ECommerce

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E-Commerce Agriculture
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Economic Revolutions 1

• Economic revolutions are big
• Rail grew 100 X after 1860
• Cars grew 25 X from 1908 to 1916 (despite WW1)

• Economic revolutions take time
• Rail from 1860 to 1910
• Electricity from 1880 to 1920
• Computers from 1950 to 1990

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Economic Revolutions 2

• Economic revolutions change markets
• More efficient transactions
• More division of labor
• More demanding consumer

• And they reconfigure corporate operations
• Better sales-to-inventory
• -to-asset ratios
• Higher sales per employee
• Lower profit / sales - higher profit / assets

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Four Technology Drivers

• Biotech, the science of life
• Nanotech, new materials, micro machines
• Ecotech, the balance of life technology
• Infotech, information and communication

Agriculture benefits from all four
No other industry does !
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IT Hardware Software

• Moores law is alive and kicking
• Continued hardware cost reductions
• Computers on a chip
• Imaging sensory chips (CCD -- DSP -- CMOS)
• Issues storage - power for mobile use

• Software
• After GUI GIS Voice Technology
• Real Time analysis and processing
• Overhead, Scalability, Reliability,
  Interoperability
  
• Dominant architecture under pressure

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InfoTech Communications
Source The Industry Standard, May 17, 1999

• World standard for packet data (TCP/IP)
• Broadband within wired infrastructure (DSL,
  Cable)
  
• Digital Wireless moves to one unique world
  standard (2000 in Japan)
  
• PDA-Phone hybrid
• Networked Vehicles (Cadillac OnStar)
• Networked information appliances

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Bandwidth Glut in 2001?

• Collective Euphoria
• US puts down million of miles of fiber, every
  year
  
• In 2001 400 times bandwidth capacity vs. 1998
• Causes
• Regulations push investments toward
  infrastructure
  
• Communications startups valued on miles of fiber
• Consequences
• Consolidation - Irrational pricing - Bail
  out
  
• UNLESS new products services fill the gap

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The Internet TODAY
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Eyeballs Wallets
Source CommerceNet / Nielsen Media Research
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Internet Commerce Grows
Source Forrester Research, Inc

• Business to Consumer
• 1998 5
• 1999 8
• 2000 12
• 2001 18
• 2002 35 bn

• Business to Business
• 1998 17
• 1999 41
• 2000 105
• 2001 183 bn

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Mainstream Business
Source Reader Survey, InfoWorld, July 19, 1999

• I- Commerce currently operated
• Selling to other businesses 57
• Purchasing goods for production 53
• Selling directly to consumers 49
• Procuring non-production goods 48
• Hosting online auctions 14
• Plan to upgrade within 18 mo. 61

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Mars Venus on the Web
J. Cassell H. Jenkins, From Barbie to Mortal
Combat, MIT Press, 1999

• Web for Women
• Medium - Tool
• Communication - Sharing
• Creation - Expression
• Flexibility
• Effective
• Personal Integration
• Exploration

• Web for Men
• Product - Weapon
• Control - Autonomy
• Power - Instrument
• Speed
• Efficient
• Consumption
• Exploitation

Does this look like cars, or what?
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Opinions from Leaders
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Strategic Intent
Based on an Wall Street Analyst presentation by
Lou Gerstner, CEO IBM, in Business and the
Internet, The Economist, June 26, 1999

• Dot-com companies are fireflies before the
  storm. The storm thats arriving is when
  thousands of institutions that exist today seize
  the power of this global computing and
  communications infrastructure and use it to
  transform themselves. Thats the real
  revolution.

• IBM Today
• 15 billion sales over the Internet (3.3bn in
  1998)
  
• 28 million visits for e-service support
• (saving 660m in support costs to IBM)
• 12 billion procurement over the Internet
• (eliminating 5m invoices)

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Strategic Intent
Based on an interview of Jack Welch, CEO GE, in
Internet Anxiety, Business Week, June 28, 1999
I dont think theres been anything more
important or more widespread in all my years at
GE. Where does the Internet rank in priority?
It is No. 1, 2, 3, and 4.

