From Product to Platform: John Deere Revolutionizes Farming
Written by Cassie Perlman, HBS ’17. This post was originally published on the Digital Initiative’s public blogging platform, Open Knowledge.
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. 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.
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. 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.”
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…”
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):
 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