Two announcements this week on farm technology rules crack the door on rapid internet-of-things innovation in the agriculture industry. The moves spell opportunity for a few new entrants, should sound disruption alarms for some entrenched incumbents — and almost certainly signal money to be made for investors with the wisdom to know the difference.
For non-innovating incumbents hiding behind switching costs, the implications are dire. For nimble ag tech startups hiding in tiny holes, this could be just the asteroid they were hoping for.
The first announcement came Nov. 13 from the American Farm Bureau Federation on an agreement over much-fought-over privacy guidelines for farm data, as well as who owns usage data streaming off the currently disparate array of smart devices in American farm fields. The second came days later from AgGateway, the non-profit consortium of businesses serving the industry, and governs how data files should be structured, exchanged and classified.
Taken together, they spell the beginnings of industry standardization around data in U.S. agriculture, an industry with an annual gross output placed by Statista at $374 billion. It was a necessary first step toward interoperability, connected business models, and new industry growth.
“You talk about a shrinking world? This is part and parcel about what a shrinking world would look like,” said Joe Russo, president of farm IT adviser ZedX and contributing columnist at PrecisionAg magazine. “This next year truly is going to be a revolutionary year in agriculture.”
Because of all the parties and interests involved, farming is probably the last heavy industry to join the Internet of Things bandwagon, and the impacts could be enormous.
Up for grabs are increased functionality of existing farm assets, improved reliability and up-time, and new fronts for competition in product differentiation, revenue from services related to interoperability, and wholly revamped industry structures.
Suddenly, big business, entrepreneurs and investors in farm tech can have new conversations about innovation, adoption curves and rapid scalability.
Under the underlying agreement announced by the AFBF, farmers own the data created by their equipment, and must be asked for permission to use it each time suppliers wish to learn something new from it.
In the follow-on pact pushed by AgGateway, initial industry-wide goals and processes are spelled out for structuring data in standard markup languages, establishing an API protocol for communications between devices, and developing a standard glossary of terminology — ending at least officially the different regional terms for such things as fertilizer tanks, subsurface tillage and other tools and techniques.
From a competitive standpoint, this restarts the race for customers on American farms.
In the short run, there will be winners, losers, mergers and acquisitions. As with IoT in general, it lays the groundwork for discussion of new competition, new entrants around data usage services and industry consolidation as software replaces manufactured components and drives out the need for many traditional suppliers.
For big incumbents who have relied on locking customers into proprietary software platforms that excluded competitors, they will be faced with the challenge of holding onto customers — who suddenly can switch to new offerings that offer improved options.
For statups, it means a seat at the table with the same technology and access opportunities as big companies, who once enjoyed big barriers to new entrants who lacked the capital needed to establish a customer network big enough to fend off challenges. Look what just two of those startups have been able to do with publicly-available, non-proprietary data, however: 640 Labs and FarmLogs are both Midwestern startups.
Both sets of rules were years in the making, involving the input of growers associations, individual farm bureaus, standards makers and Big Farm suppliers such as Dow, John Deere and DuPont.
The path to the November agreements required a three-year process. Visit the discussion minutes at the bottom of this link to dive into the issues that complicated the conversation.
Things are likely to move faster. Standards can be expected in 2015, at least for testing, Russo said. And for updates, watch AgGateway.
“This really promotes innovation. Now the design and performance of tools will be looked at, not just the ability to have a network effect that precluded a switch to a competitor,” Russo said. “This is going to start the ball rolling internationally. This is going to be a global phenomenon. This is just the start.”
– James Janega