Mali or the Funtua women’s group producing fura in Nigeria – will inspire
other food-processing SMEs and producer organizations to do the same. Well-­
documented case studies will be used to create this ripple effect. We will do this not
only through face-to-face encounters, but also through digital learning, such as
webinars and podcasts – all building on the experience and insights from the
first phase.
176 N. van Dijk et al.

Another mechanism for increased impact is replication. Overall, the second

phase will have a stronger focus on sector transformation, ensuring that the impact
of 2SCALE goes beyond individual partnerships and transforms entire sectors. For
instance, building BoP market propositions around the processing of soybeans in
Nigeria should not only positively impact the business champion with whom this
work is undertaken, but ideally it should impact the entire soybean production sec-
tor in Nigeria and even beyond, inspiring like-minded entrepreneurs in other coun-
tries where 2SCALE is active.
There will also be more room in the program to work on BoP marketing. During
the first phase of 2SCALE, BoP marketing was delivered in a limited, pilot format –
working with short timeframes and minimal budgets. Marketing pilots were also
undertaken in less than half of the 53 partnerships that were mobilized. In the sec-
ond phase of 2SCALE, the target is to have a BoP marketing component in at least
40 of the anticipated 60 partnerships and to have at least five of these 60 partner-
ships primarily focused on BoP markets. For this, the in-country expertise on BoP
marketing across all eight 2SCALE countries will be expanded.
The focus also will increase on nutrition. The program will further involve nutri-
tion experts to help assess the nutritional value of the different products developed
under the BoP marketing approaches, to ensure all products developed under BoP
marketing activities are more nutritious than the current alternatives in the market.
From the demand point of view, in close synergy with market activations to be
undertaken, 2SCALE will look at the opportunity to develop activities that focus on
behavioral change in nutrition to help create more awareness with BoP consumers
on the importance of nutrition and to influence their purchasing and consumption
behavior for the better when it comes to food products. This will not only have a
potentially positive impact on the health of consumers, it will also create demand
for the food products that are developed under BoP marketing activities, creating
new market opportunities for our business champions.
Finally, the importance of partnerships with other programs, organizations, or
companies must not be forgotten here. The new and ambitious target of providing
access to a more nutritious and affordable diet for one million BoP consumers will
need smart collaborations. This way, 2SCALE can share its lessons learned on BoP
marketing and, at the same time, leverage the networks of other organizations and
programs that also work on the implementation of business-led approaches to mar-
keting and distributing nutritious food to the BoP.

6.7 Concluding Remarks

As mentioned in the last section, the 2SCALE program is extended with 4 years and
will run until 2023. The approach and lessons learned will be leveraged with the
agribusinesses that will be part of the second phase of 2SCALE. Apart from that, it
is our wish that this chapter will be useful for other agribusiness and incubator
6 Innovating at Marketing and Distributing Nutritious Foods at the Base… 177

p­ rograms. We hope you find those business cases inspiring and the lessons learned
useful as we all work toward a more sustainable and viable food system in low-­
income markets.

References

Osterwalder A, Pigneur Y (2010) Business model generation: a handbook for visionaries, game
changers, and challengers, vol 288. Wiley, Hoboken
Prahalad CK (2009) The fortune at the bottom of the pyramid: eradicating poverty through profits.
Pearson Education Publishers, United States. 358 p

Open Access This chapter is licensed under the terms of the Creative Commons Attribution 4.0
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the copyright holder.
Chapter 7
Innovation and the Quest to Feed
the World

David Donnan

7.1 Introduction

Our ability to feed a growing population has been the topic of government policy-­
makers, economists, NGOs, and most obviously the agriculture community for cen-
turies. In this chapter, we explore the history of hunger relief efforts from
communities, religious organizations, and governments and now toward private cor-
porations and innovative agriculture startups. While global levels of hunger and
malnutrition have dropped significantly in the last few decades, there are concerns
that agricultural advancements and R&D spending are not enough to unlock the true
agricultural potential of the millions of smallholder farmers in rural and developing
nations. Government spending on agricultural R&D has decreased in the last decade
and many of the large-scale NGO activities are now focusing on environmental and
sustainability issues. A renewed focus by private corporations’ CSR initiatives,
coupled with NGOs and startup entrepreneurs, is offering a new approach to innova-
tions in hunger relief.

7.2 Global Issues of Hunger and Malnutrition

Throughout history, agriculture innovation and hunger relief have always been
closely connected. The advent of perennial agriculture led to the first permanent
settlements over 10,000 years ago, creating the first reliable source of food (Diamond
1998). Agriculture supplied a more stable source of food and nutrients to the early
hunter-gatherers and provided the foundation of tribal governance, work rules, tool
development, and culture for early civilizations in the Middle East, Asia, and Africa.

D. Donnan (*)
Kearney, Chicago, IL, USA
e-mail: [email protected]

© The Author(s) 2021 179

H. Campos (ed.), The Innovation Revolution in Agriculture,
https://doi.org/10.1007/978-3-030-50991-0_7
180 D. Donnan

Structured, sustainable agriculture allowed civilization to take root and develop.

Small tribal encampments became villages, then city-states, and eventually nations
(Harari 2015).
The development of agriculture and subsequent agricultural revolutions allowed
for accelerated population growth. Eventually it evolved from simply enabling pop-
ulation growth to reducing hunger resulting from population growth. As population
centers grew, fewer people were involved in agriculture and farmers role shifted
from self-sufficient harvests for their families to feeding all the members of the
community. How to feed a growing planet has been an issue of public discourse for
centuries, perhaps since Thomas Malthus wrote in 1798 that “the power of popula-
tion is so superior to the power of the earth to produce subsistence for man, that
premature death must in some shape or other visit the human race” (Malthus 1798).
Fortunately Malthus’s warning has not come to pass, thanks largely to various tech-
nological innovations (first mechanized farming tools, later nitrogen fertilizers, and
subsequently the genetic improvement of crops which through the green revolution,
the development of transgenic crops and other scientific progress has enabled dra-
matic increases of productivity in most crops) that have aided the “power of the
earth” to meet the demands of a population that has increased eightfold since the
eighteenth century. Recently, the issue of food security has come back into the spot-
light (Fig. 7.1). After decades of relative stability, food prices have become more
volatile, dramatically illustrated by the 2007–2008 global food crisis that saw riots
in over 25 countries.1

Fig. 7.1 Prevalence of undernourished in the world (2017). (Source: FAO 2018 The State of Food
Security and Nutrition in the World. DC Donnan analysis)

1
https://www.theguardian.com/environment/2010/oct/25/impending-global-food-crisis
7 Innovation and the Quest to Feed the World 181

Today (2018), hunger has been dramatically reduced around the world. According
to FAO “State of Food Security and Nutrition 2018,” out of a world population of
well over 7.6 billion, only approximately 821 million are undernourished (FAO,
IFAD, UNICEF, WFP and WHO 2018). This is a dramatic decrease from 30 years
ago when over a 1 billion people were considered hungry and malnourished world-
wide. Even with a slight increase in global undernourished population in recent
years, hunger has been reduced from 20% of the world population to 11% today
(Fig. 7.2). If we look deeper, we find that most hunger and malnourishment exist in
areas where access to nutritious food is limited for a variety of reasons. External
forces such as drought, insect damage, transportation availability, and geopolitical
conflict are much greater influencers of food access than agricultural productivity.
We currently are producing enough food to feed the world; it is just not evenly
distributed.
That still leaves us with the question of how to feed the future population as we
continue to witness continued, although slowing, global population growth. Current
estimates predict that the global population will increase to over 10 billion people
by 2050, an increase of 2.5 billion or 35%. There is no linear relationship between
population growth and the necessary increase in food calories. Resources like land,
water, soil are finite. But we can improve their effectiveness by increasing our agri-
cultural productivity or yield (Figs. 7.3 and 7.4). The unknown variables are human
diet, climate, and access.

Fig. 7.2 Number of malnourished people in the world (millions and %). (Source: FAO 2018 The
State of Food Security and Nutrition in the World. DC Donnan analysis)
182 D. Donnan

Fig. 7.3 Increase in agricultural output required (to meet projected demand). (Source: The future
of food and agriculture, FAO Rome 2017 DC Donnan analysis)

Fig. 7.4 Growth in land and labor productivity (1961–2005). (Source: OECD Library Global and
US Trends in Agricultural R&D in a Global Food Security Setting 2012 DC Donnan analysis)

As population groups become more affluent, they eat more processed food and
increase their protein consumption to replace plant-produced proteins. As a result,
we find the 35% increase in population will require almost 100% increase in crop
production to meet the shifting diet and nutritional needs.2 Climate has always had
a significant impact on agriculture from regional droughts to early frosts and exces-
sive rains destroying entire harvests. Access is still the most significant contributor
to famine and hunger. Globally we produce enough food but due to lack of infra-
structure, geopolitical conflicts, and spoilage, we are unable to efficiently get it to
those in need.2 Finally, as a society, we do not utilize our food resources well. Food
7 Innovation and the Quest to Feed the World 183

waste is a significant issue. It is estimated that between 25% and 30% of all har-
vested food is wasted either through cultivation, transportation, processing, and
consumer plate waste. Managing and reducing food waste can go a long way to
closing the food gap between agricultural production and population
consumption.2

7.3 The Long History of Hunger Relief

Charity and feeding the hungry have always been part of human society. It was first
referenced in biblical times in both Christian and Jewish scriptures.3 Throughout
history hunger relief was a localized event focused on the less fortunate members of
a community. As civilization evolved, the task of feeding the poor migrated from
communities to churches and religious organizations and then to larger-scale gov-
ernment institutions. In the Ottoman Empire, the development of public soup kitch-
ens – which handed out free food to the needy in a combination of patronage,
hospitality, and charity – and food banks evolved in collaboration with the churches
(Cohen 2005).
Another example of community outreach on a global scale occurred in 1847,
during the height of the Irish Potato Famine; a Choctaw community in Oklahoma,
USA, who had been forcibly removed from their ancestral land during what came
to be known as “The Trail of Tears,” pooled its money to help feed starving families
across the Atlantic, raising $170 ($5,000 in today’s currency) to donate to the people
of Ireland. In 2015, Ireland erected a monument called Kindred Spirits to pay tribute
to the Choctaw people’s generosity. Irish schools still use this history lesson to teach
the spirit of true selflessness.4
After World War I, large-scale, government-state-funded hunger relief became
more prevalent as shipments of foodstuffs were organized to feed the needs of refu-
gees and inhabitants of war-torn regions. Federal food assistance programs arose
during the Great Depression when excess wheat production was diverted to feed the
poor and less fortunate peoples in the United States.5 In the 1940s, the newly estab-
lished United Nations (UN) became a leading player in coordinating the global fight
against hunger. The UN has three independent agencies that work to promote food
security and agricultural development. The first, the Food and Agriculture
Organization (FAO), created in 1943, is a specialized food and agriculture agency
tasked with eliminating hunger, food insecurity, and malnutrition; reducing rural
poverty; enabling more efficient food systems; increasing resilience to disasters;

2
http://www.fao.org/tempref/docrep/fao/meeting/018/k6021e.pdf
3
https://www.nationalgeographic.com/foodfeatures/feeding-9-billion/
4
https://www.irishtimes.com/news/ireland/irish-news/choctaw-generosity-to-famine-ireland-
saluted-by-varadkar-1.3424542
5
http://nrs.harvard.edu/urn-3:HUL.InstRepos:8846747
184 D. Donnan

and making agriculture, forestry, and fisheries more productive. The second, the
World Food Programme (WFP), established in 1961 as a joint FAO/UN joint ven-
ture, provides emergency food aid and humanitarian services. The third agency, the
International Fund for Agricultural Development (IFAD), formed during the food
crisis of the early 1970s, is tasked with providing improved technologies and pro-
duction methods to the poorest nations of the world (Shaw 2007).
Most hungry and malnourished peoples live in rural areas and earn their livings
by working on small-scale farming, fishing, or forestry. Almost 75% of these farms,
around 375 million, are smaller than one hectare in size and provide barely enough
food for the family to live. Programs that helped rural families in times of crisis
were often extended to become permanent relief operations. While assisting in
immediate hunger and nutrition efforts, these programs did little to improve the
long-term viability and sustainability of the rural poor.
After decades of hunger relief programs, a shift in policy emerged in the 1980s.
Leading food donor nations became weary of providing excess foodstuffs to other
food deficit nations. It was becoming evident that the wholesale export of charitable
grains and foods to developing nations was hurting their ability to develop their own
sustainable agriculture economy.6 A new “market-based” approach started to emerge
that emphasized self-sufficiency and building infrastructure to support local farmers
and sharecroppers. Food aid shifted from exporting food to providing the necessary
funds and expertise to develop agricultural food systems within countries and
regions (Fig. 7.5). While governments led this shift, the newly emerging

Fig. 7.5 Financial flows to low-income countries (US$ Millions). (Source: The future of food and
agriculture, FAO Rome 2017 DC Donnan analysis)

6
https://www.weforum.org/agenda/2015/10/does-foreign-aid-always-help-the-poor/
7 Innovation and the Quest to Feed the World 185

multiregional and global corporations started to become involved since they owned
the production and distribution infrastructures need to provide access to food.

