top of page

Servitization in Agriculture: Enhancing Farming Value

 

Agriculture industry, the backbone of human civilization, has undergone numerous changes over the centuries. From the introduction of machinery to advances in biotechnologies, each wave of innovation has reshaped the contours of farming. The emergence of servitization in agriculture puts us now on the verge of yet another paradigm shift.

​

Servitization in the agriculture industry involves offering farmers comprehensive solutions that go beyond selling equipment, including services like data analytics, crop monitoring, and agronomic advice to enhance productivity and sustainability.

The goal is to furnish farmers with holistic solutions that elevate their productivity, efficiency, and sustainability.

Servitization Opportunities for the Agriculture Industry

 

Agriculture, while grounded in tradition, constantly seeks evolutionary avenues. Now, with servitization weaving its way into the industry, a plethora of opportunities beckon. These opportunities not only redefine the economic landscape but also reshape customer relationships and operational efficiency:

 

  1. Stable Revenue & Loyalty: Through value-added services and long-term contracts, businesses can establish recurring revenue streams, ensuring financial predictability. This also bolsters customer loyalty, as businesses cater to unique needs and offer consistent support.
     

  2. Distinctive Competitive Edge: Embracing servitization differentiates companies from their peers, transforming them from mere product vendors to holistic solution providers.
     

  3. Informed Decision-making & Customization: Offering services equips businesses with invaluable customer insights. This data-driven knowledge enables better product tailoring and meets dynamic demands more aptly.
     

  4. Profit Maximization & Growth: The allure of higher profit margins from services propels overall profitability. Coupled with the potential to tap new markets and diversify, businesses can chart a trajectory of sustainable growth.
     

  5. Agility & Brand Positioning: Servitization fosters adaptability, allowing swift response to market fluctuations. Plus, it enhances brand perception, positioning businesses as progressive and customer-centric.
     

  6. Partnerships & Sustainability: The model fosters long-term collaborations, weaving a fabric of trust and mutual growth. Also, by championing eco-friendly services, businesses can earn the badge of sustainability and attract a green-conscious clientele.
     

  7. Revolutionized Access & Shared Benefits: Moving away from traditional purchases, farms can now leverage equipment based on assured outcomes. This shared responsibility model implies mutual risk and rewards, culminating in a beneficial alliance.
     

  8. Technological Integration & Predictive Care: Real-time feedback, powered by IoT and sensors, empowers farmers with on-the-spot decision-making. Additionally, predictive maintenance replaces reactive approaches, ensuring machinery longevity and peak performance.
     

  9. Streamlined Supply Chain: The servitization lens could render middlemen obsolete by crafting direct farmer-market linkages, simplifying trade routes, and potentially amplifying profit margins.

 

Harnessing these opportunities, agriculture businesses can craft a future that's not only financially robust but also resilient and in sync with evolving market dynamics.

Two-farming-employees-discussing

Spectrum of Services in Agriculture’s Servitization

 

In the context of agriculture, servitization can include various elements, such as:

 

  1. Agriculture-as-a-Service (AaaS): Borrowing from the software world, AaaS offers modular farming solutions. Farmers can access cutting-edge solutions without heavy capital investments.
     

  2. Equipment-as-a-Service (EaaS): A shift from capital expenditure to operational expenditure, where farmers lease state-of-the-art machinery with maintenance and upgrade provisions.
     

  3. Precision Farming Services: Harnessing drones, AI, and IoT, this service provides granular data about crop health, moisture levels, and potential threats, enabling precise interventions.
     

  4. Remote Monitoring and IoT: With connected devices, farmers can get insights without being physically present on the field. This remote oversight ensures timely interventions and reduces costs.
     

  5. Crop Protection Services: From predicting potential pest threats to recommending suitable pesticides, these services ensure crops remain healthy and yields are maximized.
     

  6. Sustainable Agriculture Solutions: Addressing the increasing global concern of sustainability, these services provide insights and methods to farm in an environmentally conscious manner.
     

  7. Market Access and Supply Chain Support: Bridging the gap between producers and consumers, this service ensures that products reach the market in the most efficient way, reducing wastage and increasing profitability.
     

  8. Agricultural Consultancy: Expert advice on crop rotation, soil health, sustainable practices, and market trends, ensuring farmers are always a step ahead.

 

The goal of servitization in agriculture is to enhance the overall value proposition for farmers by addressing their specific needs, challenges, and opportunities. By combining products with relevant and tailored services, servitization can lead to increased productivity, reduced waste, better resource management, and more sustainable agricultural practices.

