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Rhishi Pethe

133. Convenience, network effects, and incentives

Published about 1 year ago • 8 min read

“Software is Feeding the World” is a weekly newsletter about technology trends for Food/AgTech leaders.

Greetings from the San Francisco Bay Area. The rain has taken a breather and hopefully is on its way out.

My Work

World Agritech San Francisco 2023 reflections

World Agritech 2023 in San Francisco is behind us. I published some of my reflections from the event on my blog. I talk about my reasons to continue to go to the event, my 5 key takeaways from the event (independent voices matter, automation & robotics are important, and so is climate smart agriculture, collaboration and partnerships are key, and the industry is hungry for large exits), and some reflections on the logistics of the event.

Towards horizontal agriculture

While innovations in AI and ML are maturing, we can’t neglect the need to build an open infrastructure that enables more participants to create compelling applications. Just as the open source revolution made tech more accessible and productive for all, so too will AI and ML open up new possibilities for agriculture. The firms that embrace a horizontal and collaborative approach are the ones who will capture the full value of these technologies, double down on what they do best, and help us face the urgent challenges ahead. The ones who don’t, risk being left behind.

I wrote about the need for collaboration, open architectures, and a horizontal approach to agriculture technologies on the Mineral.ai blog.

Convenience, network effects, and incentives

Some of California’s consumer friendly subsidies and rates for sending excess solar power back to the grid are running out and so we decided to get solar before it happens. We went with solar panels on the roof and a battery pack (for when power goes out due to California’s aging infrastructure and for nighttime needs) from Tesla (Please don’t email me with your comments on whether you love or hate Elon). The whole process is long with many steps, including interaction with multiple entities like the HOA (HomeOwners Association), Tesla, our local government, financial institutions etc.

But the process managed by Tesla was very convenient, and they were the single point of contact for all the steps in the process. (Except for the HOA approval, which I had to do and was the least fun). When I had to make my payment, I was very easily able to connect my bank with Tesla using Plaid. The process was seamless, and as I have used Plaid before (and it was trusted by Tesla) I didn’t think twice before making the connection for a payment.

Convenience matters

We all value convenience and ease of doing business. While conducting business we like to work with as few people as possible (assuming they are solving your problem satisfactorily). When you call customer support, and you get passed from one representative to the next, it is very frustrating.

When solving your problem requires multiple point solutions, (as is the case with installing solar power), if someone can come and stitch the entire workflow seamlessly, it creates a better customer experience.

We see this problem in AgTech as well. You have your field data in one system, your planning data in another system, your financial data about your farming operation in another system, and your marketing data in another system. Your planning and execution workflow spans multiple systems, and it is oftentimes difficult to move data around, and “stitch your entire workflow together”.

I have often liked the approach taken by Leaf Agriculture (They have a solid team too). Agtech providers want to focus on what they are good at - prescriptions, financial management, analysis, operational planning etc. Their customers and users want their data to move around to other systems, instead of having to enter it again and again.

Leaf provides the convenience of translating the different equipment formats, and then abstracting it out to a unified JSON (think of JSON as an easy to understand, open format which most software engineers understand). Now as a grower or an agronomist or an ag retail or OEM representative, you can seamlessly move data from one system to the other (obviously based on permissions from the data owner - typically the grower).

This makes it quite easy for users and customers to move their data, and it lets the AgTech provider focus on their priorities, instead of worrying about the underlying infrastructure of data movement and data translation.

I had covered this approach of taking a hub and spoke approach in edition 95. Hub and spoke model for data.

Image from “Hub-and-Spoke vs. Point-to-Point Data Synchronization: There's One Clear Winner

In edition 84. The Babel Fish of Agriculture, I had written about data interoperability,

Interoperable data unlocks actionable insights by connecting disparate sets of data and illuminating real world interactions and trends. Farmers can leverage interoperable data to optimize resource utilization and improve business, production, and sustainability decisions.
Interoperability can improve the customer experience with better onboarding (similar to Login with FB or Login with Google1), consistent decision making (same data shared with the same meaning), multi-party collaboration (between different entities), and reducing system latencies.

In edition 95. Hub and Spoke Model for data, I had written about potential future growth areas for Leaf,

Once Leaf has a large amount of data flowing through their hub, they can offer higher value add services around data cleansing, data security, data provenance, and other infrastructure tools. Leaf has found an interesting wedge in the precision agriculture data ecosystem, and their success will depend on the UX they provide, and the independence, & objective nature of their tools.

Leaf has been offering some data cleansing services for precision agriculture data for some time, based on documentation from their blog as shown below. The example below shows how Leaf can remove outliers from harvest data, which are more than 3 standard deviations from the mean. (This is a configurable setting, though in the case of harvest data one has to be careful to maintain some mass balance. I am sure Leaf is taking care of it.)

This is a good example of the plumber providing the pipes, cleaning some of the water which flows through the pipes.