7.4  Shift in Values: The Emergence of Corporate Social

A
Responsibility (CSR)

As governments of developed countries reduced food relief efforts in emerging

economies, corporations began to see an opportunity for growth through expanded
markets. In lieu of reduced government intervention, corporate social responsibility
(CSR) programs began to develop, designed to benefit the triple bottom line of eco-
nomic, social, and environmental stewardship. The failure of Enron, WorldCom,
and Tyco led to an increased mistrust of corporations and their ability to work
toward the public good (https://hbr.org/2009/06/rethinking-trust). As a result, gov-
ernments and NGOs pushed to solidify the need for better corporate oversight and a
rethinking of responsibilities to consumers and the society. CSR initiatives are to
some degree a result of the need for large corporations to regain public trust and
provide better environmental and social stewardship.
CSR initiatives in the food and agriculture sector often started as environmental
sustainability efforts to improve all aspects of the supply chain from farming prac-
tices to the use of renewable and biodegradable packaging. As consumers became
more aware and vocal about environmental issues, large corporations saw the need
to communicate positive results in environmental and sustainability activities. Large
corporations have embraced CSR programs as they try to shake the image of “Big
Business” and become more socially aware. Large agri-food companies also see
CSR initiatives as a direct response to more persistent activism by NGOs focused
on social justice topics. In a landmark 2011 Harvard Business Review article,
Michael Porter and Mark Kramer argued that a new definition of values creation
was emerging in the capitalist system (Porter and Kramer 2011). The concept of
shared values was focused on a more sustainable capitalism by ensuring that limited
resources such as land, energy, environment, and labor were considered in the over-
all strategy of profit optimization. As they sought to improve their firms’ reputa-
tions, the resolution of societal problems, once the realm of governments and NGOs,
became a focus for large multinational corporations who realized they could create
economic value by creating societal value through a more efficient use of resources
and reconceiving products and services.
Today, according to a recent KPMG survey, over 93% of the top 250 global com-
panies report CSR initiatives.7 As they began to value CSR as an indicator of good
corporate governance and business growth governments, stock exchanges and regu-
lators are helping drive global corporations’ participation in CSR initiatives. In

7
https://assets.kpmg/content/dam/kpmg/be/pdf/2017/kpmg-survey-of-corporate-responsibility-
reporting-2017.pdf
186 D. Donnan

Fig. 7.6 UN sustainable development goals. (Source: United Nations Sustainable

Development Goals)

September 2015, the UN developed a list of 17 Sustainable Development Goals

(SDG) (Fig. 7.6), including poverty reduction, environmental stewardship, and
prosperity through the elimination of hunger, clean water and sanitation, good
health and well-being, and improved life on land and below water, detailed in 169
specific outcome goals targeted to be completed by 2030.8 Over 43% of the global
top 250 companies connect their individual CSR initiatives to the UN SDGs which
require governments, academia, private companies, and NGOs to work collabora-
tively in new and innovative ways.
For food manufacturing companies and retailers, the historic focus on taste and
consumption growth has been augmented by a prioritization of consumer nutrition
and well-being. Following the 2015 World Health Organization’s guidelines on
sugar and salt reduction in processed food (World Health Organization 2015), refor-
mulated products were introduced by several large global food companies in 2016.9
In agriculture, CSR programs have expanded beyond a focus on environmental sus-
tainability to encompass social impact through reduction of slave labor, small
farmer economic improvements, rural development, and the health of migrant farm-
workers. Leading food and agriculture companies embrace a comprehensive defini-
tion of CSR that covers many of their customers’ social, economic, and environmental
concerns (Box 7.1). As consumers from developed countries became more aware of
social injustices in the agricultural business, exporting companies realized the

8
https://sustainabledevelopment.un.org/content/documents/21252030%20Agenda%20for%20
Sustainable%20Development%20web.pdf
9
https://www.nytimes.com/2016/11/30/business/nestle-reformulates-sugar-so-it-can-use-less.html
7 Innovation and the Quest to Feed the World 187

benefits that attention to the living conditions of workers brings to their businesses
(Ortega et al. 2016).
Nestlé, www.nestle.com, is a company that has a 150-year history in the food
industry. Its global reach and involvement in everything from chocolate to water and
nutritional foods have given it the opportunity to work with agricultural operations
throughout the world. Nestlé has had a checkered past regarding social responsibility
and environment stewardship, and they have been the focus of activist’s scorn and
intense media scrutiny.10 Nestlé’s response is to increase their commitment to society
and nutrition demonstrated through their creating shared value (CSV) program that
works on the individual, community, and planet level on programs in sustainability,
nutrition, water, and rural development. In their 2017 report, Nestlé outlines one of
its initiatives to empower the next generation of farmers. The Farmer Connect
Program helps new young farmers to get the necessary training and mentoring to suc-
ceed as prosperous farmers. The benefit to Nestlé is to develop a strong farmer base
that will provide a reliable, low-cost, high-quality source of supply for their products.11

Box 7.1 Launching Collaborative Corporate Social Responsibility

Initiatives: The Consumer Goods Forum1
The Consumer Goods Forum12 (CGF) is an international industry association
that represents the leading consumer goods retailers and manufacturers glob-
ally. With member companies such as Nestlé, Walmart, Coca-Cola, and Procter
& Gamble, the CGF strives to drive positive change through and on behalf of
its members. The CGF mission is focused on four pillars and seven strategic
initiatives. Two of its key strategic pillars are Social and Environmental
Sustainability and Health & Wellness.
The CGF provides a global platform for collaborations between members
and NGOs, governments, public health authorities, and other relevant actors to
discuss areas for program acceleration and change. For many companies, it is
difficult to engage with the variety of NGOs, governments, and agencies on a
one-to-one basis. Through the CGF initiatives, the member companies can
engage with leading NGO organizations such as the World Wildlife Fund,
Greenpeace, International Labor Organization, and United Nations Industrial
Development Organization. The CGF provides a more unified forum of
engagement as well as a strong communication vehicle for its members to
show their motivation and persistence toward their CSR goals. Each of the
strategic initiatives is led by co-sponsors from the consumer product manufac-
turing companies and retailers.

(continued)

10
https://www.bloomberg.com/news/features/2017-09-21/nestl-makes-billions-bottling-water-
it-pays-nearly-nothing-for
11
https://www.nestle.com/sites/default/files/asset-library/documents/library/documents/corpo-
rate_social_responsibility/nestle-in-society-summary-report-2017-en.pdf
12
www.theconsumergoodsforum.com
188 D. Donnan

(continued)
Under the Health & Wellness mission of the association, the members
through their board of directors have made joint commitments on behalf of
their organizations:
• By 2016: Make company policies public on nutrition and product
formulation.
• By 2016: Implement employee health and wellness programs.
• By 2018: Industry-wide implementation of consistent product labeling and
consumer information to help consumers make informed choices
and usages.
• By 2018: Stop marketing communications to children under 12 for food and
beverage products that do not fulfil specific nutrition criteria based on sci-
entific evidence and/or applicable national and international dietary
guidelines.
Unlike hunger relief organizations, the CGF is clearly a business-oriented
association with the benefit of its members paramount. But they see the clear
focus on both employee and consumer health and wellness as a mandate for
change. The shift from a charity focus objective to a business and consumer
focus benefit has reoriented the nature of the strategies and initiatives. Each
company member is free to engage in their own way to develop CSR goals and
focus on consumer health through nutrition, fair wages, or safety. This pro-
vides a broader approach to the issues of feeding the world through a more
holistic approach to well-being, nutrition, and consumer health.
The CGF expects its members to be transparent in both their communica-
tions and their reporting. They host webinars, led by members who are look-
ing to share their expertise and best practices on these subjects, and produce
resources such as guidelines and toolkits to support members in the implemen-
tation of these actions. They also openly discussing them at key industry
events like the Sustainable Retail Summit.
1
Consumer Goods Forum website, www.theconsumergoodsforum.com, and
member interviews

7.5 Feeding the World: A Renewed Focus on Innovation

At the same time the CSR movement has brought positive change in global sustain-
ability and social justice, we have seen a steady decline in the funding available for
agricultural research – particularly by leading governmental organizations.
Throughout the nineteenth century, agricultural research and development expendi-
tures were on the rise as new developments in crop and animal science dramatically
improved land yields and labor efficiency. The United States was the largest con-
tributor to agricultural research with the establishment of land grant universities (in
the Morrill Acts of 1862 and 1890), state agricultural experiment stations (SAES),
7 Innovation and the Quest to Feed the World 189

Fig. 7.7 Public agriculture research as a percentage of total public research. (Source: https://www.
ers.usda.gov/webdocs/publications/89114/err-249.pdf?v=43244. Heisey, Paul W., and Keith
O. Fuglie. Agricultural Research Investment and Policy Reform in High-Income Countries,
ERR-249. U.S. Department of Agriculture, Economic Research Service, May 2018 Agricultural
Research Investment and Policy Reform in High Income Countries, USDA May 2018, DC Donnan
analysis)

and public-private research partnerships. After the 1960s, many developed nations
saw a shift in research to focus more on the environmental impacts of agricultures,
food safety, and energy uses of agriculture and away from traditional yield and out-
put improvements (Pardey and Alston 2012).
While government-sponsored R&D has been in decline, there has been a more
dramatic increase in private agricultural R&D investments (Fig. 7.7). In 2000, over
55% of agricultural R&D spending in developed countries was through private
organizations, an increase of 44% from 1981. In contrast, in developing nations
only 6.4% of R&D expenditures are from the private sector with major disparities
between regions and countries. The lack of domestic large-scale agricultural com-
panies has been part of the reason for the low proportional investment. But the
abundance of small and local farm operations makes large-scale agricultural
research and investments more difficult. Most developing nations, apart from Brazil,
China, and India, are falling behind in agricultural investments, creating a larger gap
between the advanced and developing nations’ agricultural capabilities.
Further complicating the reduced investments by developing nations is the nature
of agricultural innovation itself. Most improvement technologies used for small-
holder farms are either mechanical or chemical applications, both of which tend to
be protected by intellectual property rights and patents. This often makes the spe-
cific technology application cost prohibitive to smaller farmers in developing
nations. Being coupled with the new focus by developed nations away from agricul-
tural productivity toward environmental protection and food safety means that many
of the newer innovations may be less applicable to developing economies. This is
190 D. Donnan

Fig. 7.8 Slowing US public R&D spending for agriculture. (Source: https://www.ers.usda.gov/
webdocs/publications/89114/err-249.pdf?v=43244. Heisey, Paul W., and Keith O. Fuglie.
Agricultural Research Investment and Policy Reform in High-Income Countries, ERR-249,
U.S. Department of Agriculture, Economic Research Service, May 2018 Public USDA CRIS data
series OECD Library Global and US Trends in Agricultural R&D in a Global Food Security
Setting 2012, OECD, Agricultural Research Investment and Policy Reform in High Income
Countries, USDA May 2018 DC Donnan analysis)

most apparent with larger food and agriculture companies that have adopted the UN
SDGs as part of their CSR strategies. Of the 169 targets embedded in the UN SDGs,
only 15 are directly related to hunger and poverty eradication.13 The focus and capi-
tal commitment needed to meet the SDGs will redirect funding away from hunger
and poverty programs to environmental and sustainable goals such as deforestation,
sustainable seafood, and carbon footprint. The gap in agricultural yield and farm
output will not be closed with traditional approaches to R&D and investment fund-
ing, but will require a new approach to agricultural innovation, particularly for
developing nations to close the agricultural productivity gap they experience.
Over the last several decades, the United States, historically the leader in agricul-
ture research, has reduced the growth of its investments in agricultural and crop
research, further amplifying the reduction in available agricultural innovation to
developing nations and smallholder farmers (Fig. 7.8).
As government investments have been reduced, the private sector has seen an
opportunity to invest in profitable research and development projects. Through
much of the twentieth century, private equity and venture capital firms invested in
new business opportunities and potential growth business operating models. In the

13
http://businesscommission.org/our-work/valuing-the-sdg-prize-in-food-and-agriculture
7 Innovation and the Quest to Feed the World 191

late 1990s and early 2000s, a boom in venture funding emerged, foreign investment
in the startups during the dotcom boom and Internet bubble. By 2017, venture funds
financed close to $150 billion in investments in new technology startups, nearly
reaching market highs not seen since the Internet bubble in 2000.14
Compared to technology-led industries, the agriculture industry is still under-
served by the technology community and venture capital investors. The agricultural
community relies mostly on chemical and mechanical technologies for the majority
of their innovations in plant yield, productivity, and cost efficiency. Digital tech-
nologies did not easily adapt to the rough and dirty environment of farm-level appli-
cations. The digital age initially reached agriculture using GPS systems on tractors
to aid in seed and fertilizer applications. Precision farming, which allows more pre-
cise application of agricultural protection chemicals and nutrients, is now delivering
significant value. Technologies such as automation, decision support systems, and
agricultural robots are rapidly being adopted on many of the large-scale farms. The
connection of smart sensors through the Internet of Things (IoT) gives farmers valu-
able information, including soil moisture, nutrient levels, the temperature of pro-
duce in storage, and the status of farming equipment. Self-driving equipment
connects with satellite imagery to apply fertilizer automatically and relay nutrient
information to a farmer’s mobile computer. Agtech is still small in comparison to
other technology investments, but it is disrupting the agri-food industry by applying
new innovative and sometimes counterintuitive technologies on the farm and
throughout the food processing industry.
In comparison to the burgeoning $84 billion technology-led investments in 2017,
the Agtech and FoodTech investment market is still relatively small. According to
AgFunder 2017 Investment Report, the food and agriculture venture investments –
comprised of over 990 deals and 1,487 unique investors – totaled $10.1 billion.15
With a 29% increase in investment growth, Agtech deals are getting larger and
attracting more prominent investors.
Currently, Agtech investments occur in three broad areas:
1. Digital Innovation capitalizes on the latest advancements in hardware and soft-
ware to create a new system of farming relying on computing power and con-
nectivity. Soil sensors measure ground moisture. Drones collect data and
imagery, providing specific and precise crop analytics. Cloud-based advanced
analytical solutions process this data to provide growers with direct recommen-
dations. As Randall Barker, Managing Director of FarmLink, states, “There’s an
obvious convergence about all these technologies that can be connected and
solved for in a data science approach. It’s all about taking the complexity of biol-
ogy, weather, and math and making it work.”16

14
https://pitchbook.com/news/articles/a-record-setting-year-2017-vc-activity-in-3-charts
15
https://research.agfunder.com/2017/AgFunder-Agrifood-Tech-Investing-Report-2017.pdf
16
http://www.middle-east.atkearney.com/documents/10192/7853238/Innovation+in+Agriculture-
the+Path+Forward.pdf/4e2d0e75-eea6-42e4-bc6d-6a75450ad8bf
192 D. Donnan

