E-Commerce and Agriculture:Where is There Value

to Create?

Steve SonkaNational Soybean

Research Lab University of Illinois

Where’s thebeef ????

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 PullingTowards Redefinition

Consumer segments thatdesire differentiated farm output

Biotechnology

Environmental responsibilities

Food safety traceback

e-Commerce

Precision ag

E-Commerce1. 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 Dynamics1. American Airlines and Sabre2. American Hospital Supply3. Frito Lay

**** Broiler industry ****

Aggressively used data from their own operations

to gain competitive advantage

Common Feature Vision

Hallucination

Hallucination

Information TechnologyAnd 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

Today011010100110111000

Transaction Characteristics (2)

• Aggregation potential: extent to which the information’s value is “leverageable” beyond the original transaction

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Otherinputs

Genetics Farming Processing Consumers

The Sector: Today

High/High High/HighLow/Low

Tomorrow

Potash and Phosphate Institute

Separability

The Dot.Com’s Come to Ag:A Two Day Sample

• J.R. Simplot Company &Aspen Technology – e-business 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

Aggregationpotential

Otherinputs

Genetics Farming Processing Retail

• Precision Agriculture• “B 2 B” E-commerce

Two IT-DrivenChange Factors

Agenda

• E-Commerce and information technology (IT) coming to ag

• IT implementation and industry redefinition

• Where are the IT gaps?• Implications

The Generic Value Chain

Inboundlogistics

Operations Outboundlogistics

Marketing& sales

Services

Ma

rg

in

Firm infrastructure

Human resource management

Technology development

Procurement

---------- Primary activities ----------

Sup

port

act

ivit

ies

Food and Ag:A Series of Value Chains

Input mfgrs

Farming

Retail

Input retailers

First handlers

Food mfgrs

Bar Coding andManufacturer / Retail Power

Retail

Food mfgrs

Bar Coding andManufacturer / Retail Power

Retail

Food mfgrs

Where IT’s Being EmployedToday

Input mfgrs

Farming

Retail

Input retailers

First handlers

Food mfgrs

IT Within the Farming Sector

Farming

Farming

Farming

Farming

Precision ag as we thought it would be

Fixed assetutilization

From “JIC” to “JWN”

Farming

Input retailers

Just In Case

From “JIC” to “JWN”

Farming

Input retailers

Just What’s NeededFor Production

Input mfgrs

From Commodity toSupply Chains

First handlers

Farming

Food mfgrs

Tomorrow’s Consumer Driven System

Food mfgrs

First handlers

Farming

Input retailers

Input mfgrs

Retail

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 ?

Intangibles Brands Knowledge Risk taking

Tangibles

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