Network effects

Leaf has continued to build on the infrastructure play by adding a network effect to their offering. Leaf recently launched “Leaf Connect” (see image below from Leaf’s website)

Leaf Connect accomplishes this by allowing any company using Leaf to request permission, and receive access, to another company’s data. By default, data coming through Leaf is secured by account, meaning that data that is permissioned by a farmer to a company is only available to that company and no others.

With Leaf Connect, companies can now request permission from the Farmer and a partner company to allow the partner company to access the farmer’s data via Leaf. If permission is granted, the partner company is able to access the partner’s data in their own Leaf account.

Leaf Connect is an interesting way to create network effects for data connectivity. With seamless connectivity, there were existing implicit network effects as the value of the connected ecosystem increases as more application providers join the network.

With Leaf Connect’s added convenience of explicit connectivity, while maintaining farmer data privacy, security, and control provides an added incentive for application providers to join the network, and make the network effects more explicit.

The key challenge for Leaf is how big is the network of qualified application providers, and how many of them are willing to work with Leaf.

Incentives matter

I have worked at many startups (the smallest was a 7 person startup which was acquired), including Mineral (which is a startup within the Alphabet ecosystem). One of the challenges for any startup (amongst many) is the limited capacity of their sales and marketing team. This is especially true in the case of B2B businesses. Due to this startups are always looking for channel partners to expand their sales capacity, even though it means slightly lower revenue per deal. The key to establishing any channel partnership is making sure incentives align.

Over the last few years, the three major cloud providers have been trying hard to win the cloud business for millions and millions of developers, and organizations. The sales people at these cloud providers are obviously incentivized to sell more of their cloud solutions to their customers. Due to the tough competition among the cloud providers, they are also looking for additional services they can layer on top to provide a differentiated solution.

Leaf has recently launched its cloud based APIs on the AWS marketplace. This move addresses the convenience problem for an Agtech provider who is already on AWS (or planning to move to AWS), as they can get their cloud and Leaf invoice from one place (AWS). They already trust the security, privacy, and other features offered by AWS (in this case), and it is convenient for them to deal with one provider from a contracting and billing standpoint.

Having our services available in the AWS Marketplace makes the selection and procurement process significantly easier for these businesses to start building new value with farm data. In addition, it allows our customers to consolidate their cloud accounts. Now they can choose to monitor and manage their Leaf usage via their AWS dashboard and move Leaf onto their AWS bill.

What is the motivation for the AWS sales person to include the Leaf API from the AWS marketplace in their sales effort?

Given Leaf shows up in the AWS account, the spend on Leaf (I am assuming some percentage of it) shows up against the AWS sales person’s sales quota, on which their bonus is dependent. Now the incentives for the AWS field sales staff are aligned with Leaf’s sales and marketing goals, and it can create a symbiotic relationship. Setting up a channel partnership requires incentive alignment, and excitement, and without which it cannot be an effective channel partnership.

Leaf has added weather data in their offering from multiple sources (though they still don’t have hourly measurements). This is a convenience, one-stop-play for data.

Leaf has moved up the value chain by providing additional data cleansing services to a set of its customers. Leaf has to figure out higher value added services, without having to compete with their existing customers on those services.


In the News

AgTech and Agronomy

Texas Crop Science partners with plant-genetics powerhouse GDM for high-yield soybeans “The end goal of the partnership is to deliver soybeans that can produce higher yields in a variety of conditions, from normal to stress-impacted ones such as drought.”

Robotics and Automation

Smartwyre™ is now offering enhanced technology features to help crop input manufacturers, distributors, and retailers better manage critical customer information to track sales transactions and rebate payments.

A technology firm in India introduced a robotic arm to perform religious rituals (called Arti). Will AI and robotics take jobs of priests and godmen/god women as well?

Sustainability

Conservation practices reduce crop insurance claims and premiums. “Anecdotal reports indicated that other farmers who implemented conservation practices may have reduced their prevent plant risk as well; and, in some cases, planted earlier than on conventionally tilled fields, but we need credible data-driven proof to verify these conservation benefits.”

Another report found the positive impact of conservation practices for reducing crop production risk. “Across the 6-state region, consistent use of cover crops and no-till/reduced-till resulted in a 24% reduction in the odds ratio of prevent-plant loss in 2019. These findings demonstrate that conservation practices can help farmers mitigate their risk to wet weather conditions.”

Smallholder

Blockchain company Dimitra brings modern AgTech to smallholder farmers in developing countries. “The platform allows users to generate detailed dashboard reports, track farming activities and receive recommendations for better decision-making.”

Paddy farmers in India embrace drone technology. “Farmers using UAVs say they are now less worried about labor shortage and high labor costs at least for foliar application of micronutrients and biopesticides. According to sprayer drone operators and officials, UAVs have been deployed for aerial plant spraying in over 10,000 acres in the district so far this season, up from 6,000 acres the previous season.

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About me

My name is Rhishi Pethe. I lead the product management and technology delivery teams at Mineral, an Alphabet company. The views expressed in this newsletter are my personal opinions.

Rhishi Pethe

Agriculture and Technology or AgTech

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