2. Biotech Innovation incorporates scientific techniques to improve plants, animals,

and microorganisms. It includes a broad array of solutions, ranging from geneti-
cally engineered plants and animals, improved tools such as CRISPR (an
improved genome-editing technique with potential in yield improvement, crop
protection, ecology, and conservation), and microbial technologies targeting
bacteria. Virginia Ursin, Biotechnology Prospecting Lead for Monsanto
Company, notes, “18 million farmers globally are growing biotech crops. Ninety
percent are in the developing world as smallholder farmers and this technology
has made agriculture profitable and has decreased problems with pesticide poi-
soning. We cannot go back to agricultural practices that will increase the foot-
print of agriculture. We must decrease the footprint. Sustainable intensification
and genetic optimization are essential parts of that.”
3. Process Innovation introduces new farming techniques that address constraints
on farmers’ productivity and environmental sustainability (see Box 7.2 for a
good example on food preserving). Vertical farming combined with hydropon-
ics/aquaponics allows agriculture to flourish in areas without natural soil. Drip
irrigation technology uses sub-surface low-pressure piping to deliver water
directly to crop roots, resulting in both better yields and preservation of water
resources. Desalination removes salts and minerals from saline water for fresh-
water uses. Efficient technologies, such as drip irrigation and desalination, are
some of the tools that Israel has used to produce a surplus of 20% more water
than it consumes. Aaron Mandel, Co-founder and Chairman, WaterFX and
HydroRevolution, believes that solar desalination can create an affordable, sus-
tainable water source in water-scarce regions. “We need to focus on redesigning
the entire sustainable water model from the ground up,” Aaron notes. “WaterFX
focuses on leveraging what is happening in the energy industry and applying it

Box 7.2 Connecting Farmers with New Preservation Technologies:

HERE Foods1
The farm to label market connects local farmers with brands and value-added
products beyond the basic agricultural commodities. Framers are always
looking for ways to promote their crops and minimize the seasonal volatility
that is inherent in commodity products. One example of this relationship is
HERE.CO, a Chicago-based company that makes juices, spreads, and salad
dressing with ingredients sourced from local farmers. Founded in 2017 by
entrepreneurs Nate Laurel and Megan Klein, the company has developed a
network of over a dozen indoor and outdoor farms in the Chicago and Midwest
US market to provide various fruits and vegetables to its processing plant. The
products are sold in over 400 retailers in the Midwest markets under the
HERE brand.
What makes this business unique it that it combines the use of a local net-
work of farmers with advanced food preservation technologies. High-pressure
pasteurization (HPP) is a cold pasteurization technique that is applied to

(continued)
7 Innovation and the Quest to Feed the World 193

(continued)
finished packages to kill yeast, mold, and bacteria. Once the juice or spread is
packaged, it is placed in a hydrostatic pressure vessel and subjected to over
87,000 pounds per square inch of pressure.
The HERE model works as follows:
• Farmers: HERE has direct relationships with local farmers. As a result,
they earn more income, gain exposure, and enjoy predictable price and
quantity parameters. By developing unique and exclusive supply arrange-
ments with the farmers, the company can receive very fresh ingredients,
reliably.
• Community: The HERE model decreases food miles, using less resources.
With each purchase, money gets reinvested in the consumer’s local
community.
• Retailers: The locally sourced products deliver a unique value proposition
to retailers, expanding local products beyond the produce department.
• Consumer: HPP products are unique tasting (very fresh and intense fla-
vors), fresh (local ingredients), healthy (clean label and plant based), con-
venient, and trusted. By applying scale and vertical integration, they can do
this at a competitive price point.
By building a community of farmer/suppliers and providing a value-added
approach to local produce, HERE hopes to be able to replicate their Midwest
model at other locations in the United States and potentially abroad.
1
https://fieldandfarmer.co/

to water. Water is just a form of energy. If we have a sustainable, affordable, scal-

able source of energy, we can actually produce as much water as we need.”
While the new startup entrepreneurs in Agtech/FoodTech show promise, they are
still only scratching the surface on the global issues of technology access and feed-
ing those in need. Most startups focus on a commercially viable business model
while investors are targeting a profitable exit. Better collaboration is needed between
the small startups, venture funds, governments, and corporations to develop innova-
tive, sustainable, and most importantly scalable solutions that can be applied broadly
in a global environment. Of concern are the 2.5 billion people that live on the
500 million small farm households in most of the developing economies. Their abil-
ity to access innovative agricultural and food solutions is critical to the objective of
feeding the planet.17 For many of these smallholder farms, access to water, improved
crop yields, access to capital, and easier delivery to markets are critical resources.
Several startups and agriculture innovation have started tackling these perplex-
ing issues:

17
https://foodsecurityindex.eiu.com › DownloadResource
194 D. Donnan

• Nicaragua: The 22 vegetable farmers making up the Tomatoya-Chaguite Grande

co-operative worked with TechnoServe to improve access to markets for their
vegetables and sell directly to supermarket chains.18 They introduced drip irriga-
tion and staggered their plantings to increase the number of harvests per year.
• USA: Robert Egger founded the DC Central Kitchen and L.A. Kitchens as culi-
nary teaching, waste food reclamation, and feeding centers for low-income citi-
zens. The combination allows L.A. Kitchens to train low-income people in
kitchen skills often while using wasted and discarded foods. Working with non-
profit AARP and the Los Angeles City, L.A. Kitchens has flourished under the
“buy local” program for several retailers.19
• Vietnam: Metro Cash & Carry works with local vegetable farmers to improve
farm yields and employ better agricultural management including crop rotation
and improved fertilizer management. The result is improved quality and food
safety for the retailer and improved income for the farmer.
• Nigeria and Kenya: Hello Tractor is working with over 22,000 farmers, giving
them access to low-cost farm equipment rentals using smartphones to access and
rent out equipment. Considered the Uber of farming tractors, the smartphone
application connects supply and demand. The app lets tractor owners find other
farmers in need and rent out their equipment economically.20
• West Africa: Easy Solar is a for-profit enterprise with a social mission of making
clean energy affordable to off-grid communities in West Africa. It finances easy-­
to-­use, high-quality solar devices to farmers not serviced by the existing ­electrical
grid. Since launching in 2016, Easy Solar has provided electricity to over 40,000
people.21
• Bangladesh: HarvestPlus is an international NGO focused on biofortification of
crops to fight global malnutrition. Most Bangladeshis eat rice, but childhood zinc
deficiency and its associated stunting affect 40% of the children. PRAN, a food
distribution company, worked with HarvestPlus to supply zinc-fortified rice to
farmers and then bought the harvested rice through their distribution system.
Over 120,000 participating farmers were able to grow a profitable crop and
reduce malnutrition.22
• India/Africa: Digital Green is a unique partnership among technology companies
(Oracle, Google, Microsoft), governments (India and Ethiopia), and NGOs (Bill
& Melinda Gates Foundation, USAID). Smallholder farmers are given access to
data capture and analytics to improve the overall yields and quality from their
farms. Digital Green brings technology startups together with practical imple-

18
https://www.weforum.org/reports/realizing-new-vision-agriculture-roadmap-stakeholders
19
https://www.latimes.com/food/dailydish/la-dd-la-kitchen-food-waste-20150817-story.html
20
https://www.fastcompany.com/3048780/an-affordable-smart-tractor-for-african-farmers-and-
their-tiny-farms
21
https://www.forbes.com/sites/mfonobongnsehe/2018/04/18/30-most-promising-young-
entrepreneurs-in-africa-2018/#14e009377474
22
https://www.harvestplus.org
7 Innovation and the Quest to Feed the World 195

mentation opportunities to prove and scale the technology applications across

regions and globally.23
By aligning incentives based on profits and CSR goals, private businesses are
now becoming more involved in localized initiatives to improve farming practices
and introduce new technologies to local and small-scale farmers. In some cases
(Boxes 7.3, 7.4 and 7.6), they facilitate the access of small farmers to markets and
market information and increase their likelihood of commercial success. Technology
startups are tackling the issues of hunger and food waste in increased numbers. The
entrepreneurial founders of these companies see the elimination of hunger and the
improvement of smallholder farmers as being of great benefit – societally and eco-
nomically. They use their knowledge of crowdsourcing, mobile telephony, and
localized initiatives to develop programs that can easily scale using digital technolo-
gies. This offers a fundamental new approach to public-private partnerships (PPPs)
as the small-scale entrepreneur can tackle larger issues on a smaller scale and then
replicate results. In addition to the tech entrepreneurs, private companies and NGOs
are working together, creating innovative financing tools and technology transfer
mechanisms to meet the needs of the smallholder farmers.

Box 7.3 Connecting Small-Scale Farmers in India: Crofarm and

Retail Stores1
The farm economy in India accounts for 18% of the GDP and provides
employment for 50% of the country workforce. While large, it is also unorga-
nized with small-scale rural farmers selling through local village mandis that
procure the produce from farmers and then sell it through a series of middle-
men eventually delivered to retailers. This results in a fragmented and disjoint
supply chain with wide variations in process and income paid to farmers.
While India is the second largest producer of vegetables and fruits in the
world, almost 25–30% of the products get wasted due to spoilage from poor
transportation and cold storage. For Reliance Retail, India’s largest retail
enterprise, the fractured supply chain results in excessive spoilage and poor
quality of the fruits and vegetables delivered to its stores.
In 2016, two entrepreneurs, Varun Khurana and Prashant Jain, established
a business called Crofarm to find a solution to the issues of farmers supply of
fresh fruits and vegetables to retailers. They had previously worked for
Grofers, an online grocery delivery service that operates in 13 cities in India.
There they saw the disjoint nature of the farm to retail supply chain for perish-
able products such as vegetables, fruits, and exotics. After Grofers they spent
time with local farmers in Haryana, Uttarakhand, and Uttar Pradesh to under-
stand the issues faced by the farmers trying to sell their products.
From this knowledge and their understanding of retailer needs, they devel-
oped a series of applications to link farmers directly with retailers and bypass

(continued)
23
https://www.digitalgreen.org
196 D. Donnan

(continued)
many of the small village mandis. The applications help farmers select the
crops that will fetch the best prices and are in demand as well as connect each
farmer to more buyers. By providing better price visibility, the farmers can
select the best buyer and time and place to sell. All transactions are digital
allowing for quick payment transactions. Crofarm generates revenue through
commission, starting from nearly 5% of the price in case of less perishables
like potato and onions. It makes a commission of around 15% of the price of
green vegetables and 20–25% in case of fruits.
The Crofarm network now connects over 10,000 farmers with leading retail-
ers in India such as Reliance Retail, Grofers, Big Basket, Jubilant FoodWorks,
Big Bazaar, and Metro Foods. They have secured cold storage to preserve the
fruits and vegetables that require refrigeration. It has also developed an applica-
tion to connect farmers directly with consumers and utilizes demand prediction
algorithms using artificial intelligence and machine learning.
Because of these initiatives and applications, the farmers in the Crofarm
network have access to more buyers and better prices. This has helped improve
their standard of living while at the same time providing consumers with
fresher and higher-quality vegetables and fruits.
1
With $1M Topline, Crofarm marches toward eliminating middlemen
between farm and retail https://entrackr.com/2018/02/crofarm-eliminate-
middlemen-farmer/. Crofarm website www.crofarm.com

Box 7.4 Connecting Coffee Farmers in Ethiopia: Ethiopian Commodity

Exchange1
In 1984 famine struck Ethiopia with extreme shortages of food and grain
crops in the north part of the country and resulted in more than 400,000
deaths. In 2002, another famine occurred after bumper agricultural crops in
2000 and 2001 forced prices to record lows. How could this boom-bust sce-
nario be stopped so that the population would not starve and how can both
buyers and sellers of crops be protected against drastic price and vol-
ume swings.
Prior to the formation of the exchange, buyers and sellers would often meet
locally to exchange product for negotiated prices. Often the buyers would not
get payments without significant delays and the buyers were always at risk of
poor-quality product or shortages in weight.
The Ethiopian Commodity Exchange (ECX) was established in 2008 as a
mechanism to bring farmers and buyers together to trade coffee and sesame
seeds and assure both timely delivery and payment. The ECX was established

(continued)
7 Innovation and the Quest to Feed the World 197

(continued)
with seed funds from the Ethiopian government and USAID and was operated
as a public-private enterprise. Quickly the ECX was a success as it provided
better market information, standardization of products, and standard con-
tracts. The ECX promotes the following services:
1. Market integrity, by guaranteeing the product grade and quantity and oper-
ating a system of daily clearing and settling of contracts.
2. Market efficiency by operating a trading system where buyers and sellers
can coordinate in a seamless way based on standardized contracts.
3. Market transparency by disseminating market information in real time to
all market players.
4. Risk management by offering contracts for future delivery, providing sell-
ers and buyers a way to hedge against price risk.
The information transparency provided the ability to track coffee movement
from farm to buyer organization in an efficient manner, promoting better
transportation planning and inventory management. Trucks were able to be
scheduled, rather than just being available when they happened to show up at
a warehouse. This was particularly important since there was a shortage of
delivery trucks in Ethiopian and any inefficiencies were costly. All this
resulted in lower costs of supply chain as well as improved crop yields from
reduced spoilage.
Behind the ECX is a market information system that ties the various trad-
ing systems together. This includes electronic tickers at 200 market sites
across the country for disseminating information; farmers’ access to mobile
phones to disseminate market information via text; a fully automated tele-
phone system which allows traders to access market information 24 hours a
day, 7 days a week; and the ECX website that provides real-time data for all
commodities traded. The rapid progress of technology was manifested by the
increased penetration of mobile phone technology in the nation. Between
2008 and 2016, the number of mobile phones increased from under 2 million
to over 50 million for a population of 102 million people.
For all the benefits that the ECX proposed, today it is still primarily an
export exchange for spot pricing of two primary crops – sesame and coffee.
More works need to be done to find a better platform for smallholder farmers
to access a larger portion of the overall commodity profit pool.
1
Ethiopian Commodity Exchange website, http://www.ecx.com.et/
http://www.2merkato.com/news/alerts/5008-ethiopia-mobile-subscribers-
reached-53-million
198 D. Donnan

