E-Commerce and Agriculture:
Where is There Value
to Create?
Steve Sonka
National Soybean Research Lab
University of Illinois
Where’s the
beef ????
Agenda
• E-Commerce and information technology
(IT) coming to ag
• IT implementation and industry redefinition
• Where are the IT gaps?
• Implications
Agenda
• E-Commerce and information
technology (IT) coming to ag
• IT implementation and industry redefinition
• Where are the IT gaps?
• Implications
Forces Pushing and Pulling
Towards Redefinition
e-Commerce
Biotechnology
Environmental
responsibilities
Food safety
traceback
Precision ag
Consumer segments that
desire differentiated farm output
E-Commerce
1. Encompasses all electronically facilitated
business processes, including data transfer
among buyers, sellers and various supply
chain entities.
2. Has three primary components
•
•
•
Supporting infrastructure,
Processes supporting how business is
conducted, and
Commercial transactions.
Agenda
• E-Commerce and information technology
(IT) coming to ag
• IT implementation and industry
redefinition
• Where are the IT gaps?
• Implications
What is Industry Redefinition ?
Redefinition: When profound change occurs
in the rules of competition
•Between suppliers and customers
•With consumers
•Among competitors
Knowledge Creation
Stories of Competitive Dynamics
1.
2.
3.
American Airlines and Sabre
American Hospital Supply
Frito Lay
**** Broiler industry ****
Common Feature
Aggressively used data from their own operations
to gain competitive advantage
Information Technology
And Strategic Change
Jeffrey Sampler: How information
technology redefines industries.
... Look at individual transactions
(1) Separabilty
(2) Aggregation potential
Transaction Characteristics (1)
• Separability: extent to which information
can be separated from the associated
transactions
• Amount of information
CAPTURED as transactions occur
Transaction Characteristics (1)
• Separability: extent to which information
can be separated from the associated
transactions 1950s
0 or 1
Today
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Transaction Characteristics (2)
• Aggregation potential: extent to which
the information’s value is “leverageable”
beyond the original transaction
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The Sector: Today
Genetics Other
inputs
High/High
Farming
Processing
Low/Low
Consumers
High/High
Tomorrow
Potash and Phosphate Institute
The Dot.Com’s Come to Ag:
A Two Day Sample
• J.R. Simplot Company &Aspen Technology – ebusiness solutions
• Rooster.com -- Cargill, DuPont and Cenex Web
site to sell inputs
• www.farms.com -- new CEO & CTO
• Cargill & Ariba –B2B exchange for food mfgrs
and suppliers
• Ocean Spray & Symbol -- warehouse productivity
Two IT-Driven
Change Factors
Genetics Other
inputs
Farming
Processing
• Precision Agriculture
• “B 2 B” E-commerce
Retail
Agenda
• E-Commerce and information technology
(IT) coming to ag
• IT implementation and industry redefinition
• Where are the IT gaps?
• Implications
Support activities
The Generic Value Chain
Firm infrastructure
Human resource management
Technology development
Procurement
M
a
i
n
Inbound
logistics
Operations Outbound Marketing Services
logistics
& sales
---------- Primary activities ----------
r
g
Input mfgrs
Food and Ag:
A Series of Value Chains
Input retailers
Farming
First handlers
Food mfgrs
Retail
Bar Coding and
Manufacturer / Retail Power
Food mfgrs
Retail
Bar Coding and
Manufacturer / Retail Power
Food mfgrs
Retail
Where IT’s Being Employed
Today
Input mfgrs
Input retailers
Farming
First handlers
Food mfgrs
Retail
IT Within the Farming Sector
Fixed asset
utilization
Farming
Farming
Farming
Farming
Precision ag as we
thought it would be
From “JIC” to “JWN”
Just In Case
Input retailers
Farming
From “JIC” to “JWN”
Input mfgrs
Just What’s Needed
For Production
Input retailers
Farming
Farming
From Commodity to
Supply Chains
First handlers
Food mfgrs
Tomorrow’s
Consumer Driven System
Retail
Food mfgrs
First handlers
Farming
Input retailers
Input mfgrs
Agenda
• E-Commerce and information technology
(IT) coming to ag
• IT implementation and industry redefinition
• Where are the IT gaps?
• Implications
Managerial Implications
• Anticipate interactions
• Concentrate on timing and sources of value
• Manage (create) intangibles
Assets Today !!!
What earns high value ?
Tangibles
Intangibles
Brands
Knowledge
Risk taking
In Conclusion….
• E-Commerce, application of IT, is a feature of
tomorrow’s ag system
• IT redefines industries, predictably
• IT gaps exist at and around the producer level
• Intangible assets with demonstrable value are
the key