• GE Today
• TPN (Trading Process Network to suppliers)
• By yearend 1999 all 200 GE businesses will be
  able to do E-commerce transactions
  
• Paper based billing, quality monitoring etc will
  move to the net.
  

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An in depth analysis
Based on Michael Dell, CEO Dell Computer, in
The World in 1999, The Economist magazine

• The Internet is a new business system
• Boundaries Supplier / Enterprise / Customers blur
  or disappear
  
• Paper based functions will disappear
• Corporate organization will flatten
• Time and distance will shrink in a way not
  possible before

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The I.T. Battleground
According to Scott McNealy, CEO Sun Microsystems,
at the JavaOne Conference, San Francisco, June
1999
Product Company
No mans land To be avoided
Integrator / Service Company
Broker Company
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The I.T. Battleground 2
According to Scott McNealy, CEO Sun Microsystems,
at the JavaOne Conference, San Francisco, June
1999
Intel Sun Apple Microsoft
Undifferentiated PC companies
Gateway Dell
EDS
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The I.T. Battleground 3
According to Scott McNealy, CEO Sun Microsystems,
at the JavaOne Conference, San Francisco, June
1999
IBM
Successful Transition
No mans land To be avoided
Compaq
Incomplete Transition
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For Business The Internet is ...
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Cyber Business

• Cyber individuals
• Reduced transaction costs
• New information based opportunities
• Power shifts from seller to buyer
• Threats to entrenched companies
• Disintermediation
• Think C
• The big Guys will ultimately win

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Cyber Individuals
Source Technology Business, Dec 1998

• Real time learning creates empowered and
  independent individuals
  
• The Wired Workforce irrevocably changes the
  workplace dynamics
  
• Consumers want factual information, easy
  transactions and fast delivery
  
• Customers become data, can be analyzed predicted

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Reduced Transaction Costs

• Examples
• Banking
• Airline tickets
• BUT these saving will only be available to
• - corporations selling directly to consumers
• - OR by Infomediaries that link sellers and
  buyers

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Information New Business

• Speed of Information
• Range of Information
• Accessibility of information
• Low cost of capturing information
• Low cost of distributing information

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Markets for Information 1

• Commoditized information,
• freely available on many web sites
• News, Sports results Weather around the world
• Financial and commodity prices
• Maps (from generic to highly specific)
• Phone numbers Yellow pages
• Travel Information
• Business Model Advertising click-through
  revenues
  
• Dominated by traditional and Yahoo type media
• Several examples in Agriculture

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Markets for Information 2

• Proprietary content available for
• paying subscribers to web services
• Help users to make money (Investing, Gambling)
• Have recognized monopoly of information
• WSJ, Washington Post, New York times
• Have valuable franchise (Disney, Time Warner,
  AOL)
  
• Business Model
• Subscription fees, Some ad. Revenues
• Infotainment

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Markets for Information 3

• Individualized Insight for one-on-one solutions
  to customer problems
  
• Taxes
• Investment management
• Legal matters
• Ag consultants
• Aggregators, Auctioneers, Exchanges
• Information/Web sites serve the professionals who
  dispense the insights to the consumer

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Power shift Seller to Buyer

• Free distribution of product information
• Free distribution of price information
• Reduces switching costs
• BUT this power can be overwhelming

• SO
• Buyers desire one stop shopping
• Buyers desire accurate disinterested advice

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Use of Customer Data
Source Forrester Research Survey of 50 top 1000
US companies, 1999

• of respondents 1999 2001
• Marketing 18 52
• Customer Service 16 48
• Sales 16 34
• Process improvement 2 22
• Dont use data 72 0

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Threat to Entrenched Cos
Source Ward Hanson, Stanford Graduate School of
Business others

• New business models
• New business lines
• Less boundaries of time
• Less boundaries of geography
• Expansion at relatively low cost
• Stock market valuations (up till now)
• Broader Product assortment
• Quality enhancements

• Better Service
• Greater efficiency
• More information
• Easy Comparison shopping
• Shoppers buyers contribute to the content
• Personalization
• Direct Communication
• Community
• Cost Savings
• Direct Distribution

