The Next Big Disruption for Food, and Who Will Win
by: Joanna Rogerson, Innovation Advisor
My hypothesis: The next big food disruption will be within our food supply chain, and those that will capitalize most will not be those who focus on large, vertical integration, but rather those who can most effectively orchestrate networks of, likely small and specialized, producers.
Let’s back up and start with the problem.
By 2050, food demand is estimated to increase by a whopping 70%. This massive demand estimation is pressuring existing food manufacturers to reach beyond their traditional ingredient supply (think mega farms in the Midwest) and into developing economies (think small farmers in India). As that last sentence might imply, today, large, vertically integrated food companies dominate our developed economy’s food system field to table. But with ever increasing demands to that system, the result is more interest in and potential reliance on the larger numbers of small food producers (smallholders) common to developing economies.
Let me highlight just a few broad examples so you can get a sense of the scale the smallholders control in those economies:
· In China, there are 26.7M poultry farms alone that slaughter just 2k birds/year.
At this point, you might be asking yourself, so what?
Let me give you a better image. The following is an overly simplistic diagram meant to visually emphasize the differences in traditional food supply chain and emerging. Developed economies are often vertically integrated, heavily controlled in the types of crop species produced and managed from the field all the way to the consumer. Contrast this with developing economies where many small farms produce limited quantities using often unsophisticated techniques for niche crops (e.g., pepper, mangos, and specific strains of wheat).
Operating within this developing economy system is a dramatic shift away from processes to which traditional food manufacturers are accustomed. These diagrams do not do justice to the intricate demands and challenges plaguing developing economies’ value chains. These ingredient streams are difficult to track, predict, and control, often leading to potential safety and regulatory concerns. In fact, the challenges are so vast that many large food manufacturers still have a hard time operating there.
What’s next, and who will win?
My hypothesis is that (1) more food organizations (large and small) will begin to recognize their waste in the ineffective use of food sourced from developing nations and (2) those who will capitalize most in the future will not be those who buy up mega farms under a single rigid supply infrastructure, but rather those who can effectively manage a decentralized network of small, specialized producers.
This hypothesis is not new to supply chain management. In fact, a 2002 McKinsey report noted how “mobilizing other companies’ assets and capabilities” delivers increased value to customers; however, it is relatively new to food and agriculture. Thanks to rapid technological advancement since that time (from mobile technology to inventory robotics), successful organizations outside of food may now serve as models of success that can help us learn how to apply these principles. For most, Uber is the most recognizable example of successful network management; however, other potentially more relevant examples might also include Amazon and Li & Fung.
Although the industry is still emerging, we are seeing small, early applications of this concept broadly by food and consumer small companies like Sokowatch, a company that leverages thousands of small stores and street vendors to increase sales and inventory tracking, and M-Farm, a company that aggregates smallholders’ food supply into a single channel to meet larger buyer demand. Beyond discrete companies, we also see smallholders partnering together in interesting ways, like independent and government-supported co-ops to aggregate their voice and product. We also see philanthropic groups like the Bill & Melinda Gates Foundation continue to aid in pushing new technology developments. As globalization matures, we anticipate that we will continue to see dramatic shifts in how these millions of smallholders participate and how our private sector responds.
Are you a preparing for globalization supply chain shifts happening in our food system? Are you leading the industry, or following?
I ask you to think about competencies internal to your own organization in the framework of a globalizing supply chain, and ask yourself questions about your team that might include the following:
Organizational learning (creating meaning): Do you deeply understand a defined supply chain in a developing geography better than anyone else in the field (known key inputs, losses, culture, education, infrastructure, and technologies available)? Have you translated that knowledge into meaningful output for your execution team?
Team (the right people): Do you have all the right people on the team for the right moments in the project? How could you improve that team? Do you willingly recruit more participants into your network to deeply strengthen connectivity and capacity?
Decision-making capacity (next steps to action): Are there defined stage gates/outcomes/goals for decision making? What are your performance feedback loops for course corrections? Have those decision points been successes or failures in the past?
Let’s talk about how you are innovating to manage the challenges of an emerging supply chain and agricultural system. As RTI International’s Innovation Advisors, we are actively working to strengthen the intersection of emerging economies, food and agriculture, and organizational innovation to help feed a hungry world. I’d love for you to start participating in our discussion. Contact me directly at email@example.com to hear how we might conduct an assessment for your team.
For RTI International’s Innovation Advisors group, Joanna helps food and agriculture companies identify and evaluate new sources of innovation. She also supports a range of sectors including devices / appliances, consumer products, water and sanitation, and waste-to-energy technologies.
 UN News Centre. (2017, March 3). UN expert urges greater protection of people with albinism from witch doctors. Retrieved from http://www.un.org/apps/news/story.asp?NewsID=46647#.WCN_p9UrLIU
 Chaturvedi, S. (2016, May 4). Land reforms fail, 5% of India’s farmers control 32% land. IndiaSpend. Retrieved from http://www.indiaspend.com/cover-story/land-reforms-fail-5-of-indias-farmers-control-32-land-31897
 Chandran, R., & Mohanty, S. (2017, January 31). Bigger land holdings key to preventing farmer suicides in India, activists say. Reuters. Retrieved from http://www.reuters.com/article/us-india-landrights-farming-idUSKBN15F0T5
 Dev, S. M. (2012, June). Small farmers in India: Challenges and opportunities. Retrieved from http://www.igidr.ac.in/pdf/publication/WP-2012-014.pdf
 Reducing Global Food Waste and Spoilage. A Rockefeller Foundation Initiative. Written by The Global Knowledge Initiative
 Rose, A. L. (2014, November 24). Bringing fresh solutions to the challenge of global food security. The Bridgespan Group. Retrieved from https://www.bridgespan.org/insights/blog/innovation-labs/fresh-solutions-to-challenge-global-food-security
 Brown, J. S., Durchslag, S., & Hagel, J. (2002). Loosening up: How process networks unlock the power of specialization. The McKinsey Quarterly. Retrieved from http://www.johnseelybrown.com/McKinsey_version_loosening_up_how_process_networks.pdf
 Senthilingam, M. (2017, February 24). The tech solutions to end global hunger. CNN. Retrieved from http://www.cnn.com/2017/02/23/health/tech-apps-solving-global-hunger-famine/index.html