What do old-school cooperatives have in common with new and disruptive businesses? Seed World explores the evolution of our economy and what’s staring us in the face.
The business of seed has changed dramatically in the past 20 years, with a shift to larger companies that can invest in the research and development while also shouldering the regulatory costs of bringing those products to market. Generally speaking,it’s the large companies that have been the big innovators with small and regional seed companies licensing those products and offering them in their portfolios.
The small- and medium-sized seed companies are closer to the farmer and more agile in their ability to make changes on the fly and offer services that differentiate them from their competitors. There are advantages and disadvantages of each.
Farmers, it seems, are then left with a conundrum: support smaller, local business or support investors? That can be a hard decision for many to make, and many farmers end up somehow splitting their acres between the two. Each year, farmers give the most thought to making the decision of what to plant and from whom to buy.
One less talked about business approach is that of cooperatives, which are unique in that a cooperative might have a few owners or well over 100, depending on the kind of business.
Cooperatives are nothing new to agriculture. In fact, they’ve been around for more than 170 years and used to be the backbone of the agricultural community. Today those have primarily faded into the background, partly due to 1980s farm crisis and the mass exodus of small farms. But there are a few cooperatives in the seed sector that have a long-held success story: the French-owned Limagrain, parent to AgReliant Genetics, HM.Clause and many other entities/brands, and Land O’Lakes, the parent of Winfield Solutions. CHS and GROWMARK, parent to SEEDWAY, are two more.
These businesses are unique in that the member-owners share in the risks, profits and losses. They often approach business with a long-term vision and aren’t as focused on ROI as publicly traded companies that have to worry about investors and stock prices.
The basic premise being that cooperatives can choose to implement business practices, such as sustainability initiatives, that might not be friendly to the bottom line in the short term.
Today in the United States, there are approximately 30,000 cooperatives delivering food, energy and water. Around the world, there are now more people working for cooperatives than there are working for multinationals.
Cooperatives are an integral part of our current economic DNA.
There’s a buzz right now about the “collaborative economy,” especially in entrepreneurial circles and in large cities or population centers where services can be shared. Think about Airbnb, Zipcar, Kickstarter and Bitcoin. These “sharing services” are disrupting business as we know it.
To understand why, Shane Hughes, an environmentalist and entrepreneur in the United Kingdom, says we need to look back at our economic evolution.
In the beginning, we had Hunter-Gatherer economics, which consisted of tribe (organizational component) and land (economic component). Then we shifted completely to the agricultural revolution, with the economic components of labor and land and the organizational components of tribes and institutions (empires, governments, corporations).
Enter the new economic driver of capital and that gave way to the Industrial Revolution with the new organizational component being international markets, Hughes explains. Finally, we are sitting on this cusp between these two worlds, the old industrial economy and the new information economy.
That’s why we see these disruptions, Hughes says. The two components that the information or electronic economy brings are information (economic) and network (organization).
“The most apparent place where we see the information economy is online,” Hughes says. “In the information economy, sharing adds value, whereas in the industrial economy scarcity added value.”
Some ag businesses have sharing down, some are starting to come around to it, and still some come at it from a proprietary or capitalistic approach. But what’s needed to breakout or really make the sharing work? Information and a network, which farmers and companies have been collecting at record speed as of late. Seed companies big and small are working to combine the two but none have successfully found the right combination and/or approach to be truly disruptive.
Outside of agriculture, Hughes points to the hotel group Hilton that took 100 years to reach its current
size, now the biggest hotel group in the world. Airbnb, he says, has a completely different format. They don’t have hotels; they just provide access to people who have spare rooms, condos or houses, and travelers can connect with owners directly. You don’t need to have that central structure.
“What’s very interesting about Airbnb is that it’s a mixture of the old economy and the new economy,” Hughes says. “You have hierarchies. Within the Airbnb organization, you have management, hierarchy and all these other things, but they use networks as their core tool of accessing the market. One economy doesn’t necessarily mean the complete annihilation of the old economy.
“Those companies that best know how to use the mix of the old and the new are the ones that will be the most successful.”
These disruptive businesses aren’t just limited to the hotel and travel industry. Entrepreneurs benefit from peer-to-peer financing, such as Prosper Marketplace, Zopa and Kickstarter — platforms that match people who have money with people who need money. Groups such as this have the opportunity to really change the banking business, according to the Central Bank in the United Kingdom. Then there’s Windows versus Linux (the basis of Android).
“We are seeing this disruption all through the marketplace,” Hughes says. “No longer is it survival of the fittest. It’s the companies that can collaborate the best that are far stronger.”
How might this apply to your business?