7.6 How Profit and Nonprofit Can Work Together

Very high levels of investments are needed to use agriculture to solve the issues of
malnutrition and rural poverty, but direct investments have been lacking. With lim-
ited government resources available, a new model of collaboration among govern-
ments, NGOs, and corporations is being sought to improve agricultural productivity
and food access. Governments eager to show progress on social programs have
encouraged private sector companies through incentives and taxation breaks to
enter program investments. Public-private partnerships (PPPs) were utilized in
developing countries to solve large infrastructure issues related to the energy and
water sectors. In many cases these PPPs were focused on concessions on contracts
and leases and independent energy producers. Many communities and NGOs are
skeptical about the true intent of PPP initiatives and whether they were just another
means to ultimately privatize public infrastructure. In agriculture, PPPs must oper-
ate differently than the water or energy sector since the participants are often inde-
pendent farmers rather than utilities or infrastructure projects. Agricultural PPP
programs, while successful, have had to face several hurdles (FAO 2016):
1. Access to specialists in agriculture, land use, and technology. These usually are
supplied by the private sector, but for ongoing success, these skills must be trans-
ferred to the community.
2. Access to capital and credit. Often this is the role that the government can play
or financial institution with micro loans and farmer credit.
3. Poor infrastructure will inhibit the transportation and storage of food items.
Basic road and storage systems must be considered before the program can start.
4. Land rights are often not well understood in many developing nations. Land
acquisition and land leasing must be part of the program.
PPP contract relationships are more complex in this sector as farming communities
are much more fragmented and lack a unified voice, requiring more community
involvement and communications.
While many examples of public-private partnerships exist, they are not as simple
as they may seem. For private companies to work with NGOs, they need a knowl-
edge transfer framework, financing, resource availability, and the ability to navigate
through local regulatory and government rules. Governments must make the pro-
cess more navigable by redesigning tax incentives, financing rules, regulatory
requirements, and access to public resources.
Typically, the roles of the public agency and/or NGO in the PPP programs are as
follows:
• Creating a supportive regulatory environment with appropriate incentives for pri-
vate sector investment and inclusion of smallholders
• Developing program concepts in alignment with national socioeconomic and
sector development priorities
• Designing detailed program guidelines and transparent partner selection criteria
• Promoting the incorporation of risk sharing/mitigation in the design process
7 Innovation and the Quest to Feed the World 199

• Managing evaluation and selection processes for partnership proposals

• Coordinating negotiation and contract signing
• Ensuring regulatory compliance, including the enforcement of land rights
• Providing funding with assistance of larger for-profit companies
• Linking private partners to local public institutions and services
• Providing technical and managerial assistance
• Monitoring and evaluating the partnership at both the national and local govern-
ment levels
For private businesses, the roles include:
• Developing business plans with thorough financial and market analysis
• Contributing funding or in-kind resources as agreed
• Leading implementation of partnership activities and delivering results
• Providing professional management
• Securing markets for end products and procuring raw materials from farmers
through contract farming agreements
• Providing technical assistance and business management training for FOs
• Disseminating inputs and technology
• Linking farmers to business development services (BDSs) such as financing and
third-party certification
• Supporting the monitoring of partnership activities
Companies and NGOs have discovered several reasons to partner:
• Creating business value and environmental benefits. A business-NGO partner-
ship can result in measurable business and environmental benefits such as
reduced costs, reduced risk, new market development, and enhanced brand value
along with reduced environmental impacts in the company’s product line, opera-
tions, or supply chain.
• Raising the bar on environmental performance. Innovations arising from partner-
ships can create competitive advantage for a business as well as establish a new
standard of environmental excellence for others to build on.
• Leveraging skills and perspectives not available in the organization. Partnering
with an NGO can help a company address issues that it may not have the exper-
tise, skills, or resources to manage on its own. NGOs also provide a valuable
outside perspective. For the NGO, a partnership can provide a testing ground for
the effectiveness of its approach to an issue.
• Building respect and credibility. When a partnership between a trusted NGO and
a well-known company delivers tangible results, it improves the image and cred-
ibility of both organizations.
• Providing independent validation. NGO participation can provide independent
“third-party” validation of a company’s claim of environmental and social ben-
efits from a project.
• Helping achieve a long-term vision. While most leading companies and organi-
zations have long-term goals and visions, they often are preoccupied with short-­
term priorities in their day-to-day operations. A partnership project designed to
200 D. Donnan

address a long-term issue can help provide the external push needed to realize
long-term goals.
In some situations, partnerships may not be practical. If the need is immediate or
is one that can be achieved independently, a partnership might not make sense.
Similarly, an NGO may determine that a partnership is not the best way to achieve
a policy goal or social outcome. In general, if a company or NGO can accomplish
its goals on its own, there may be no need to partner.24
For a private company, a PPP partner will have specific goals in their core areas
of focus. By better understanding these goals and the NGO’s motivations, a com-
pany can make sure that it is both meeting its own objectives and satisfying the
needs of its partner. Similarly, an NGO should look for corporate partners that share
similar social and environmental values (see Box 7.5). Ultimately companies will
need to demonstrate a business case for an initiative and NGOs can help frame the
benefits and costs such that the company can achieve both. Many PPPs start out as
pilot programs used to demonstrate new technologies or techniques and can be
scaled once the benefits are understood.
When working with smallholder farmers, the ownership of the final operating
model and business must be transferred to the farmer. This may be difficult to
achieve since the ownership also implies risk. Both the NGO and the private com-
pany need to be able to mitigate the risk during the pilot phases prior to the scale up
of the initiative. This may require additional farmer training, assumption of the ini-
tial technology investments, and modifications to the contracts and agreements to
allow more flexibility in operations. As the project moves from pilot to scale, the
PPP should allow for shifts in conditions to enable creative financing, supply con-
tracts, and inclusion of additional commercial partners. All of these will be required
to achieve scale and replicability in other regions.
The Institute of Medicine – Building Public Private Partnerships in Food and
Nutrition Workshop is one of the best resources for agriculture-based PPPs (IOM
2012). These text and workshop materials cover the full range of governance and
operating rules for companies and NGOs to work together. The workshop covers all
aspects of how to choose business partners and how to manage expectations through
the initiatives.
Some corporations treat hunger relief and agricultural innovation in ways that do
not involve their CSR initiatives. By focusing on profitable economic and social
change, the initiatives try to provide an opportunity for seed financing, skills train-
ing, and expertise to be transferred to farmers and regional economic systems
(Kaplan et al. 2018). This approach is analogous to venture capital and startups. A
larger corporation realizes that single-use funding or shared expertise is not enough
to develop a sustainable economic and supply system for local farmers. They focus
on a well-thought-out business plan, coupled with seed capital and supply chain
partners (suppliers and customers) to ensure the sustainability of the new business

24
http://gemi.org/resources/GEMI-EDF%20Guide.pdf
7 Innovation and the Quest to Feed the World 201

Box 7.5 Solving Food Waste and Feeding the Hungry: Feeding America
and Starbucks
The concept of food banking was developed by John van Hengel in Phoenix,
AZ, in the late 1960s. Van Hengel, a retired businessman, had been volunteer-
ing at a soup kitchen trying to find food to serve the hungry. Van Hengel
established St. Mary’s Food Bank in Phoenix, AZ, as the nation’s first food
bank. In its initial year, van Hengel and his team of volunteers distributed
275,000 pounds of food to people in need. Word of the food bank’s success
quickly spread, and states began to take note. By 1977, food banks had been
established in 18 cities across the country. Today Feeding America is com-
prised of over 200 regional food banks that feed over 46 million people in the
United States, making it the largest hunger relief agency in the United States.
What started as a small, single store in Seattle’s historic Pike Place Market,
Starbucks Company has grown into a global leader with 24,000 stores in 70
countries. Starbuck’s mission is “to inspire and nurture the human spirit – one
person, one cup and one neighborhood at a time.” Howard Shultz, the CEO of
Starbucks believes that an economic mission must be balanced with a strong
social mission as well. “As a business leader, my quest has never been just
about winning or making money. It has also been about building a great,
enduring company, which has always meant striking a balance between profit
and social conscience.”
In addition to its coffee and tea products, Starbuck locations sell ready-to-­
eat foods from their refrigerated counters. Many of these foods are made daily
and packaged for a grab and go format. However, at the end of the day, any
prepared food that had not sold had to be discarded to maintain the high qual-
ity and freshness that Starbucks wanted. Starbucks decided to start a program
to donate its ready-to-eat prepared meals from each of its Starbucks stores in
the United States to local foodbanks and hunger relief agencies. To be able to
scale this effort across the nation, Starbucks decided to work with Feeding
America to coordinate nightly pickups of prepared foods and distribute it to
the food banks and relief agencies that were working with Feeding America.
The Starbucks FoodShare™ program provides over five million meals to
families and individuals served by the Feeding America network. As the pro-
gram is rolled out to all the company-operated Starbucks stores, the goal is to
provide as much as 50 million meals by 2021.
The challenge with the initiative was the coordination of nightly pickups at
over 7600 stores and the goal to be in and out of each store in 5 minutes so as
not to disrupt the store operations. This required the coordination of hundreds
of local food pantries to pick up the packaged foods in refrigerated trucks
each day. This allowed the food pantries to pick up sandwiches and other
prepared foods nightly and have them ready to be distributed to customers the
following morning.

(continued)
202 D. Donnan

(continued)
Jane Maly, Program Manager, Global Social Impact, saw many unantici-
pated benefits from the program, “In speaking with Food banks, we quickly
learned that their concerns primarily revolved around running an overnight
shift, seven days per week to pick up food at Starbucks stores. It took a few
innovative leaders in the food bank network to address the concerns through a
pilot test, which ultimately demonstrated the advantages of operating the pro-
gram overnight. For example, there are very few vehicles on the road at night,
the stores are usually empty of both customers and employees, and the overall
logistics of picking up donations are much more efficient.”
Based on the success of the FoodShare program and a few passionate peo-
ple, technology innovators and food startups are now using crowdsourcing and
mobile apps to connect restaurants and food donors that have excess fresh
food with the food banks, pantries, and agencies in need. Several startups have
already been launched across the United States to fulfill this important need.
Source: Feeding America website, www.feedingamerica.org; Starbucks
website, www.starbucks.com
Howard Schultz, Joanne Gordon, Onward: How Starbucks fought for its
life without losing its soul, 2011;
Interview with Jane Maly, Global Social Impact, Starbucks Coffee Company

Box 7.6 Better Life Farming Alliance

Better Life Farming works together with smallholders to help them on their
journey to grow their farms into commercially viable and sustainable farming
businesses.
Better Life Farming is an alliance of leading private sector companies pro-
viding holistic and innovative solutions that enable smallholders to unlock
their farming potential. By connecting global expertise with local insights and
partners, Better Life Farming offers solutions, each customized to fully
address smallholders’ needs at scale. Bayer has partnered with the IFC,
Netafim, and Swiss Re Corporate Solutions to form the Better Life Farming
alliance, specializing in investments in developing areas and providing holis-
tic and innovative solutions that enable smallholders to sustainably produce
more food and improve the livelihood of rural communities. Each organiza-
tion brings their strengths and expertise to the Alliance to deliver the most
value possible to smallholder farmers:
Bayer: Bayer is a global enterprise with core competencies in the Life Science
fields of health care and agriculture. Its products and services are designed
to benefit people and improve their quality of life. Bayer is committed to
the principles of sustainable development and to its social and ethical
responsibilities as a corporate citizen.

(continued)
7 Innovation and the Quest to Feed the World 203

(continued)
IFC: A sister organization of the World Bank and member of the World Bank
Group, IFC is the largest global development institution focused on the
private sector in emerging markets. IFC works with more than 2,000 busi-
nesses worldwide, using capital, expertise, and influence to create markets
and opportunities in the toughest areas of the world.
Netafim: Netafim is the global leader in precision irrigation for a sustainable
future. With 29 subsidiaries, 17 manufacturing plants, and 4,500 employ-
ees worldwide, Netafim delivers innovative, tailor-made solutions to mil-
lions of farmers, from smallholders to large-scale agricultural producers,
in over 110 countries.
Swiss Re: Swiss Re Corporate Solutions provides risk transfer solutions to
large- and mid-sized corporations around the world. Its innovative, highly
customized products and standard insurance covers help to make busi-
nesses more resilient, while its industry-leading claims service provides
additional peace of mind. The Food and Agriculture Business team pro-
vides a comprehensive array of innovative risk transfer solutions, like crop
shortfall covers, weather index, and revenue hedges, to clients along the
agricultural supply chain. It also serves farmers directly through corporate
agribusinesses and other distribution partners.
By bringing together a group of partners with distinct specialties and skill-
sets, the BLF alliance provides a comprehensive approach that covers plant-
ing seeds, precision irrigation, crop protection, finance, and insurance – all
tailored to the specific local and cultural needs of those who farm less than
two hectares of land.
Starting in 2016, initial Better Life Farming pilots were launched in areas
with high potential for increased productivity in India and Southeast Asia (the
Philippines, Thailand, Vietnam, and Indonesia).
India
In Uttar Pradesh, India, the pilot focused on the green chili crop as it is an
important cash crop that can provide a consistent income. The project started
with 20 farmers in 2016, and since then the BLF alliance has collaborated
with more than 1500 smallholder farmers across various villages in the region.
In addition, another pilot focusing on smallholder tomato growers was initi-
ated in 2017.
Farmers in India who have joined the program have had tremendous growth,
experiencing up to double their previous yields and tripling their incomes.
The Philippines
In the Philippines, the pilot focuses on rice and has sought areas where
smallholder rice farmers significantly contributed to the local economy and
there was a significant yield improvement potential. The Philippines project
started with 40 farmers and 69 hectares of land. From July 2017 to November
2017, that grew to 300 farmers.

