The digital agriculture revolution will take more than innovation (Part 2)

By Shruthi Baskaran, Sonya Hoo, Chris Mitchell, Jim Larson, Shalini Unnikrishnan, Sushma Vasudevan, and Younès Zrikem
This article was originally published at https://www.bcg.com/en-cn/publications/2021/digital-agriculture-and-development

A SPOTLIGHT ON MARKET SOLUTIONS

No single method of developing successful market solutions is applicable to all situations, but two variables in particular have a bearing on the best approach to take. The first is whether the public sector, the private sector, or a public-private partnership will be creating and operating the solution. The second is what portion of the value chain the solution will cover. Integrated solutions apply to the value chain from end to end, while discrete solutions focus on a particular part of the value chain, such as inputs (connecting farmers with providers of seeds and fertilizer) or outputs (helping farmers find buyers or distributors).

Our examination identified winning offerings that have very different profiles—some led by government, others by the private sector and others by a mix of the two; some integrated and some discrete. The following four examples suggest the range of possibilities.

Government-Led Integrated Solution: India. The Government of India is in the process of building a platform dubbed IndEA Digital Ecosystem for Agriculture (IDEA). IDEA is being designed as an open platform whose goal is to use open digital technologies to offer farmers integrated services across inputs, production, and post-harvest, such as soil health monitoring, crop loss/damage assessment, smart logistics and distribution, and market access.

Public-Private-Partnership-Led Integrated Solution: Rwanda’s Smart Nkunganire System. Against the backdrop of a relatively mature, mostly government-led digital agriculture ecosystem, Rwanda's Smart Nkunganire System (SNS) is a public-private partnership between the Rwanda Agriculture Board and BK TechHouse. Targeting end-to-end digitization and supply chain management of Rwanda's public-sector Agro-Input Subsidy program, the platform has registered roughly 1.2 million farmers and more than 1,000 small agro-dealers.

Private-Sector-Led Discrete Solution: Olam’s Digital Solution Suite. Over the past few years, the international agribusiness Olam has expanded its portfolio of digital tools to rethink the way farmers access markets, providing end-to-end traceability over the supply chain and capturing activities at the level of individual farmers. The company has also taken steps to ensure that its solutions are accessible to smallholder farmers, including through training sessions that rely on images and practical demonstrations to reach people who have basic or no literacy skills.

Private-Sector-Led Integrated Solution: DeHaat’s Success in India. DeHaat is an accessible online platform that brings together an ecosystem of partners to provide a range of agricultural services, including access to agricultural inputs and financing, as well as connections to bulk buyers. DeHaat has also developed a network of more than 1,300 micro-entrepreneurs who use the platform to help farmers source inputs and access free agro-advisory services; today these micro-entrepreneurs serve about 350,000 farmers.

Despite those success stories and the clear need for tools that improve market efficiency, digital ag companies continue to overemphasize productivity-based solutions. Agricultural advisories, which focus on helping farmers improve their productivity, account for roughly 66% of all registered users, compared with just 9% for market-linkage solutions, according to CTA.

THE ROLES OF THREE KEY STAKEHOLDERS

Governments, private-sector players, and development organizations and donors all have parts to play in driving the development of the digital ag ecosystem. Those efforts should be coordinated, should reflect the maturity of the markets in question, should aim to drive promising solutions to scale, and should enhance the development of agricultural markets in general. In addition, they should meet farmers where they are (as opposed to where digital ag players would like them to be) in terms of their ability to afford and use solutions.

Governments. It is critical for governments to begin by identifying the maturity level of their country’s or region’s digital ag ecosystem. Armed with that assessment, they should create a roadmap in partnership with private-sector and social-sector players to make the required investments and remove critical obstacles to advance through the maturity spectrum. Progress can look very different at different maturity stages:

• In early-stage ecosystems where mobile penetration is limited—those at either the basic investment stage or the digital inflection point—governments should review their regulatory frameworks, paying particular attention to policies or regulations that may affect private sector investment. Establishing suitable regulatory frameworks can spark investments that are necessary to expand mobile networks.

• As a country’s digital ag ecosystem reaches the digital inflection point, and again as it begins to achieve moderate digital capacity, with a sufficient critical mass of digital solutions, the government can play a critical role in digitizing data to make it accessible and appropriately structured for digital solutions. Such data, including digital identity information and digitization of land records, tends to be in short supply. Strong government leadership in data digitization has fostered the development of a robust digital ecosystem in Rwanda and in the Indian state of Andhra Pradesh. In some cases, the task may entail digitizing existing government paper documents such as land records; in others, it may involve developing new sources of data. Making the digital data available to private-sector players will enable them to focus on developing optimal tools and solutions.

• At the moderate digital capacity and robust scaling capacity stages, governments can introduce incentives to encourage solution providers to make their tools accessible and interoperable with other solutions. Such efforts will promote inclusivity and reduce duplicative design work.

Private Sector. Private-sector players, including mobile network operators (MNOs), large-scale agribusiness companies, and small and medium-size enterprises (SMEs) are best positioned to act in three areas:

• MNOs can drive explosive, cost-efficient growth in digital infrastructure. In India, Myanmar, and Kenya, for example, digital connectivity has grown rapidly thanks to private-sector investments. One company, Reliance Jio, has amassed over 400 million subscribers in the past five years thanks to major investments it has made in India. And Safaricom’s investments in Kenya helped bring more than 35 million people online.

• Large agribusinesses can help develop digital agriculture ecosystems in two ways. First, they can promote the development of robust agricultural markets. This includes using digital tools, developed in house or by other solution providers, to increase the amount of product they purchase from smallholder farmers. In this way agribusinesses can function as an anchor organization, giving farmers reliable buyers at better prices than they would otherwise garner. Second, they can support the scaling of winning digital ag solutions. This may include acting as strategic investors and advisors to solution providers and incubating promising ideas. THRIVE, a US-based accelerator, receives support from large agribusinesses such as Corteva. Besides benefiting the recipients of the funding, such arrangements can help agribusinesses by enabling them to identify promising innovations early on and leverage those themselves.

• Agribusinesses, MNOs, and SMEs can provide last-mile access to smallholder farmers, by creating connectivity via mobile phone networks or via in-person touch points.

Development Organizations and Donors. Development organizations and partners are uniquely positioned to take an ecosystem approach, connecting the dots between promising solutions and the capabilities, capital, and coordination that those solutions need to scale in developing markets.

The specifics of their role will differ depending on the maturity of the market. At the basic investment stage, for example, they can sponsor contests and competitions to spur innovative activity, and they can invest in knowledge hubs that catalog and transfer lessons from mature regions to areas that are at this early stage of development. In later stages of digital maturity, they can aim to overcome specific barriers in ecosystems that the private sector cannot address on its own. This effort may include advocating for improvements in regulatory frameworks, supporting the development of inclusive solutions by making growth capital available to solution providers or agribusinesses, and by offering technical assistance to solution providers and governments.

Digital agriculture has the power to transform life for smallholder farmers around the globe. Digital solutions can help farmers access the best inputs, adopt the most effective cultivation practices, improve the quality of their produce, and connect with the right buyers to maximize their incomes.

But to fully realize that potential, all players—governments, businesses, and development organizations—must work together to support digital agricultural development. This effort should reflect a thorough understanding of the actions and investments needed at a particular time, given the country’s maturity level, and of the role that each stakeholder is best positioned to play. And finally, all stakeholders should develop tools and solutions that advance the development of the agriculture market. When that happens, the promise of digital agriculture will become a reality.