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Disintermediation

• Traditional intermediaries are vulnerable
• Increased power of the producer
• Realistic option to service customer directly
• Increased power of the customer
• Broader choice for the consumer
• More transparent pricing
• Better information on product/service
• On the other hand
• Buyers desire one stop shopping
• Buyers desire accurate disinterested advice
• So we will see the Emergence of Infomediaries

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Infomediaries Categories
Sources The Economist, June 26, 1999 - The
Industry Standard, June 28. 1999
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Perishable Commodities

• Empty transport space truck - barge - rail -
  plane
  
• Empty storage space warehouse - elevator
• Advertising space
• Seasonal goods
• Social / shopping habits
• Agricultural inputs
• Seasonable services
• Social / entertainment habits
• Tax filing
• Agricultural contract work

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Infomediaries Examples
Sources The Economist, June 26, 1999 -
InternetWeek, July 29, 1999
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Infomediaries - Old Leaders
Source Media Metrix - The Wall Street Journal,
Aug 2, 1999
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The 4 Cs of Web Marketing
Inspired by Ward Hanson, Stanford Graduate School
of Business

• 4 P Marketing
• P roduct
• P romotion
• P ricing
• P lace

• Web Marketing
• C onsumer loyalty
• Brand equity product enhancements
• C ommunication, two way
• New medium, targeted publicity
• C ost / Value transparency
• Real time, free trial, yield mgt, bundling
• C onvenience to acquire
• New flatter channels

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Big Guys will win

• Mass market brands
• Economies of scale
• Economies of scope
• Financial clout
• Wide reach for advertising
• But some of the big guys are start-ups today

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Internet Agriculture
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Online Groceries Shopping
Source The Industry Standard, March 29, 1999

• Supermarkets
• Safeway.com
• Albertsons.com
• Kroger.com
• Wholefoods.com
• Schnucks.com

• Online Grocers
• Peapod.com
• Netgrocer.com
• Homegrocer.com(Seattle)
• Yourgrocer.com (New york)
• Homeruns.com (Boston)
• WebVan (San Francisco)

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Outsiders about Ag Sites ...
Source The Industry Standard, June 7, 1999

• Focus on Information
• AgCast.com
• Agriculture.com
• AgDayta
• StratSoy
• VantagePoint ?

• E-Commerce
• CranInfo
• FarmCredit.com
• Netseeds.com
• XSChem.com
• Cattleofferings.com
• Machineryfinder.com
• E-markets

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Fast Track Ag Companies
Source Top 100 Fast track Technology
Innovators, PC Week, June 21, 1999
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Battleground in Agriculture
Inspired by Scott McNealy, CEO Sun Microsystems
Product Company
Who is Who? Who is Where ?
No mans land To be avoided
Integrator / Service Company
Broker Company
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Battleground in Agriculture
Inspired by Scott McNealy, CEO Sun Microsystems
Deere Pioneer Monsanto
No mans land To be avoided
Transformers Traders Coops
Integrated Food Cos
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Battleground in Agriculture
Inspired by Scott McNealy, CEO Sun Microsystems
Deere Pioneer Monsanto
Strategic Intent ?
No mans land To be avoided
Transformers Traders Coops
Integrated Food Cos
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Strategic Intent
Based on an interview of Lloyd Taylor, CIO
Cargill, InformationWeek, June 21, 1999
We know E-commerce will be an important part of
our future relations with customers, suppliers
and trading partners.

• Initially Cargill wants to (still according to
  Lloyd Taylor)
  
• Experiment with new web based products
• Streamline the supply chain
• Vertically and horizontally
• Key customers and vendors
• Launch Consulting services to farmers
• Integrate enterprise applications across the
  Internet

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Perishable Ag Commodities

• Empty Land
• Empty storage space warehouse - elevator
• Empty transport space truck - barge - rail
• Idle farm equipment
• Agricultural input products
• Agricultural contract work
• Agricultural produce
• System integration by the farmer
• Timely answers

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Disintermediation in Ag.