(continued)
204 D. Donnan

(continued)
Smallholders who enrolled in the program gained an incremental yield of
57% and a net income 2.7 times higher than the base. BLF aims to partner
with 1,767 farmers through 2018, continuing to find ways to increase the agri-
cultural inputs and provide finance for their growth.
Source: https://www.betterlifefarming.com/

venture. As the initiative grows and replicates, a second round of financing is often
needing to help capitalize the expansion. In both technology and agriculture start-
ups, the same finance and business planning approach is used to inject capital at
various stages of development to help progress the initiative and ensure suitable
management. This is a longer-term endeavor and requires a multiyear commitment
of time and resources.

7.7 Final Remarks

With the evolution of CSR initiatives, coupled with the growth of agricultural start-
ups and venture funds, the role of agriculture and hunger relief has dramatically
changed in the last several decades. A new focus on sustainable growth, capabilities
development, and innovative approaches for smallholder farmers has created an
environment of continuous innovation that has replaced many of the donation-based
hunger relief initiatives of the past. In the next decade, we should see more socially
minded entrepreneurs that will work with NGOs and private businesses to solve the
issues of smallholder farming and provide the opportunity to introduce both digital
and agricultural innovation at the local level to further the quest to feed the world.

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Chapter 8
Digital Technologies, Big Data,
and Agricultural Innovation

Steven T. Sonka

8.1 Introduction

For the future well-being of the global society, agricultural innovation is a necessity.
As it has been throughout history, having access to adequate amounts of food is an
uncertainty for many individuals across the world. For others, availability of reason-
ably safe, affordable food is somewhat taken for granted. For both groups, simply
continuing the practices of our current agricultural and food system is not sufficient
nor tenable as we look to the future.
Among the many stressors facing that system, four are of key importance. Global
population growth is expected to continue, particularly in those areas of the world
where food security is relatively weak. While this challenge suggests the need for
more food to be produced, the environmental effects of agricultural production
increasingly are recognized as having both immediate and long-term consequences
that are undesirable. Furthermore the prospects of a changing, more variable cli-
mate contribute to the need to enhance the resilience of current agricultural prac-
tices. And, fourth, consumers in both developed and developing countries are
demanding an even more nutritious and safe food supply.

S. T. Sonka (*)
University of Illinois, Champaign, IL, USA
Ed Snider Center for Enterprise and Markets, University of Maryland,
College Park, MD, USA
Centrec Consulting Group LLC, Savoy, IL, USA
e-mail: [email protected]

© The Author(s) 2021 207

H. Campos (ed.), The Innovation Revolution in Agriculture,
https://doi.org/10.1007/978-3-030-50991-0_8
208 S. T. Sonka

From one perspective, these challenges are daunting and may seem insurmount-
able. Yet this setting is not new to mankind and, from a historical perspective, is
more the norm rather than the exception. If society is to maintain itself and advance,
agricultural innovation is essential. Indeed, 50 years ago, eminent scholars employ-
ing sophisticated mathematical models confidently predicted that within a decade
massive famine caused by chronic food scarcity would characterize the world’s
future (Meadows et al. 1972). However agricultural innovation, along with other
changes in society, rose to the challenge and led to reductions in the number of
malnourished in the world.
Today, new tools such as digital technology and big data are being developed and
applied within agricultural production systems. Effective implementation of these
tools offers unprecedented capabilities to fuel innovation and contribute to our
response to the challenges just noted. (These terms will be described more fully
later in this chapter.) It is important to recognize both (1) that their implementation
is itself a key form of innovation and (2) that the use of these technologies can foster
additional innovation by making existing innovation systems even more effective
(Sonka 2016).
While an exciting prospect, the extent and impact of the use of these technolo-
gies are themselves uncertain. The purpose of this chapter is to explore that poten-
tial for effective implementation. A managerial, not a technological, perspective
will be employed as the primary lens for this chapter.1 A key premise of this per-
spective is that the existence of a technology does not guarantee immediate or future
adoption nor value creation for its users and the market. Rather, the extensive use of
technology will hinge on its ability to enable managers to better achieve their goals.
These managers can be operating in either the public or private sector or in devel-
oped or developing agricultural settings.
Framed by this perspective, this chapter contains the following five sections.
First, key elements of digital technology and big data will be described and the most
profound decision-making aspect of their application will be identified. This ele-
ment can be captured by a simple question, “What is, or can be, agricultural data?”
While the capabilities of technologies being developed are continually more
advanced, the use of what is commonly known as precision agriculture has been in
process for the last two decades. Those experiences and lessons learned will be the
subject of the second section which follows. The term “big data” has become com-
mon throughout much of society, although the term’s meaning is not well defined.
In next section of this chapter, the characteristics of big data are identified and par-
ticular attention is devoted to the central role of analytics. The fourth section of this
chapter will depict the digital agriculture that is emerging. Also, that concept will be
linked to the broader needs and opportunities associated with the adoption of digital
technologies throughout the food system. A brief concluding section ends this
chapter.

1
Other perspectives are relevant to the application of digital technologies and big data in agricul-
ture. Space limits preclude their analysis here. For example, Weersink et al. (2018) explore envi-
ronment implications and Wiseman et al. (2018) consider data ownership and management issues.
8 Digital Technologies, Big Data, and Agricultural Innovation 209

8.2 “What Is, or Can Be, Agricultural Data?”

To many, maybe most, of us, the word data tends to generate little excitement.
Frankly data was just boring, as it suggested rows and columns of numbers on a
spreadsheet offering scant guidance or insight. Yet data in either its implicit (that
which we sense or feel) or explicit (that which is written down) forms is essential to
how we make decisions. Farmers, throughout time, have been constrained to mak-
ing decisions based upon what they could observe, sense, and feel. This constraint
was imposed by technology and economics. Digital technologies and big data are
changing the parameters associated with those constraints. However, those forces
will continue to determine the extent and effectiveness of technology adoption.
This section addresses the links of technology, data, and decision making. Its
first segment employs a very simple example to demonstrate the interactions of
technology, economics, and farmer decision making. The second segment illustrates
how emerging technologies are fundamentally changing what is available as explicit
data for agricultural decision making. The section’s final segment provides a more
complete description of some of terms associated with digital technologies.

8.2.1 Measurement

“You can’t manage what you don’t measure!” is a phrase attributed to both Peter
Drucker and W. Edwards Deming. This phrase is as applicable to farmers as it is to
managers at Toyota or Amazon (Brynjolfsson and McAfee 2012). The relationship
between measurement and the ability to make improved decisions is critically
important in understanding the potential for digital technologies to affect agricul-
tural management.
The author of this paper had the benefit of growing up on a small farm in the
Midwest region of the United States and, throughout his career, has learned exten-
sively from farmers in the United States and globally. With apologies for a small
digression, let me use personal experience to focus on the linkage between measure-
ment and management. Growing up on a farm, the linkage between what could be
measured and our ability to improve performance was straightforward. In those
days, we had to carry the, hopefully, full milking machine from the cow to the milk
tank. The weight of the bucket gave direct evidence as to which cows were produc-
ing more. And because there were less than 20 cows in the herd, it also was possible
to remember which were the higher-producing cows and give them an extra portion
of grain. Laggard producers received less grain.
On this same farm, about 120 egg producing chickens were housed in a building,
with ample room to roam outdoors as well. Eggs were collected twice a day.
Performance of the entire group was observable. Information that could lead to
improved performance of individual birds, however, was not observable. Technically,
it would have been possible to establish a production system where measurement of
210 S. T. Sonka

individual bird performance could have been accomplished. However, the econom-
ics of egg production and the technologies available at that time did not justify the
costs of such a system.
There are two important points illustrated by this story. One is that the desire to
link measurement of outcomes and management actions in farming is not new.
However, the economics of measurement (the cost of measurement versus the ben-
efits of doing so), given the available technology, inhibited my father and other
farmers from capturing and exploiting more data. The second point, then, is that
measurement is both an economic and a technical issue for agricultural managers.

8.2.2 What Is or Can Be Data in Agriculture?

Suddenly (at least in agricultural measurement terms), the “what is data” question
has new answers. Figure 8.1 provides a visual illustration of the change. In its upper
left hand corner, we see data as we are used to it – rows and columns of nicely orga-
nized, but basically boring, numbers.
The picture in the upper right hand corner is of a pasture in New Zealand. Pasture
is the primary source of nutrition for dairy cows in that country and supplemental
fertilization throughout the growing season is a necessary and economic practice.
The uneven pattern of the forage in that field is measured by a sensor on the fertil-
izer spreader to regulate how much fertilizer is applied – as the spreader goes across
the field. In this situation, uneven forage growth is now data.

Fig. 8.1 Sources of agricultural data. (Graphics courtesy of: agrioptics.co.nz; T. Abdelzaher,
Champaign, IL.; Mock, Morrow & Papendieck; International Rice Research Institute)
8 Digital Technologies, Big Data, and Agricultural Innovation 211

The lower left hand corner of Fig. 8.1 shows the most versatile sensor in the
world – individuals using their cell phone. Particularly for agriculture in developing
nations, the cell phone is a phenomenal source of potential change – because of both
information sent to those individuals and information they now can provide.
As illustrated in the lower right hand quadrant of Fig. 8.1, satellite imagery can
measure temporal changes in reflectivity of plants to provide estimates of growth
(RIICE 2013). The picture is focused on rice production in Asia. Such information
has numerous potential uses. One is to provide a low-cost means of identifying
fields where adverse conditions have caused major production shortfalls. Once that
field is identified, similar low-cost means could be used to provide insurance pay-
ments to farmers eligible for that insurance.
While satellite imagery is one source of remotely sensed data, recent years have
seen a pronounced increase in the capabilities and interest in unmanned aerial sys-
tems (UASs) as a source of data for agriculture. There are numerous ongoing efforts
to transform UAS technology originally focused on military purposes to applica-
tions supporting production agriculture. “Universities already are working with
agricultural groups to experiment with different types of unmanned aircraft outfitted
with sensors and other technologies to measure and protect crop health” (King
2013). A few, of many, example applications include the following:
• Monitoring of potato production (Oregon State University)
• Targeting pesticide spraying on hillside vineyards (University of California, Davis)
• Mapping areas of nitrogen deficiency (Kansas State University)
• Detecting airborne microbes (Virginia Polytechnic Institute and State University)

8.2.3 Technologies Transforming What Can Be Data?

Terms such as precision agriculture, big data, digital technology, and big data ana-
lytics are frequently used in society and among farmers. While such use is common,
a common understanding of what these terms precisely mean has not been achieved.
(Because of the rapidly evolving nature of the technologies, the problem is not the
lack of definitions, rather it is that numerous definitions, all with some valid-
ity, exist.)
This section will provide a brief perspective of the terms digital technology, pre-
cision agriculture, and big data analytics. The intent is not to provide precise or
universal definitions. Instead, the goal is to provide a general perspective that will
contribute to a better understanding of the chapter’s contents. Further discussion
and example applications are included later in this chapter.
The following two-part explanation of digital technology often is useful:
1. Digital technology in agriculture involves:
• Employing sensors and technologies to capture digital data and operating
machines which use digital information to differentially apply inputs
212 S. T. Sonka

• Using digital tools and techniques to summarize, analyze, synthesize, and

communicate digital and other information to improve decision-making
2. Within that broad perspective, it also is useful to distinguish between three types
of digital technology application:
• Precision agriculture: Although having 20+ years of history, precision agri-
culture technologies continue to markedly improve. Powered by GPS-enabled
equipment and machine-based sensors, precision agriculture focuses on mea-
surement and differential input application at sub-field levels. Managerial
analysis focuses on the use of data captured from individual farm fields to
improve productivity. Over the last two decades, farmers have been exposed
to and, in many cases, have had experience with precision agriculture.
However, today’s advances in sensor capabilities continue to enhance the
effectiveness of precision agriculture practices meaning that farmers have an
on-going opportunity to choose whether to employ new practices or not.
• Big data analytics: The ability to cheaply capture extraordinarily large sets of
data has fueled numerous big data applications throughout society. However,
the existence of massive datasets is only part of the story. Big data analytics
requires extensive computational power as well as application of fundamen-
tally different means of analysis to provide probabilistically based insights to
improve decision making.
–– A potential for the application of big data analytics in farming is the pooling
of production-related data from many farming operations across potentially
millions of acres to discern previously unknown managerial insights.
–– Terms such as “big data” and “artificial intelligence” are relatively new to
society, let alone agriculture. Tracking of the mention of those terms in media
publications (for all uses) indicates that such mentions barely existed in 2007.
However, over 150,000 mentions were identified by the year 2014, only
7 years later (Gandomi and Haider 2015). The media hype associated with
such rapid growth, however, often contributes to confusion and uncertainty
regarding the managerial application of such innovations (Sonka 2015).
–– Some applications of big data analytics in agriculture (weather forecasting,
autonomous steering of machines in the field) do not require that detailed
farm production data from one field/farm be compared with data from other
farm operations.
• Communication and social media: This category includes two somewhat dif-
ferent applications:
–– The use of social media to communicate with personal and business contacts.
–– The use of telecommunication-based wireless, WIFI, and the Internet
• To transfer production-related data captured from sensors to devices where
that data can be stored/analyzed
• To transfer findings to the farmer and/or instructions directly to machines
as activities that should be conducted
8 Digital Technologies, Big Data, and Agricultural Innovation 213

–– While typically not featured in discussions of precision agriculture or big data

analytics, advances in communication capabilities based upon digital technol-
ogy often are essential to enhancing performance.

