From Product to Platform: John Deere Revolutionizes Farming
See how a 179-year-old company has created the go-to platform for the agricultural industry, allowing John Deere to compete against both other farm equipment manufacturers as well as new Ag Tech entrants.
John Deere is the number one farm equipment manufacturer in the world with 2016 worldwide revenues of $26.6B.[1] In 2012 John Deere created the open platform, MyJohnDeere, an information system to help agricultural producers optimize the management of production data, equipment information and farm operations. The company provides an interesting case study to see how product-centric firms can strive to utilize platform-centric models to compete in the digital age.
Value Creation through Ag Big Data & Platforms
The USDA’s Agricultural Research Service highlighted several examples of how Big Data can create value in the Agricultural industry including, “increasing the resilience of production systems; improving understanding of genotype by environmental interactions; and enhancing human and animal health.” The industry is already seeing a competitive edge given to those players who are data focused. This includes a general shift to those who are familiar with technology and platforms in other areas of their life, a shift from supply to a demand-driven industry in which farmers are expected to react quickly to consumer food demands, and a move towards open communication between members of the community.[2]
John Deere saw the opportunity to enter the Big Data space with their platform, MyJohnDeere. In 2012 the company launched several software products that connected John Deere equipment with other machines, owners, operators, dealers and agricultural consultants. This software analyzed individual data through sensors added to the latest John Deere equipment combined with historical data on everything from weather and soil conditions to crop features. This information is shared across stakeholders to help farmers manage their fleet, reduce downtime inefficiencies, and save on fuel costs.[2] Consumers manage all of this information through smart phones, tablets and computers, allowing information to be accessible at all times.
Utilizing an Open Platform to Capture Value
In 2013 John Deere opened their platform to allow input suppliers, agriculture retailers, local agronomists, and software companies to provide applications and software that connect through the platform. A spokesperson for the company said “these collaborations will greatly benefit our customers by expanding the choices they have to improve productivity, efficiency and yield.”[3]
MyJohnDeere is free for consumers who purchase John Deere equipment, and from what can be seen from the website it does not look like John Deere is charging 3rd party developers a fee for integrating on their platform (however all applications must be approved by John Deere). While the benefit to the consumer is straightforward, the move towards bringing in 3rd party developers highlights John Deere’s strategy to become a central platform for farm equipment hardware and software. It seems the company has learned about the importance of open systems in winning a platform game, and several other benefits are likely to come out of this:
- Increase hardware purchases – John Deere has seen competition from low-cost competitors, but by integrating a software platform into its products, it can provide a reason for consumers to pay more for its hardware.
- Prevent hardware multi-homing – one of the benefits of MyJohnDeere is connecting all equipment in one software database. Creating this unified platform gives incentives to farmers to purchase all equipment through John Deere instead of through multiple hardware providers.
- Create barriers for Agriculture Tech companies to enter the space and capture all the value. As we saw in several cases including Nokia and Samsung, when software platforms gain marketplace control, they can push hardware margins down. By being an early mover in this space, John Deere is preventing the emergence of strong Ag Tech companies to become the market power. In fact, John Deere is making these Ag Tech players complementors for its platform instead of competitors.
- Big Data – A big trend in any industry today is whoever owns the data wins. Big Data itself can become a revenue generator and John Deere is likely thinking about how it can utilize the vast data it is gathering in the future.
There are hundreds of Ag Tech products out there, but John Deere has shown it has become integral to this space. When developing apps to help farmers in decision-making, Chris Harbourt, chief executive officer of Agrible in Champaign, said the most frequent comments he hears is “I want something that integrates with my John Deere…”[4]
John Deere is not stopping in their quest for agricultural platform dominance. For a fascinating look at how John Deere sees the future of farming take a look at this video (you can skip to ~1:00):
https://www.youtube.com/watch?v=jEh5-zZ9jUg
[1]https://www.deere.com/en_US/corporate/our_company/investor_relations/financial_data/earnings_releases/2016/fourthqtr16.page
[2] Gustafson, M. (2014). BIG DATA AND AGRICULTURE. AgriMarketing, 52(2), 24-25,27. Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1518588141?accountid=11311
[3]https://www.deere.com/en_US/corporate/our_company/news_and_media/press_releases/2013/corporate/2013nov14_corporaterelease.page
[4] http://www.illinoisfarmertoday.com/news/regional/tech-transition-ag-companies-expected-to-consolidate-innovate/article_31aa52e8-bc99-11e6-a3db-6341bf3fd3ab.html
Cassie – this is SO interesting!
I’ve heard of tons of startups in the agriculture space, who are all trying to help farmers optimize everything from their use of fertilizers, ability to identify crop diseases early, share/rent equipment. But it DOES seem like John Deere has a huge advantage because of its installed base of users already familiar with the brand, and already using its products. It particularly helps with both the network effects and multi-homing questions, by strongly-encouraging (forcing?) users to adopt the John Deere platform – and eventually driving more sales of their actual equipment. In a way, it’s the opposite of the simulation – where there was no money to be made on the device, and all economic opportunity came from the apps/digital components. Here – the digital component is the free platform, and the devices will drive revenues. Overall – that seems like a better model – since the platform component is scalable with limited variable costs!
Great post! Really interesting that John Deere, as the incumbent with a long history as a product company, has been able to launch this platform to stay ahead of the competition! By opening up their platform to other 3rd party developers, they are in effect making MyJohnDeere the go-to platform for ag tech. I could see this being a winner-take-all market with no need for farmers and other users to multi-home on other platforms, especially since John Deere has a head start in aggregating big data that will create really strong direct and indirect network effects.
Love the post! I think i agree with Sonali. It feels like an Apple model almost where the value is in the UX and the data, but they monetize it through the physical products and give the software away.
I feel like because the farming industry is so family focused, with land and equipment being passed down generation after generation, if this will make their hardware extremely sticky and ensure that once john deere is able to sink its teeth into a farmers field, they are stuck forever.
This is incredibly interesting and a great example of a legacy equipment provider actually being ahead of the technology / software game. I’m curious about how they internally managing resource allocation between the software and equipment tech teams and how they went about building this platform in the first place.
Hi Cassie, thanks for the post!
I just came back from a class taught by Michael Porter on John Deere’s Internet of Things platform. The case described it is difficult for the company to drive adoption. Most farmer users generally use the Automatic Guidance features (70% adoption), and 10-15% use the Variable-rate Application Technology to save on fertilizer and pesticide uses. It looks like the customers are not easily sold on the data analytics features, and John Deere need to significantly improve customer service to encourage adoption.
Really loved this post. Thanks for sharing in class!
Your mention of education efforts in class triggered an additional thought on my part …. I thought the “future of farming” video was fascinating, but the main farmer character didn’t really resonate with me in terms of being representative of John Deere’s core customer. I’m from a small farming town in MN, and the farmers in my town (granted they’re not running large, commercial sized farms) tend to be traditional, not tech savvy, and love rolling up their sleeves and being outdoors. I did wonder if perhaps the shift to platform is actually ahead of the market, and I was not surprised to hear you say in class that adoption has been low. Will be interested to 1) see if JD’s “farmer education efforts” can help them cross the chasm into mainstream farmers; and 2) how quickly that will happen.