Building Entrepreneurial Capacity
for Agriculture
Dr. Chris Peterson
Director, MSU Product Center
NACAA Conference
July, 2007
© Dr. H. Christopher Peterson, Michigan State University, 2007
Business innovation in agriculture, food and natural resources
The Issues
• The Problem
• The Basics of New Venture Creation
• Capacities Needed vs. What Exists for
Entrepreneurial Agriculture
• Overcoming the Capacity Gap to Build
an Entrepreneurial Agriculture
Business innovation in agriculture, food and natural resources
The Problem
• Undesirable outcome: Declining agri-food
firm profitability
• Possible Responses (not exhaustive):
– Find alternatives to commodity production, e.g.,
value-added and/or non-food uses of ag
– Foster sustainable rural development
• “Mandate”: Assist new venture creation
– Both new businesses & new products/services
Business innovation in agriculture, food and natural resources
The Problem
• What capacities are needed to create new
ventures?
• Do we have these capacities in agriculture?
– If not, how do we get them?
• How knowledgeable and skillful are we (the
entrepreneurial support community) in
assisting new venture creation?
Business innovation in agriculture, food and natural resources
Examining the Basics
• Entrepreneurship vs. Innovation
– Entrepreneurship: The drive and skill to
commercialize a new venture.
– Innovation: The drive and means to create a
new idea; not adoption; not a venture.
– Entrepreneurs and innovators need not be the
same; but mixture is possible.
– Entrepreneurship does require an innovative
idea; but degree of innovative varies widely.
Business innovation in agriculture, food and natural resources
Examining the Basics
• Innovation vs. Market Opportunity
– Innovation: a new idea for business change
• Products & services, processes & technology,
capabilities & competencies, supply chain
relationships, and markets
– Market Opportunity: the demand and supply
conditions that would lead to an innovation’s
commercialization through a new venture.
– Idea and opportunity are too often mixed.
Business innovation in agriculture, food and natural resources
Examining the Basics
• Entrepreneur vs. Manager
– Entrepreneur: Ability to create a new venture.
• No existing endowment of resources
• Only non-marginal decisions about resource
accumulation and use
– Manager: Ability to sustain a continuing venture.
• Existing endowments of resources
• Marginal and non-marginal decisions about resource
use and growth
Business innovation in agriculture, food and natural resources
Examining the Basics
• Venture Potential vs. Feasibility
– No common definition for a business plan or a
feasibility study.
– A useful distinction?
• Potential: Can the venture create needed profits
under a general set of assumptions?
• Feasibility: Can the venture create needed profits
when all knowable factors (in advance) are taken
into account?
Business innovation in agriculture, food and natural resources
A FRAMEWORK FOR NEW VENTURE CREATION
Policy Environment
Innovative Idea
Entrepreneur
Venture
Concept
Market Opportunity
Test of
Potential
Test of
Feasibility
•Prove potential
•Create initial
“prospectus” to
seek resources
•Prove feasibility
•Prepare for
implementation
•Gather resources
Resources III
Resources I
Resources II
•“Potential” Info
(general market,
process, org., etc.)
•“Sweat” Equity
•“Feasibility” Info
(specific market,
process, org., etc.)
•Initial Equity
•Prop., Plant & Eqmt
•Personnel
•Management
•Buyers
•Suppliers
•Advisors/Partners
•Full Debt & Equity
Industry and Market Environment
New
Venture
What Capacities Are Needed?
• Entrepreneurial capacity
– Risk seeking and resource creating
• Innovation capacity
– Willingness to create the new
• Capacity to assess market opportunity
– What the customer values!
• Commercialization Capacity
– Ability to convert the concept into practice
Business innovation in agriculture, food and natural resources
Entrepreneurial Agriculture?
• Do we have entrepreneurs?
– Mostly managers, not entrepreneurs
• Do we seek innovation?
– Rather conservative business approach
• Do we assess market opportunity well?
– The “commodity” mind set
• Do we know how to commercialize?
– IP, capital, and partners
Business innovation in agriculture, food and natural resources
Entrepreneurial Agriculture?
• Two other challenges:
– Biological foundation of products
– Need for collective action
• CONCLUSION: Agriculture is challenged
in every capacity needed for venture
creation.
– This does not mean that agriculture can not
be entrepreneurial.
Business innovation in agriculture, food and natural resources
Building Entrepreneurial Ag?
• The way we always have in extension by
working directly with agricultural
producers and related firms.
– Apply knowledge
• Entrepreneurship, innovation methods, market
opportunity assessment, commercialization
know-how
– Encourage and support experience
Business innovation in agriculture, food and natural resources
Building Entrepreneurial Ag?
• Build partnerships
– With ag & non-ag entrepreneurial community
• USDA RD, AgMRC, Farm Credit, RECs, FB, etc.
• SBA, SBTC, Economic Development Corp., etc.
– With rural communities
• Creating Entrepreneurial Communities
– Through networking organizations
• The Product Center and like entities
Business innovation in agriculture, food and natural resources
GOVERNANCE
•Dean and Directors
•Department of Ag Economics
•Joint Advisory Committee
PROGRAM
DELIVERY
NETWORK
Product Center
Networks & Outcomes
(with participation from customers,
internal & external providers, and
sponsors.
COMPONENT
NETWORKS
MSU
PRODUCT CENTER
PROGRAMS
•Venture Development
•Market & Innovation Research
(Knowledge Development)
•Entrepreneurial & Community
Development
COOPERATORS
•EXTERNAL PARTNERS
•INTERNAL PARTNERS
•INNOVATION COUNSELORS
& EDUCATORS
•SPONSORS
VENTURE
DEVELOPMENT
NETWORKS
•Provider Networks
•Service Networks
MARKET &
INNOVATION
RESEARCH
NETWORKS
ENTRENEURIAL
& COMMUNITY
DEVELPMENT
NETWORKS
Customers
(Ag, Food &
Natural Resources)
•Entrepreneurs
•Existing Firms
•Producer
Organizations
•Commodity Groups
•Communities
•Government
Agencies
•MSU Faculty & Units
•Economic
Development Groups
•Local Food Systems
•Other economic
entities
Desired
Outcomes:
ECONOMIC
OPPORTUNITIES
•New businesses
•New products
•More successful
existing businesses
•Reduced likelihood
of losses from
inappropriate
business/product
decisions
•Better access to
existing resources
•More educated
pool of
entrepreneurs and
managers
•Creation of
entrepreneurial
communities
A FRAMEWORK FOR NEW VENTURE CREATION
Policy Environment
Innovative Idea
Entrepreneur
Venture
Concept
Market Opportunity
Test of
Potential
Test of
Feasibility
•Prove viability
•Create initial
“prospectus” to
seek resources
•Prove feasibility
•Prepare for
implementation
•Gather resources
Resources III
Resources I
Resources II
•“Viability” Info
(general market,
process, org., etc.)
•“Sweat” Equity
•“Feasibility” Info
(specific market,
process, org., etc.)
•Initial Equity
•Prop., Plant & Eqmt
•Personnel
•Management
•Buyers
•Suppliers
•Advisors/Partners
•Full Debt & Equity
Industry and Market Environment
New
Venture
Concluding Thoughts
• We face a “mandate” to support new
venture creation.
• A worthy concept comes first.
– Entrepreneur, Innovation, Opportunity
• Then all the elements of commercialization.
• Agriculture is entrepreneurially challenged.
• Education, experience, and partnering.
Business innovation in agriculture, food and natural resources