8.3 Precision Agriculture: Precursor to Big Data

This section will provide a brief overview of the precision agriculture experience. It
is not intended as comprehensive assessment. It is intended to provide a sense of the
evolution of precision agriculture, identify the more popular technologies employed,
and discuss the admittedly scant evidence as to the economic gains from the use of
these innovations.
It is important to note that precision agriculture and big data are not synonymous.
As noted above, the current tools and techniques of precision agriculture have
existed largely without the application of big data concepts. However, it is hard to
foresee that big data approaches could have significant impact without employing
precision agriculture technologies to capture at least of the data required.
Precision agriculture has several dimensions; indeed the concept itself is not pre-
cisely defined. A 1997 report of the National Research Council (National Research
Council 1997) refers to precision agriculture, “...as a management strategy that uses
information technologies to bring data from multiple sources to bear on decisions
associated with crop production.” Key technologies and practices included within
precision agriculture are as follows:
• Georeferenced information
• Global positioning systems
• Geographic information systems and mapping software
• Yield monitoring and mapping
• Variable-rate input application technologies
• Remote and ground-based sensors
• Crop production modeling and decision support systems
• Electronic communications
The term precision agriculture primarily has been linked to crop production.
However, precision practices (and big data techniques for that matter) are equally
applicable in animal agriculture, where georeferencing can refer to both sub areas
of a field and individual animals. The tracking processes and required tools may
differ but the managerial goal is still to separately manage increasingly smaller units
of observation.
Farmers and agribusiness managers played a significant role in the development
of precision agriculture. For example, in the mid-1990s, a group of agribusiness
professionals in Champaign County, Illinois, came together to explore the opportu-
nities associated with two emerging technologies — site-specific agriculture and
that strange thing called the Internet (Sonka and Coaldrake 1996). This group,
called CCNetAg, was part of an initiative co-sponsored by the local Chamber of
214 S. T. Sonka

Commerce and the National Center for Supercomputing Applications at the

University of Illinois. A voluntary enterprise, CCNetAg provided a vehicle for
farmers, agribusiness managers, and university researchers to jointly explore adop-
tion of these tools. The key elements of precision farming are as follows:
• Georeferencing as indicated by satellites linking to the farm field.
• Key farming operations are being directed by and are capturing digital informa-
tion on the following:
• Soil characteristics
• Nutrient application
• Planting
• Crop scouting
• Harvesting
Since 1997, technologies have advanced, although the general categories remain
relevant. For example, auto-steer capabilities on farm machinery have become much
more prevalent. And active, detailed measurement of the planting process (record-
ing where “skips” occur) is now feasible. Furthermore, the ability to monitor the
status of farm machinery as it operates is now paired with electronic communica-
tions to signal when machine operations may be out of acceptable bounds. While
there have been many publications describing precision agriculture, reports with
independent evaluation of the economics of adoption are much less numerous. One
means to assess whether there are net benefits of a technology is to monitor its mar-
ketplace adoption. For several years the Center for Food and Agricultural Business
at Purdue University and CropLife magazine have surveyed agricultural input sup-
pliers regarding the adoption of precision agriculture. Focused primarily on the
Midwest and Southern regions in the United States, this work is a particularly useful
assessment of the technology’s application. From the 2017 report, there is clear
evidence of adoption for key precision agriculture practices (Erickson et al. 2017).
The crop input dealers who provided input for this study are uniquely well posi-
tioned to understand and report on adoption of these technologies. Their firms pro-
vide inputs (fertilizer, pesticides, and seeds) and services to producers evaluating
and adopting precision agriculture.
Early interest in precision agriculture focused on site-specific application of
inputs and on the use of yield monitors. As shown in Fig. 8.3, grid sampling, a prac-
tice associated with site-specific lime and fertilizer application, is currently
employed on nearly half of the crop acres. Increased coverage to 6 out of 10 acres
is expected by 2020. Similar adoption rates have been experienced for GPS-assisted
yield monitors. Over the last decade, the use of GPS guidance systems has increased
rapidly to a current use estimated to exceed 60%. Continued strong growth to 2020
is expected. The use of satellite imagery and UAVs as tools to support crop produc-
tion is more recent. Current use affects 19% and 6% of acreages, respectively.
Interesting, acreage covered by UAVs is expected to increase by over threefold, to
22%, in just 3 years.
Erickson et al. (2017) describe a relatively consistent adoption pattern for vari-
able rate technology (VRT) practices. In the early 2000s, adoption was at
8 Digital Technologies, Big Data, and Agricultural Innovation 215

Fig. 8.3 Components of a

potential digital agriculture

single-­digit levels. Since then, steady increases in the extent of acreage covered
have occurred. However, the most utilized practice, application of lime, is only now
achieving coverage on 40% of the total acreage. These patterns also are interesting
because of the very different price regimes that existed for corn and soybeans over
these 15 years. When output prices were low prior to 2008, the driver for adoption
likely was cost reduction. Possibly, increasing yields were a more significant factor
in later years when prices were higher.
Media and marketing attention sometimes blur distinctions between precision
agriculture and big data. Some communications seem to suggest that big data is just
an updated buzzword for precision agriculture practices. That is not the case, and
the main differences among these two concepts are as follows:
• While the farmer has several types of precision data from each field, additional
sources of data naturally reside and originate beyond the fencerow. Accessing
that information raises both technical and organizational challenges.
• Precision agriculture employs comparisons across field map layers as its domi-
nant method of analysis. The effect of a single factor, such as a blocked tile line
or a buried fencerow, often is observable from a map. However, identifying com-
plex interactions across several production factors and multiple years requires
much more sophisticated tools.
• As noted previously, precision agriculture has had 20+ years of experience.
Aggregating all the digital information collected from yield monitors and site-­
specific input operations would result in an extremely large set of data. However,
that data currently is located on innumerable thumb drives, disk drives, and desk-
top computers. Large-scale analysis would not be possible unless/until that data
can be accessed and aggregated.
Both precision agriculture and big data arise from the advent and application of
information and communication technologies. As noted previously, they are not
synonymous. That said, it is hard to foresee that big data approaches will have sig-
nificant impact without employing the data generated by precision agriculture
practices.
216 S. T. Sonka

8.4 Dimensions of Big Data

Although of relatively recent origin, numerous attempts have been made to define
big data. For example:
• The phrase “big data” refers to large, diverse, complex, longitudinal, and/or
distributed datasets generated from instruments, sensors, Internet transactions,
email, video, click streams, and/or all other digital sources available today and in
the future (National Science Foundation 2012).
• Big data shall mean the datasets that could not be perceived, acquired, managed,
and processed by traditional IT and software/hardware tools within a tolerable
time (Chen et al. 2014)
• Big data is where the data volume, acquisition velocity, or data representation
(variety) limits the ability to perform effective analysis using traditional rela-
tional approaches or requires the use of significant horizontal scaling for efficient
processing (Cooper and Mell 2012).
• Big data is a high-volume, high-velocity, and high-variety information asset that
demands cost-effective, innovative forms of information processing for enhanced
insight and decision making (Gartner IT Glossary 2012).
Three dimensions (Fig. 8.2) often are employed to describe the big data phenom-
enon: volume, velocity, and variety (Manyika et al. 2011). Each dimension presents
both challenges for data management and opportunities to advance business deci-
sion making. These three dimensions focus on the nature of data. However, just
having data is insufficient. Analytics is the hidden “secret sauce” of big data.
Analytics, discussed later, refers to the increasingly sophisticated means by which
useful insights can be fashioned from available data.
“90% of the data in the world today has been created in the last two years alone”
(IBM 2012). In recent years, statements similar to IBM’s observation and its empha-
sis on volume of data have become increasingly more common. The volume dimen-
sion of big data is not defined in specific quantitative terms. Rather, big data refers
to datasets whose size is beyond the ability of typical database software tools to
capture, store, manage, and analyze. This definition is intentionally subjective; with

Fig. 8.2 Dimensions of

big data
8 Digital Technologies, Big Data, and Agricultural Innovation 217

no single standard of how big a dataset needs to be considered big. And that stan-
dard can vary between industries and applications.
An example of one firm’s use of big data is provided by GE—which now collects
50 million pieces of data from ten million sensors everyday (Hardy 2014). GE
installs sensors on turbines to collect information on the “health” of the blades.
Typically, one gas turbine can generate 500 gigabytes of data daily. If the use of that
data can improve energy efficiency by 1%, GE can help customers save a total of
$300 billion (Marr 2014).
The velocity dimension refers to the capability to acquire, understand, and
respond to events as they occur. Sometimes it is not enough just to know what has
happened; rather we want to know what is happening. We have all become familiar
with real-time traffic information available at our fingertips. Google Maps provides
live traffic information by analyzing the speed of phones using the Google Maps
app on the road (Barth 2009). Based on the changing traffic status and extensive
analysis of factors that affect congestion, Google Maps can suggest alternative
routes in real time to ensure a faster and smoother drive.
For analysts interested in retailing, anticipating the level of sales is important.
Brynjolfsson and McAfee (2012) report on an effort to monitor mobile phone traffic
to infer how many people were in the parking lots of a key retailer on Black
Friday — the start of the holiday shopping season in the United States — as a means
to estimate retail sales.
Variety, as a dimension of big data, may be the most novel and intriguing of these
three characteristics. For many of us, data referred to numbers meaningfully
arranged in rows and columns. For big data, the reality of “what is data” is wildly
expanded. The following are just some of the types of data available to be converted
into information:
• Financial transactions
• The movement of your eyes as you read this text
• “Turns of a screw” in a manufacturing process
• Tracking of web pages examined by a customer
• Photos of plants
• GPS locations
• Text
• Conversations on cell phones
• Fan speed, temperature, and humidity in a factory producing motorcycles
• Images of plant growth taken from drones or from satellites
• Questions
The variety dimension is closely linked to the discussion of “what is or can be
agricultural data?” presented earlier in this chapter. Essentially digital technologies,
including those employed in precision agriculture practices, are capturing informa-
tion as explicit data which previously could only be observed or sensed. Furthermore,
in many cases, this process can be accomplished at costs which are economically
justifiable. Often times, that newly available data can be directly employed without
further analysis. In other instances, the effective use of that information requires the
218 S. T. Sonka

application of newly available analytical approaches – the analytics dimension of

big data.
Some agriculturally oriented scholars (Coble et al. 2016; Weersink et al. 2018)
will include veracity as a fourth dimension of big data. In this context, veracity
references data quality that is employed within big data analyses. Indeed agricul-
tural analysis has a long tradition which emphasizes the need for accurate data, with
the oft-used phrase “Garbage in; garbage out,” exemplifying this concern. However,
as will be discussed in the following section, Analytics, the tools and techniques can
produce useful insights from less than perfectly accurate data. Therefore veracity is
not included here as a big data dimension.

8.4.1 Analytics

Access to lots of data, generated from diverse sources with minimal lag times,
sounds attractive. Managers, however, quickly will ask, “What do I do with all this
stuff?” Without similar advances in analytic capabilities, just acquiring more data is
unlikely to have significant impact within agriculture.
Analytics and its related, more recent term, data science, are key factors by
which big data capabilities can actually contribute to improved performance in the
agricultural sector. Data science refers to the study of the generalizable extraction of
knowledge from data (Dhar 2013). Tools based upon data science are being devel-
oped for implementation in the sector, although these efforts are at their early stages.
The associated concept of analytics similarly is maturing and its use refined
(Davenport 2013; Watson 2013). Analytic efforts can be categorized as being of one
of three types:
• Descriptive efforts focus on documenting what has occurred.
• Predictive efforts explore what will occur.
• Prescriptive efforts identify what should occur (given the optimization algo-
rithms employed).
One tool providing predictive capabilities was recently unveiled by the giant
retailer, Amazon (Bensinger 2014). This patented tool would enable Amazon man-
agers to undertake what it calls “anticipatory shipping,” a method to start delivering
packages even before customers click “buy.” Amazon intends to box and ship prod-
ucts it expects customers in a specific area will want but have not yet ordered. In
deciding what to ship, Amazon’s analytical process considers previous orders, prod-
uct searches, wish lists, shopping-cart contents, returns, and even how long an
Internet user’s cursor hovers over an item.
Relative particularly to agricultural applications and analytics, two key points
warrant specific consideration:
• The first continues the veracity discussion introduced in the prior section. Of
course, it is prudent to strive to capture and use data which is accurate. However,
8 Digital Technologies, Big Data, and Agricultural Innovation 219

perfect data generally is expensive to acquire and, given big data approaches,
often is not necessary to produce information that can improve decision making.
• For example, it might be technically possible to put sensors to measure actual
traffic along every mile of every road in the country. However, the cost of the
sensors and the underlying system to aggregate and communicate that informa-
tion has been prohibitively expensive. However, the use of proxy information
(primarily from cell phones and sensors put in place for other purposes) allows
for useful predictions of real-time traffic conditions to be created and communi-
cated at low cost.
• Although there are numerous mathematical and statistical approaches available
to data scientists, a key principal is the use of Bayesian inference and conditional
probabilities (Polson and Scott 2018). Essentially, through the analysis of very
large amounts of relevant data, analysists can predict with confidence that the
presence of certain factors indicates that the condition of interest exists. As a
simple example, if it is 8 am on a weekday morning (that is not a holiday) and
cell phone signals along a major highway are moving very slowly from one
tower to the next, it is likely that there is heavy traffic along that highway.
• Of course, such a prediction is probabilistic and may not be accurate in each
circumstance, especially if there is a change in the underlying conditions.
However, with careful analysis and implementation, data that is not perfect can
be effectively employed to improve decision making in agriculture. For exam-
ple, consider the large maize farmer who receives satellite maps of the fields for
which the farmer is responsible. Colors are used to identify conditions in the
field, with green indicating heavy vegetative growth. As one farmer reported to
the chapter’s author, an area marked in heavy green means either that the crop is
doing really well or that there is a heavy infestation of weeds. In either case, it is
worth the farmer’s time to physically investigate.
• In agriculture, as in most fields, descriptive efforts have been most common and
even those are relatively infrequent. However, within production agriculture,
knowing what has occurred – even if very accurately and precisely – may not
provide useful insights as to what should be done in the future.
• Production agriculture is complex, where biology, weather, and human actions
interact. Science-based methods have been employed to discern why crop and
livestock production occurs in the manner in which they do. Indeed, relative to
the big data topic, it might be useful to consider this as the “small data” process.
• The process starts with lab research employing the scientific method as a sys-
tematic process to gain knowledge through experimentation. Indeed, the scien-
tific method is designed to ensure that the results of an experimental study did
not occur just by chance (Herren 2014). However, results left in the lab do not
lead to innovation and progress in the farm field. In the United States, the USDA,
Land Grant universities, and the private sector have collaborated to exploit
scientific advances. A highly effective, but distributed, system emerged where
knowledge gained in the laboratory was tested and refined on experimental plots
and then extended to agricultural producers.
220 S. T. Sonka

• In agriculture, therefore, knowledge from science will need to be effectively inte-
grated within efforts to accomplish the goals of predictive and prescriptive analyt-
ics. Even with this additional complication, the potential of tools based upon
emerging data science capabilities offers significant promise to more effectively
optimize operations and create value within the agricultural sector.

