Bumper the Cat
I am excited about vertical farming after reading your article! First, as I think about the large variety of specialty products that are available these days, I see a great opportunity if Plenty is able to make them viable vertical farm crops. Many of these specialty products are grown in confined geographies (such as almonds), and the supply can be vulnerable to price inflation when those geographies are impacted by inclement weather. If crops such as these are adapted to vertical farming, then risk of climate change impact on supply can be greatly reduced (in addition to saving some of CA’s water!)
Another possibility that excites me is that I think vertical farms can be scalable as well. Although right now they are fairly small and require a labor intensive process, I can see a future where massive warehouses are filled with towers of vertical crop rows. The digitalization megatrend and the integration of automation and machine learning could be an integral piece of making the vertical farm a viable business model. Farmers are already using remote sensing data from drones to make harvesting decisions. These same technologies can be used within the scaled vertical farm to monitor crops and make automated harvesting decisions.
In reading about SV Agri’s offering of “better seeds” and thinking about how they could capture market share, I was reminded of the Indigo case from the innovation module. Indigo is developing seeds that will thrive under various water conditions, and this type of seed would be ideal as the climate changes in India. As these seeds are developed, SV Agri could gain market share by offering these seeds that will best perform under the changing conditions. A strong product portfolio through partnerships could be a competitive edge for SV Agri.
I believe another important factor for SV Agri’s ongoing success as the climate changes is a commitment to diversification. Climate change will affect different geographies across the Indian subcontinent in different ways, so they need to diversify the idiosyncratic risk of these various geographies by sourcing potatoes from all of the various growing locations. I also think they should begin to diversify into different crops for two reasons. First, climate change will affect various crops in different ways, and SV Agri can mitigate some risk by diversifying. Also, if some growers are unable to grow potatoes due to climate change, SV Agri can offer them different seeds/services because they will have already established a working relationship with the growers. Both of these effects of diversification will reduce SV Agri’s climate change risk.
I’m skeptical of Zume’s business model because I am not totally clear on what the value proposition of their digitization is. Are they trying to provide a higher quality product or do they think that they will be able to reduce the unit cost to a significant enough extent that they will provide economic value to the customer? I’m worried that either of these propositions is quite incremental to the customer and therefore of insignificant value. Therefore, I have a tough time believing that they will be able to recruit enough customers to be able to meet the scale that they’re capital intensive business requires. Amazon began by offering a service to readers that they did not already have. In this case, I already have the ability to order many different offerings of pizza at various price ranges. To disrupt an industry, the customer experience has to improve exponentially, and Zume’s model seems to me to only provide incremental improvement.
If the company is able to reach all 50 states and efficiently process data, I think there is an important opportunity to capture the value of their efficiency’s. In this “perfect world” scenario, let’s say they are able to process changes to land records instantaneously as they happen. This information would be incredibly valuable to companies who are looking to lease land in a given oil/gas play. Companies would be willing to pay top dollar for access to this immediate data so that they could lease the land before other companies have the opportunity. Oseberg could offer a tiered pricing system in which companies could pay top dollar for instantaneous data while others could chose a less expensive and less timely option.
Thanks for your engaging post on an important American company during interesting political times. Looking ahead, I think your question of whether or not protectionism will bring jobs back at scale is the right question, and I think that it will only be a sustainable movement if those driving the movement correctly incentivize companies to do so. The potential corporate tax reduction would be a huge step in the direction of protectionist sustainability.
This movement (if it lasts) also seems like an amazing opportunity for a major player like Nike to innovate around its automation and supply chain reinvention. A significant R&D project to reinvent the Nike factory could benefit Nike’s facilities around the world and enable them to decrease costs and decrease lead times for new products. Furthermore, this may also be an opportunity to take advantage of local incentives that may be offered for construction of new facilities (like Tesla was able to capture for building its Gigafactory in NV).
This post does a great job of highlighting the context of the protectionist movement going on today, particularly in the US. I think an important point that was touched on is the changes that have to happen within manufacturing facilities in order for companies to make themselves more competitive while defending themselves against protectionism. Specifically, the decrease in workforce, the introduction of automation, and the education of their current and future workforce. The education portion of the equation will be essential in the company’s success, as these updated facilities will function much differently than they did previously, and companies making these changes cannot afford to underinvest in education.
To the question of the sustainability of these protectionist actions, I think they are only as sustainable as the forces driving them. That is, if the only force driving them is threats from Trump, then they will be short-lived. On the other hand, if corporate tax rates are lowered and companies are properly incentivized, the protectionist movement could in fact be much more sustainable. We’ll see where the votes fall on the tax bill soon!