• Traditional intermediaries are vulnerable
• Increased power of the suppliers
• Realistic option to service customer directly
• Product / science based leverage
• Increased power of the farmers
• More transparent pricing
• Better information on product/service

• On the other hand
• Farmers appreciate the convenience of one stop
  shopping
  
• Farmers ever more want accurate disinterested
  advice
  
• Will Intermediaries become Infomediaries?

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Relations Farmers - Dealers

• New Relations - New Balance
• Dealers have opportunities
• Infomediary -- Loyalty -- Franchise
• New products and Services
• Farmers have opportunities
• Access to information -- Knowledge --
  Choice
  
• Farmer will easier spot underperformance
• What matters most is
• who best turns information into knowledge
• not whose hard drive the data sits on

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Internet Farm Operations

• Better information
• Easier communication
• Better knowledge of marketing options
• Better choice use of inputs
• Better choice use of services
• Better planning -- smoother operations --
  reduced overhead manpower
  
• New services, new suppliers, infomediaries

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New Services Integration

• Integrated into inputs supply chain
• Integration into downstream supply chain
• Best practices analysis / consulting
• Direct integration farm equipment-databases
• Compliance reporting
• Notarizing pedigree of produce

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Information Databases

• Basic suppliers
• Government (USDA, USGS, NOAA...)
• Satellite imagery (Birds will finally go up
  now)
  
• Service providers / Information retailers
• GIS industry based
• Ag Based (How many alliances will make it ?)
• New players (Microsoft with TerraServer.com ? )
• Issue of User Privacy
• Issue of Data Confidentiality

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Architecture must satisfy

• Capability of central database
• Ease of use in the field
• Open for mobile users and automated input from
  sensors
  
• Open standards (software, network)
• Objects oriented
• GIS enabled
• Serving needs of central organization,
  dealer/sales depot and farmers

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Information Service Issues

• Business model for aggregation
• Where is the value?
• How to extract the value?
• Sticker Shock if priced for real value

• Will Internet Dynamics work in Ag ?
• Too few potential users for a volume game
• Manage cost for data, software network
• Bandwidth for seasonal peaks
• Rural communications infrastructure

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The New Food Fiber Chain
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The Historic Food Chain

• Walls between input, farm production,
  processing, marketing, distribution, and
  retailing
  
• Walls between the ag. chain and the consumer
  market
  
• One way thinking, from farm to consumer

Input Industries
Processing
Farm Production Operations
Consumer
Marketing
Distribution
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Changes in the 80ies - 90ies

• Industrialization, Concentration and Integration
  in downstream processing / marketing /
  distribution

Input Industries
Farm Operations
Marketing
Distribution
Processing
Consumer
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One of the Consequences ...
Source Mark Drabenstott, VP Economist, Federal
Reserve Bank of Kansas City

• Downstream captured most of the new added
  value
  
• Leaving the farmer with a shrinking share of the
  pie

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The Internet pushes Change

• The Internet enables accelerates existing
  industry trends
  
• Concentration How many will be left?
• Oligopolies Like in many other industries.
• Globalization Like GMOs in Europe
• Integration
• Disintermediation
• We will get faster to the New Food Fiber Value
  Chain

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A New Food Fiber Chain

• Two way influences upstream and downstream
• These influences create new business models,
  some equity based, some knowledge based
  
• More integrated than ever before, from farm
  inputs straight to the consumer
  
• More concentrated, less players at every level,
  with oligopolistic markets
  
• Fast adoption of major disruptive technologies
• Re-definition of Farmer

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The Food Fiber Chain
Concentration
The Internet
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New Skills for Success

• Be an Integrator, manage the network
• People skills vs.
• the computer and machinery operator
• Manage complexity diversity
• Ask Can I afford to spend the time trying to it
  myself?
  
• Focus choose what not to do yourself
• Do what youre good at AND what you like to do
• Get a good trustworthy network to do the rest

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Social Impact in the US

• Agriculture no longer is the dominant economic
  base, even in rural America
  
• Rural communities have diversified to
  manufacturing, services, and now the knowledge
  economy.
  
• The new technologies and knowledge based
  agriculture will better fit / reintegrate into
  this new rural America.

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Thank You
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Thank You