8.5 Digital Agriculture and the Food System

To this point, this chapter has focused on individual technologies and concepts that
can affect the manner in which big data and digital technologies affect agricultural
innovation. This section will attempt to depict a more unified picture of the future
setting that we might call digital agriculture. First, the emphasis will continue at the
level of production agriculture. The focus will emphasize managerial capabilities,
which in most cases will rely upon multiple technical factors. Illustrative examples
will be provided. Second, production agriculture is just one component of the
broader food system. A system which increasingly is employing digital technolo-
gies and big data to improve efficiency and effectiveness. Linkages between those
efforts and implementation within production agriculture will be explored in the
section’s second segment. The role of societal expectations for that system will be
discussed as well.

8.5.1 Components of a Potential Digital Agriculture

This section will attempt to paint a picture of the multiple components that could
inform farmers in tomorrow’s digital agriculture. This is not intended to be a predic-
tion, as these components currently are being employed to some extent. Rather, the
discussion will hopefully provide insights as to the potentials that exist as integra-
tion across technical capabilities occurs. Of course, one needs to keep in mind the
reality that just because something is technically possible, there may not be suffi-
cient justification for managers to adopt that innovation.
Figure 8.3 graphically identifies several components that could form digital agri-
culture. Examples of each will be provided to illustrate their potential application.
Precision agriculture has been discussed at length previously. While routinely
employed by many farmers, advances in technical capabilities are continually offer-
ing new opportunities. For example, sensors embedded in the maize planter now can
sense soil moisture, depth, and other factors in each furrow to optimize the place-
ment of seed as planting is being done.
Similarly prior discussion addressed big data applications. Farmers now can sub-
scribe to services that provide extremely localized weather information and/or
receive agronomic guidance based upon insights gained from analysis of production
on thousands of acres, in addition to their own experience. As more data is captured
8 Digital Technologies, Big Data, and Agricultural Innovation 221

and as research and development continues, the capabilities of such services are
likely to increase.
The Internet of Things is a concept closely linked to precision agriculture,
although it is worthy of separate consideration. Sensors that monitor conditions in
the field to inform irrigation decisions are one example. Similarly sensors in grain
bins can continually monitor conditions in the bin. In both instances, the associated
systems can inform managers of the actual and past status, can initiate action when
warranted, and can record information that can be employed (possibly with big data
approaches) to improve the algorithms within the system.
A key difference between factory-based manufacturing and much of agricul-
ture is that agriculture occurs in the open and across significant distances.
Therefore monitoring what is happening as it happens has been a historic chal-
lenge on the farm. As noted previously remote sensing is being employed to
overcome this constraint. The source of the data can be from satellites, fixed
wing aircraft, UASs, stationary devices, or some combination of them. For exam-
ple in Australia, efforts are underway which link satellite monitoring of pasture
conditions with sensors that monitor animal weight. Algorithms are being esti-
mated which use that data to recommend when to move animals from a paddock
that is in danger of being overgrazed to another more suitable one. Applications
in developing countries are particularly exciting as the prior methods of gather-
ing information have been both expensive and insufficient. Possibly, remotely
sensed data, in combination with other information sources, can improve agricul-
tural and food systems in those settings. A marked improvement might be pos-
sible in a fashion similar to the way cell phones markedly improved
communications in developing countries.
This chapter’s second section described a story from the 1950s to illustrate that
farmers have always wanted to use evidence from their operations to improve the
farm’s performance. The high cost or infeasibility of measurement historically
limited their capabilities to do so. Labelled here as on-farm research, there appears
to be is considerable innovation and experimentation focused on the means by
which farmers can apply the digital technologies to learn how to improve their
own operations (Grains Research Development Council 2016). This interest is
being expressed in terms of actions by individual farmers, efforts of groups of
farmers (including cooperatives), and in collaboration with input providers. These
efforts are exciting because of the possibility of gain, but also because of the
potential for enhanced managerial control which previously was never available
to farmers.
Finally, coordination is a critically important aspect of digital agriculture.
Such coordination may involve relatively simple technologies. For example, a
group of woman farmers in an African country who learn that the trader can pay
higher prices for their chickens if they use a cell phone to inform the trader when
there are enough chickens available to fill the trader’s truck. In contrast, coordi-
nation may involve combining localized weather forecasts with a logistics model
of the most efficient use of equipment for a large farming operation.
222 S. T. Sonka

8.5.2 Digital Technologies Throughout the Food System

Figure 8.4 provides a high-level view of the key subsectors within agriculture that
has proved useful for consideration of future competitive dynamics relating to big
data. In that graphic, the genetics subsector is separately identified because of its
linkages with big data. A number of firms in that category have capabilities to oper-
ate as input suppliers as well. The input supply category refers to providers of
equipment, seed, fertilizer, and chemicals to farmers as well as providers of finan-
cial and managerial services. The production agriculture segment is comprised of
farming firms, which can range from low-resourced smallholders to family corpora-
tions to subsidiaries of major corporations. The first handler segment refers to firms
which aggregate, transport, and initially process agricultural produce but do not
directly market to consumers. The final segment relates to food manufacturers and
retailers. These types of activities are combined here because of their common inter-
est in employing big data tools to better understand consumers.
From a strategic perspective, it is important to stress that big data tools already
are extensively employed, particularly at both “ends” of the sector. Firms at the food
manufacturing and the food retailing levels expend considerable resources to con-
tinually develop a better understanding of consumers. Insights gained through
application of big data analytics can allow managers both to anticipate and respond
to consumer concerns. Far upstream in the sector, bioinformatics and other big data
tools are employed to accelerate research and development processes, advancing
genomic capabilities of the sector. Figure 8.4 identifies, at a general level, key inter-
ests that “naturally” reside within each subsector and have the potential to be impor-
tant within big data applications.
Agricultural operations occur across time and space. Therefore, the logistics of
providing inputs, production, and aggregating output consume considerable

Fig. 8.4 Subsectors and their key strategic interests relating to big data
8 Digital Technologies, Big Data, and Agricultural Innovation 223

resources. Advances in information and communication technology combined with

big data analytics offer the potential to reduce the amount of resources needed.
Deadweight loss is a term that describes system inefficiencies that can be reduced
by enhanced coordination within and between firms. Even in advanced agricultural
settings, reduction of deadweight loss is perceived to be an attractive potential use
of big data innovations.
In this context, deadweight loss refers to the processes by which inputs and out-
puts are delivered (when and where). A more intriguing issue for many is whether
application of big data can fundamentally alter decision making as to “what” should
be done. Can we further optimize the biology of agricultural production, especially
in the context of the larger food and agricultural system? Earlier it was noted that
new sensing technologies offer the potential to monitor and document what actually
occurs as agricultural production takes place. The resulting data potentially would
be available at never before levels of detail, in terms of time and space, and at low
cost. Furthermore, analytic capabilities could combine diverse sources of data to
discern previously unknown patterns and provide insights not available previously.
A result of application of these innovations would be optimization of agricultural
production systems, simultaneously reducing its environmental impact and improv-
ing profitability. There are two interrelated factors that need to be addressed in con-
sidering the possible evolution of this optimization:
• Production agriculture involves biologic processes subject to considerable uncer-
tainty. Therefore, even if one knows exactly what occurred in one production
season and what actions would have optimized performance under those circum-
stances, that information may not be a good predictor of what actions should
occur in the next season.
–– Some assert that capturing massive amounts of agricultural data, spread
across large geographic regions, will provide sufficient information so that the
effects of weather and location can be estimated. Doing that would enable big
data analytics to answer the question, “why does production variabil-
ity occur?”
–– Agricultural science has been devoted to discerning the why of agricultural
production. Rather than solely relying on big data analytics, others assert that
agricultural science techniques and knowledge will need to be integrated
within big data techniques to truly optimize system performance.
• In most systems of agricultural production today, even the knowledge of what
occurred does not necessarily reside within one organization. Furthermore, as
was noted for precision agriculture, individual entities at the production level
typically do not have the scale to produce sufficient data nor to have the capabili-
ties needed to analyze that data.
Because of these two factors, collaboration across organizational boundaries will
be required to fully exploit the potential benefits of big data’s application to agricul-
ture. A host of factors, beyond technological effectiveness, will influence the speed
and extent of this exploitation. These relate to intellectual property and competitive
224 S. T. Sonka

dynamics as well as the magnitude of economic benefits available. Such impedi-

ments are not insurmountable and can be viewed as much as opportunities as they
are impediments. How they are resolved, however, will have a major impact on big
data’s eventual contribution to performance within agriculture.
Beyond its direct economic impact, society has intense interest in the social and
environmental effects of agriculture. Food safety and security are of public interest
in every society. Interest in mitigating negative environmental impacts of agricul-
tural operations is increasingly a concern and that concern is not constrained to just
citizens in developed nations. In addition to public sector interest, some consumer
segments express interest and concern regarding the practices and methods
employed to produce food. Therefore, in addition to public sector-based regulation,
documentation as to practices employed is increasingly being required by private
sector food manufacturers and retailers.
Interestingly, technological innovations, such as those noted previously, have the
potential to provide much better evidence as to their societal and environmental
effects. These include both tools to more precisely measure and monitor and ana-
lytical methods to better understand and predict effects.

8.6 Final Remarks

Historically, agricultural innovation has been a key factor in the improvement of

individual and societal well-being. While much progress has been achieved through
that innovation, more needs to be accomplished especially as the world addresses
the needs of a growing population while simultaneously reducing the stress that
agricultural production can have on the natural environment. This chapter explores
factors affecting the extent to which effective implementation of digital technolo-
gies and big data can contribute to that urgently needed agricultural innovation.

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Index

A Agricultural productivity, 181

Acceptability, 149 climate change, 33, 34
Additional relational variables, 105 enabling policy environment, 63–66
Adoption food waste, 51–53
cognitive process, 96 growth, 36
individual decision-making, 96 in India, 34
innovation, 96, 111 innovations, 66, 67
process, 97 intensification, 36
socio-technical character, 95 investments, agricultural R&D, 66, 67
theories and technology, 96 irrigation, 36
Affordability, 149 land expansion, 36
Agricultural applications and analytics, 218 output, 36
Agricultural business cycles, 34 SDGs (see Sustainable development
Agricultural commodities, 34 goals (SDGs))
Agricultural data TFP (see Total factor productivity (TFP))
applications, 211 Agricultural products, 34–35
big data analytics, 211 Agricultural R&D, 47
communication and social media, 212 Agricultural research, 118
digital technologies, 209 Agricultural settings, 208
economic practice, 210 Agriculture
information, 209 and agrifood systems, 1, 2
satellite imagery, 211 origins, 71, 72
technology and economics, 209 water, 33
UAS technology, 211 Agriculture innovation
Agricultural development, 95 HarvestPlus, 194
Agricultural extension agents, 38 Nigeria and Kenya, 194
Agricultural innovation, 207, 208, 224 USA, 194
crop breeding, 72–74 Vietnam, 194
Agricultural management, 209 in West Africa, 194
Agricultural managers, 210 Agriculture systems, 33, 49
Agricultural Model Intercomparison and Agri-entrepreneurs, 140
Improvement Project Agri-food companies, 121
(AgMIP), 43, 44 Agri-food industry, 191
Agricultural operations, 222 Agri-food innovation systems, 47
Agricultural PPP programs, 198 Agri-sector, 118, 119
Agricultural production, 223 Agrobacterium tumefaciens, 79

© The Author(s) 2021 227

H. Campos (ed.), The Innovation Revolution in Agriculture,
https://doi.org/10.1007/978-3-030-50991-0
228 Index

Agtech and FoodTech investment market, 191 tools and approaches, 157
Agtech investments, 191 2SCALE, 149, 150, 153, 171
Alliance, 53 Behavioral change, 20
Ambidextrous organizations, 16 Big data, 208
American farming system, 76 agriculturally oriented scholars, 218
Arabidopsis thaliana, 77, 78 analytical process, 218
Ästad Vineyard, 133 analytics, 212, 218
ATEAR marketing model, 160 definition, 216
action, 159 dimension, 216
attention, 159 IBM’s observation, 216
experience, 159 velocity dimension, 217
tool, 160 Biological seed treatment, 88
trust, 159 Biotech Innovation, 192
ATEAR model, 166 BlocRice, 11
BoP Innovation Center (BoPInc), 147
Boran cattle, 60
B Brachiaria, 55
Bacillus firmus, 88 Breeding cycles, 74
Balanced crop nutrition, 62 Building Public Private Partnerships, 200
Base of the pyramid (BoP), 147 Business champions, 172
ATEAR model, 159 Business model, 25
branding, 164 components, 25
business champion, 173 design, 25
business perspective, 148 key resources, 28
concept, 148, 152 opportunities, 123
consumer segment, 149 profit formula, 27
consumers, 150, 151 researchers, 123
CTAE and 2SCALE, 164 value creation and delivery, 124
designing and implementing, 154 value proposition, 25, 26
distribution channels, 173 Business model canvas (BMC), 155, 158
distribution models, 162 components, 158
environmental effects, 174 persona, 158
financial perspective, 149 value proposition, 158
food products, 149, 174 Business-to-business (B2B) markets, 151
GUTS Agro, Ethiopia, 163 Business-to-consumer (B2C) channels, 173
marketing activities, 153, 175
BMC, 155
business champion, 154 C
business environment, 155 Calgene, 79
consumer behavior, 154 Cattle production, 54
expert and partnership, 156 CCNetAg, 213
follow-up strategy, 157 Center for Food and Agricultural Business at
food product, 155 Purdue University, 214
marketing strategy and design Child Grant Program (CGP), 50, 51
activities, 155 Climate change, 33, 34, 60
market activation campaign, 156 Closed innovation
market insights and strategies, 156 companies, 81
partnership agreement, 153 products, 82
strategy workshop, 155 R&D, 80, 81
workshop participants, 155 SGA, 81
marketing and distribution, 148, 150, 151 startup companies, 81
marketing approach, 149 VC, 81
marketing pilot, 151, 154 Clustered regularly interspaced short
market segment, 148 palindromic repeats
product and pricing strategy, 159 (CRISPR-Cas), 64
Index 229

