You may have heard about how “disruptive” business models are turning conventional business wisdom on its head. How will technological disruption affect seed? We ask some experts.
Erin Armstrong is director, industry and regulatory affairs, at Canterra Seeds, where she is responsible for trait & license agreements, intellectual property protection and regulatory issues. She also served for two years as the inaugural CEO of Limagrain Cereals Research Canada.
After establishing AgGenuity Consulting in 2001, Canadian Plant Technology Agency executive director Lorne Hadley has worked with several clients — on a national and international level — to provide knowledge on seed market regulations, intellectual property, contract considerations and Plant Breeders’ Rights issues.
As the Canadian Seed Growers’ Association’s managing director, certification and technology services, Doug Miller manages CSGA’s seed crop certification program and related IM/IT support services. He works closely with seed growers and the seed industry to provide ongoing operational support and guidance on certification and related issues.
Germination: What exactly is technological disruption?
Doug Miller: Disruptive innovation is a term coined by Clayton Christiansen’s 1997 article The Innovator’s Dilemma. Disruption occurs when a smaller company with fewer resources unseats an established business. The smaller company is able to achieve “disruptive innovation” by targeting segments of the marketplace that have been neglected by the larger company. This typically happens because the larger company is focused on the more profitable areas of their business and improving service for their most demanding customers. The new company is able to attract the overlooked customers with a new or innovative technology better suited for their needs, and usually at a lower price point.
Germination: Can you give an example?
Doug Miller: A textbook example is Blockbuster Video versus Netflix. At its peak, Blockbuster had 60,000 employees, 9,000 locations, and a value of $8 billion. Enter Netflix. Netflix looked to a new technology — video streaming — to give it an advantage over Blockbuster. Netflix was able to offer a low-cost, on-demand, all-you-can-watch service. They were able to tap into a new market not serviced by Blockbuster. Quickly, Netflix became mainstream and is now embedded in our daily lives.
Germination: Uber and Tesla are often referred to as disruptors.
Doug Miller: Yes, but by Christiansen’s definition, these companies are not truly disruptive. Tesla did not enter the market at the bottom — it entered by offering high-end cars at a high price point. Only recently have they moved downstream into the lower-cost market. Uber didn’t start at the bottom either. They focused on the mainstream, targeting customers who already used taxis. These are definitely innovative companies, but not disruptive in the true sense of the word.
Germination: So what disruptors affect seed?
Doug Miller: When it comes to the seed sector and disruption, I immediately think of CRISPR. CRISPR has the potential to be faster, more precise and less expensive than transgenic breeding techniques. It’s a tool that could theoretically allow smaller companies with fewer resources to try to target a market segment that is currently neglected by the existing marketplace. We may see a new breeding institution create a new type of soybeans for a specific market at a low price. Over time, this group could create new products for neglected customers and move upward in the market, disrupting larger companies.
Erin Armstrong: The “virtual seed company” model is one that comes to mind. This is a model in place in the U.S. and it’s in the process of moving to Canada, and we all need to be aware of that and what the implications are, how it’s going to work and how it will impact whatever part of the value chain we operate in. Activities to date have been the input side, but there’s talk of incorporating seed into the “virtual” model. Today a producer goes to a retail outlet or a seed grower. Under this new virtual seed company model, the grower could contact this entity and be matched up with a seed provider. It’s based on electronic exchanges and a different way of sourcing seed than what has traditionally been seen.
Lorne Hadley: Under the UPOV 91 convention, our industry has extended the opportunity for plant breeders to collect royalties owed to them. What’s disruptive about this is that in the past, innovators (plant breeders) had to get their return from the sale of seed. Now, we can create new models of royalty collection that can be used at various parts. You can create a model that allows you to collect a payment on the use of farm saved seed; a model that allows you to do an acreage payment; a model that collects on production. What can add to the disruption is that with any of these flexible options of legitimate production, you can use verification systems including imaging and drone technology to provide efficient methods of verification and confirmation of what is owed to the breeder.
Doug Miller: It’s important to note that not all innovations have to be disruptive to impact your business. Some examples are robotic process automation (using computer bots to do routine tasks, which we rely on a lot at CSGA); private blockchains (data management systems that offer huge opportunity for traceability and transparency in the supply chain); and chatbots (which are used a lot to handle routine business customer support transactions).
Germination: Blockchain is being talked about a lot more in the seed sector. What potential does it have for us?
Doug Miller: We could use it to trace assets throughout the value chain. There’s high potential for value creation mechanisms to be embedded with smart contracts. Privacy is top-of-mind for everyone. You’re creating a business ecosystem where players are invited into the blockchain; it’s encrypted and not all data is shared with all participants in the blockchain. As other industries look at blockchains, there are going to be opportunities to link up seed blockchains with others to facilitate information sharing, with the purpose of traceability and transparency.
Germination: What mechanisms are in place to protect seed from major disruption?
Erin Armstrong: I’ve been involved for the past two years with what we call value creation, looking at developing a model for comprehensive royalty collection for cereals to ensure increased investment in the development of value added cereal varieties for Canada. As innovative products are produced, not all innovations will make it to market. If value is not perceived for a particular innovation, it simply won’t be adopted. There needs to be an effective mechanism for that innovative product to reach market and to be adopted. Someone told me, “I don’t want to be able to produce more wheat; I want to produce a higher value wheat.” How do we ensure the investment continues to we can continue to develop new varieties for the benefit of producers and customers of the products produced?
Lorne Hadley: UPOV 91 gives us a new suite of tools, and it’s a matter of helping everyone understand their responsibilities. Under UPOV 91, the things that are done by farmers and processors in preparing the physical seed/grain — the hardware — are now controlled by the owner of the variety, who is essentially like a software engineer. We have a provision under UPOV 91 that allows us to go after illegitimate use of harvested material, for example. If someone acquires seed illegally and it ends up in the grain market, we can actually act in the value chain against everyone involved — be they a seed buyer, conditioners, grain processors and so on.
Doug Miller: It’s important to note that when it comes to disruption, the opportunity it offers outweighs the concerns that inevitably arise. Disruption is a good thing — we just have to be ready for it.
Erin Armstrong: Yes. Rather than looking at disruption as something to be worry about and protect ourselves from, we need to look at it as something to expect, embrace and contribute to.
https://www.youtube.com/watch?v=_tMYJSYrfds
