What drives digital transformation in the agriculture industry?

Digital transformation is first and foremost a business transformation. People, not technology, are the most important piece in the digital transformation puzzle regardless of the industry and the part of the world you are operating in. In fact, studies made by global organizations and major consultancy companies across thousands of companies and various industries shows that the main drivers of digitalization are: [1]

1. The opportunity of achieving financial gain
2. Adjusting to socio-economic factors, and
3. Changes to the foundation of how we will work in the future

1. Financial gain

The first obvious motivating factor is the outlook to make more money. But in fact, what becomes more obvious is that digitalization is also needed to stay competitive and protect current revenues in the future. [2] [3] [4]

And what we see is that commitment to digital transformation pays off financially

• 85% of leaders say digitalization efforts have increased market share, versus 39% for all others
• Leaders expect 23% higher revenue growth due to digitalization than all others in the next two years and up to 119% ROI
• 80% of leaders say digitalization has increased profitability, versus 53% of all others, as well as potential cost reduction of up to 1.3%

2. Socio-economics

Digitalization is clearly a mean to make and protect current and future revenues, but digitalization is also driven by strong socio-economic drivers focused on improving food quality and safety, animal welfare and protecting the environment.

By 2050, the global population is expected to increase by almost 40% to 9.6 billion people. And the buying power is expected to double in the same period. [5]

The agriculture industry will need to produce 70% more food while only being able to use 5% more land

In order to feed this drastically increasing population, the UN Food and Agriculture Organization predicts that the agriculture industry will need to produce 70% more food while only being able to use 5% more land. This means approximately 1 billion tons more wheat, rice and other cereals, and 200 million more tons of livestock per year, on almost the same agricultural surface area and primarily produced out of Asia and Africa. [6]

The increase in food production will contribute to prevent world hunger, but the impact of livestock farming on natural resources is under pressure from consumers. And here we will also have to look to further digitalization to help solve challenges related to:

• Land use, for feed crops and grazing
• Resource allocation due to lack of efficient logistics
• Water use for feed crop and animal drinking and servicing
• Greenhouse gases (GHG), which fuel global warming

Consumers are demanding higher social responsibility from companies, just like they do for themselves.

Consumers are demanding higher social responsibility from companies, just like they do for themselves. As they begin to favor new food sources such as plant based ”meat” and “butter”, new protein types, they also demand their food suppliers to lower meat and dairy prices, adapt to volatile demand patterns (‘barbecue demand’), always fresh products, better animal health, welfare and living conditions, reduce antibiotics use etc. [5]

So, the consumer demands keep increasing as the food product mix increase in complexity. And here we also know that digitalization plays a key role in creating transparency and delivering the right product at the right time.

3. The future of work

Driven by potential financial opportunities and challenges from an increasing globalization and refinement of consumer product demand, the way we will work in the future will be increasingly digital driven.

5 out of the top 6 digital change driving technologies are related to data management

5 out of the top 6 digital change driving technologies are related to data management where only one is related to actual physical equipment; ranked as Cybersecurity, Analytics, Mobile, Cloud, Sensor/IoT, Artificial Intelligence and Blockchain. [3]

And if we doubt that the future of our work will be dominated by data then it is worth noting that 98% out of 2000 companies asked about digitalization believed that Artificial Intelligence and Analytics combined will be #1 change driver in 2020.

Futhermore, senior executives believe the future workforce will need to understand how to collaborate with smart machines, but also feel that employees will need to collaborate more with each other and that interpersonal relationships at work will be more valuable because of what digitalization offers.

...

The challenge is not digitalization per se, but rather how leaders adjust their businesses to take advantage of the benefits technology offers. [3] The world is quickly becoming “digital first” and prioritizing your digital presence should be one of the top items on the “to-do” list to protect your current and future revenues against the competition from raising digital leadership in the agriculture industry.

More information, questions or comments

Thank you for reading this article "What drives digital transformation in the agriculture industry?”. For more article please visit me on LinkedIn to find topics covering:

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Special thanks

Special thanks to below sources of inspiration and references:

1. Source: Cap Gemini: Digital Transformation
2. Source: SAP Digital Transformation Executive Study – 4 Ways Leaders Set Themselves Apart
3. Source: Cognizant paper: The work ahead
4. Source: McKinsey Global Institute: The age of analytics - Competing in a data-driven world
5. Source: Deloitte: Smart livestock farming
6. Source: Ernst & Young: Digital agriculture data solutions
7. Source: Forbes: How to be a digital leader