Colombia sustainable livestock foundation, 55 potential, 215

Communal tenure systems, 67 societal expectations, 220
Companies and NGOs, 199 strategic perspective, 222
Conceptual business model, 124 Digital Green, 194
Consultative Group for International Digital Innovation, 191
Agricultural Research Digital technologies, 191, 208, 209, 211, 217
(CGIAR), 75, 76 Disruptive innovations, 13
Consumer-centered approach, 172 concept, 13
Consumers, 50, 59, 67 incumbent organizations, 13
Corn Productivity Feeds Vietnam, 38, 39 innovators, 14
Corporate social responsibility (CSR), 185 market, 14
agriculture, 186 OFSP, 15
food and agriculture sector, 185 products/services, 13
governments and NGOs, 185 DNA Plant Technology (DNAP), 79
initiatives, 186 DNA shuffling, 79
movement, 188 Domestic large-scale agricultural
shared values, 185 companies, 189
Creating shared value (CSV) program, 187
CRISPR-Cas9 genome editing, 86
CRISPR-Cas9 genome editing E
technology, 87, 89 Early stage technologies, 87
Crofarm network, 196 Empirical data, 129
Crop breeding Empirical study, 130
early agricultural practices, 72 End-user technologies, 87
hybrid, 72 Entrepreneurial founders, 195
modern breeding techniques, 73 Environment, 71
pea plants, 73 Environmental Defense Fund (EDF), 58
plants, 72 Ethiopian Commodity Exchange
productivity, 72 (ECX), 196
public and private breeding programs, 74 Exploration vs. exploitation, 16, 17
wild grains, 72 customers, 16
Crop genetics, 86, 87
Crop protection industry, 90
Cultivars, 72–75, 78 F
Custom Hiring Centers (CHCs), 61 Farmer Connect Program, 187
Customers, 119, 121 Farmer-level agricultural issues, 111
Cutting-edge technologies, 81 Farming sector, 86
Farmland consolidation, 63
Fast-moving consumer goods (FMCGs), 160
D Federal food assistance programs, 183
Dairy industry, 59 Fertilizers, 73
Dekalb® Cultivation Rice-to-Corn Rotation Financing, 157
Protocol, 39 Food and Agriculture Organization (FAO),
Demographic data, 7 34, 66, 73
Deoxyribonucleic acid (DNA), 77 Food banking, 201
Design thinking, 6 Food security, 34, 42, 45, 50, 53, 62
Dianthus caryophyllus barbatus, 73 Food waste, 51–53, 182–183
Diffusion, 96 Freedom to operate (FTO), 85
Digital agriculture Functional genomics, 79
big data applications, 220
components, 220
coordination, 221 G
factory-based manufacturing, 221 Gäsene Dairy, 131
financial and managerial services, 222 Gene editing, 81
Internet of things, 221 Gene-editing technologies, 64
230 Index

Genetically modified organisms Innovation, 1

(GMOs), 78, 79 of agricultural byproducts, 4
Genome editing, 89, 192 agricultural and agrifood sector, 6
Global Agricultural Productivity (GAP) awareness that technology, 5
Index™, 44, 45 definition, 5
Global Alliance for Improved Nutrition design thinking, 6, 8
(GAIN), 53 economic and social process, 3
Global food crisis, 180 employee, 3
Global Harvest Initiative (GHI), 44 and failure, 17
Global population growth, 207 biotech crops, 20
Google Maps, 217 coffee shops, 18
Government investments, 190 development and adoption, 18
Government policy-makers, 179 loss aversion, 19
Green farms, 135 metrics, 21
Green revolution, 40, 73–75 organizations, 21
Greenhouse gas (GHG) emission, 58 status quo bias, 19
Gross domestic products (GDP), 12 human-centered products, 6
Growing bio-innovation sector, 37 ideation, 7
Gudmund Farm, 132 implementation, 7
GUTS Agro Industry, 163 inspiration phase, 7
GUTS Agro’s Supermom food product, 169 multidisciplinary teams, 7
technology, 2
traditional organizations, 4
H unmet needs, 5
HarvestPlus, 194 value, 3
Healthy agricultural systems (HAS), 55, 56 Innovation ecology, 104
Högared’s main business, 129, 131 Innovation system, 104
Horizontal interdependencies, 100 Innovative organizations, 25
Human-centered approach, 8 Institutional explanations, 104
Hunger and malnutrition knowledge and beliefs, 104
agricultural revolutions, 180 market channels, 104
agriculture innovation, 179 Intellectual property, 82, 85, 86
food security, 180 Intellectual property rights (IPRs), 85
Hunger relief Intention, 105
charity and feeding, 183 Interactional view, 107
civilization, 183 (non)adoption, 107
food donor, 184 parameters, 105
government-state-funded, 183 Interdependence
hungry and malnourished peoples, 184 government responsibility, 102
Hunger relief efforts, 179 horizontal, 100
Hunger relief programs, 184 identity, 102
Hunter-gatherer populations, 72 institutions, 103
Hybrids, 72, 76 intra-individual, 100
Hybrid seed programs, 76 performance, 98
risk perceptions, 103
social pressure, 102
I temporal, 101
ICT applications, 112 trade-offs, 102
ICT4Ag, 111 types, 98
ICT4Ag applications, 113 vertical, 98
Ideation, 7 vertical and horizontal, 101
Inclusive Green Growth Department International Fertilizer Development Center
(IGG), 147 (IFDC), 148
Innovate spans, 13 International Finance Corporation (IFC), 149
Index 231

International Maize and Wheat Improvement Modern breeding techniques, 73

Center (CIMMYT), 75 Mosaic Company Foundation, 62
International organizations, 75 Mosaic Villages Project, 62
International Potato Center, 15
International Rice Research Institute
(IRRI), 73, 75 N
Intra-individual interdependencies, 100 National agricultural research systems
Irrigation, 36 (NARS), 48
National Research Council, 213
National Science Foundation (NSF), 78
J Neolithic Revolution, 71
Job to be done (JTBD) theory, 22 Next-generation seed company, 81
advantage, 24 NGOs and startup entrepreneurs, 179
anatomy, 23 Non-for-profit organizations, 12
dimensions, 23 Nonprofit organizations, 11
organizations and firms, 23 Nutrients, 88

K O
Kenya’s dairy industry, 59 Office of Special Studies (OSS), 75
Knowledge, 103 Open innovation
Knowledge-seeking organizations, 11 agriculture, 82
KPMG survey, 185 agrifood companies, 82
Krishi Jyoti Project, 62 approaches, 83
challenge, 82
crop genetics, 86, 87
L definition, 83
Land and labor productivity, 182 economy, 83, 85
Land expansion, 36 intellectual property, 85, 86
Last-mile distribution, 168 organizations, 84
existing distribution channels, 168 Open pollinated varieties (OPVs), 36
hybrid partnerships, 169 Optimization, 157
micro-entrepreneurs, 169 Orange-fleshed sweetpotato (OFSP), 15
Legumes, 59
Leucaena leucocephala, 55
Leucaena shrubs, 55 P
Likie model, 163 Pasteuria nishizawae, 88
Livestock, 34, 64 Patents, 85
Loss aversion, 19 Pesticides, 73
Pharmaceutical industry, 21
Plant breeding companies, 86
M Plant breeding systems, 79
Maize, 75 Plant genetic systems (PGS), 79
Malnourished people, 181 Plant-produced proteins, 182
Market Activation, 166, 168 Pork feed value chain, 57, 58
Medici Effect, 83 Pork productivity, 57
Microbes, 37 Postharvest Loss Alliance for Nutrition
Microbes decompose organic matters, 88 (PLAN), 53
Milk productivity, 35 Precision agriculture, 89, 211–213, 215, 220
Ministry of Agriculture and Rural and big data, 215
Development, 57 dimensions, 213
Mobile phones, 112 elements, 214
Model plant systems, 88 farmers, 213
232 Index

Precision agriculture (cont.) Research and development (R&D), 47,

fertilizer application, 214 48, 66, 80
media and marketing attention, 215 academic collaborations, 10
satellite imagery and UAVs, 214 budgets, 10
technologies and practices, 213 economic sector, 10
Private businesses, 199 efforts, 9
Private sector research investments, 48 expenditures, 8
Production agriculture, 219 expenses, 10
Productivity growth, 36, 38, 48, 50, 51 and innovation, 8
Programma Uitzending Managers (PUM), 163 innovative companies, 9
Pro-innovation bias, 98 intensity, 9
Prototypes, 7 and market success, 8
Public agency, 198 nonprofit organizations, 11
Public agricultural research and development spenders and innovative companies, 9
(R&D), 47 Responsible scaling, 110
Public agriculture research, 189 Rice, 72, 82
Public and private insurance programs, 49 Rogers seminal synthesis, 97
Public sector, 12
agricultural innovations, 76
companies, 77 S
databases, 77 Saharan Africa (SSA), 45
DNA, 77 Satisfaction gaps, 7
hybrid crops, 78 Scaling, 108
hybrid seed programs, 76 ambition, 108
innovation, 77 development, 110
land-grant universities, 76 diagnosing, 108
large-scale collaborations, 77 diagnostic analyses, 109
NSF, 78 interdependencies, 108
private sector, 77, 78 plurality, 108
Public sector-based regulation, 224 responsible, 110
Public sector R&D, 47, 48 Science-based innovations, 64
Public-private partnerships (PPPs), 147, Secondary data, 129
195, 198 Seed industry, 86
Self-driving equipment, 191
Selling, general, and administrative (SGA), 81
R Small to medium enterprise (SME), 152
Ranchers, 56 Smallholder farmer, 190, 192, 200
Recombinant techniques, 79 Small-scale farms, 40
Regional TFP growth rates Smart regulatory systems, 65
agricultural R&D, 47 Smithfield foods, 58
Asian regions, 45 Social and institutional dimensions, 98
China, 45 Social protection programs, 50, 51
food demand, 45, 46 Social-organisational behaviours, 107
Latin America (LAC), 46 Social-psychological follow-up
NARS, 48 behaviour, 99
North America, 47, 48 cognitive and/or mental variables, 98
productivity growth, 45 decision-making, 97
public agricultural R&D, 48, 49 personality traits and demographic
public sector R&D, 47, 48 variables, 98
R&D, 47 Social-psychological models, 102, 109
South Asia, 46 Soy-based product, 175
trade, 45 Startup companies, 78, 79
Regulatory system, 64–66 State agricultural experiment stations
Replication, 157 (SAES), 188
Index 233

Status quo bias, 19 T

Stewardship, 131 Technological innovations, 224
Stock keeping units (SKUs), 174 Technology startups, 195
Sub-Saharan Africa’s milk production, 59 Technology-led industries, 191
Sustainability Temporal interdependencies, 101
agri-business, 121 Tomatoya-Chaguite Grande co-operative, 194
in agri-sector, 120 Total factor productivity (TFP)
innovation, 120 agricultural extension agents, 38
unsustainability, 121 agricultural production systems, 37
Sustainability-oriented approaches, 122 consumers, 40
Sustainability-oriented innovations (SOI), 124, Corn Productivity Feeds Vetnam, 38, 39
126, 132, 134, 137, 139 Green Revolution, 40
circular economy, 122 growing bio-innovation sector, 37
literature review, 122 innovations, 37, 40
regulatory compliance, 122 livestock production, 38
Sustainable agriculture low labor productivity, 40
beef (Colombia), 54–57 measurable inputs, 36
dairy hub (Kenya), 59–61 microbes, 37
definition, 54 OPVs, 36
human needs, 53 output growth, 40–43
mechanization (India), 61–63 practices, 38
pork (United States), 57–59 producers, 40
risk management, 54 productive technologies, 38
trade-offs, 54 productivity growth, 38
Sustainable business models SDGs, 38
agri-companies, 118 small-scale farms, 40
agri-sector, 118 soil, 38
analyses, 125 water resources, 38
archetypes, 126 yields/output, 36
agri-sector, 128 Toward Sustainable Clusters in Agribusiness
OECD report, 128 through Learning in
patterns and attributes, 126 Entrepreneurship (2SCALE), 147
SOI, 127 Trade, 45
stakeholders, 128 Transgenic input traits, 90
Sweden, 128 Transgenic trait development programs, 90
building element, 125 Trypanosomiasis, 61
innovation, 117
IPCC report, 117
network approach, 124 U
social and environmental, 124 UN Sustainable Development Goals, 186
society’s development goals, 117 Unmanned aerial systems (UASs), 211
trade-offs and barriers, 125
Sustainable Development Goal 2 (SDG
2), 42, 44 V
Sustainable Development Goals Value-added plant-based products, 79
(SDGs), 38, 186 Value chain development, 150
AgMIP, 43, 44 Value creation, 2, 22
agricultural productivity, 42, 43 Value intention, 121, 125
agriculture, 41 Variable rate technology (VRT) practices, 214
GAP Index™, 44 Venture capital (VC)
productivity growth, 48, 50, 51 agricultural domain, 81
regional TFP growth rates, 45, 46, 48 biological seed treatment, 88
Swedish agri-companies, 119 CRISPR technology, 89
Swedish agri-sector, 117 CRISPR-Cas9 genome editing
Swedish context, 129 technology, 89
234 Index

Venture capital (VC) (cont.) Vertical farming, 192

entrepreneurial activity, 89 Vertical interdependencies, 98
innovation, 89 Vietnamese Ministry of Agriculture and Rural
model plant systems, 88 Development, 39
plant biotechnology startups, 88 Vitamin A, 52
precision agriculture, 89
seed companies, 88
soil microbes, 88 W
startups, 88, 89 Wapnö Farm, 134
Vertex Pharmaceuticals, 21 Wild grains, 72