Digitalization in Agriculture Industry

 

The agriculture industry is fundamentally changing due to digitalization, and servitization is at the core of this change. IoT devices collect and transmit real-time data, while cloud computing, which is supported by digital technology, ensures seamless data storage and analysis. In addition, sophisticated AI algorithms slowly navigate through these enormous datasets to offer useful insights. In essence, digitalization in agriculture refers to the blending of traditional farming practices and data-driven solutions. The combination of these technologies enables farmers to base their strategies on reliable data, resulting in more informed and effective decisions. These technologies include data analytics, remote sensing, and IoT.

​

Examples of Digitalization in Agriculture:

 

  1. Embracing precision agriculture methodologies, such as drones and GPS-enabled tractors, to refine field activities and curtail resource wastage.

  2. Leveraging remote sensing and satellite imagery for robust crop health surveillance, early identification of potential challenges, and insightful field condition assessments.

  3. Gathering and processing data via IoT-driven instruments like soil sensors and meteorological stations to guide decisions on irrigation and fertilization.

  4. Streamlining operations using farm management software and intuitive mobile apps, granting farmers instant access to real-time data and insights.

 

Integration of Servitization and Digitalization:

 

The integration of servitization and digitalization in agriculture leads to more comprehensive and efficient solutions for farmers. By combining value-added services with digital technologies, farmers can access data-driven insights and personalized recommendations to optimize their operations.

 

For example, a company that offers precision farming services may integrate digital tools like IoT sensors and weather data to provide farmers with real-time information on soil moisture levels and weather patterns. This data can inform irrigation schedules, ensuring optimal water usage and crop health.

 

In summary, servitization and digitalization are driving a transformation in the agriculture industry, enabling farmers to achieve greater productivity, sustainability, and profitability by leveraging both value-added services and cutting-edge digital technologies.

farmer-working

Servitization Challenges for Agriculture Industry

 

Navigating the journey to servitization presents its own set of hurdles. Some of the challenges that agriculture businesses may encounter on this transformative path are:

 

  1. Upfront Costs: Transitioning to servitization, especially in an industry steeped in tradition, requires significant capital.

  2. Cultural Resistance: Traditionalists may view servitization with skepticism, valuing tried-and-tested methods over newfangled services.

  3. Data Privacy Concerns: In an age of data breaches, the collection and storage of extensive farm data can raise eyebrows.

  4. Change Management: Shifting from a product-centric to a service-centric model requires a complete overhaul in strategy, operations, and mindset.

  5. Technological Investment: Staying updated with the rapid pace of technological advancements can be daunting and expensive.

  6. Regulatory Compliance: Introducing new services often means navigating a maze of regulatory requirements, which can be challenging and time-consuming.

  7. Lack of Skills and Expertise: The integration of tech in farming requires a skilled workforce, which might be lacking in traditional farming communities.

  8. Customer Education and Adoption: Farmers need to be educated about the benefits of these new services, and this process can be lengthy

  9. Market Acceptance: Convincing the market to accept a new way of doing things, especially in a sector as old as agriculture, can be a hurdle.

  10. Resource Constraints: Small-scale farmers might find it difficult to access or afford the services offered through servitization.

  11. Uncertain ROI: The returns on servitization, especially in the initial phases, can be uncertain, making stakeholders apprehensive.

  12. Interoperability: Ensuring that different digital systems and tools work seamlessly together is crucial but challenging.

  13. Balancing Services and Product Offerings: Finding the right balance so that neither the product nor the service overshadows the other is essential for the model’s success.

 

Despite these challenges, the adoption of servitization in the agriculture industry presents significant opportunities for businesses to enhance customer relationships, improve operational efficiency, and drive long-term growth. Addressing these challenges strategically and proactively can lead to successful implementation and the realization of the benefits of servitization.

 

Success Stories in Agricultural Servitization

 

 

Charting the course of agricultural servitization, some trailblazers stand out, illuminating the way with their success stories. Below are some inspiring stories that showcase the potential of this transformative shift:
 

  1. John Deere - Farming as a Service (FaaS): John Deere, a well-known agricultural equipment manufacturer, has embraced a servitization model by offering "Farming as a Service." Instead of selling tractors and machinery outright, John Deere provides farmers with access to their equipment on a subscription basis. This allows farmers to use advanced machinery without the need for large upfront investments and provides John Deere with recurring revenue through ongoing service and maintenance contracts.
     

  2. Trimble - Precision Agriculture Solutions: Trimble, a technology company, offers precision agriculture solutions to farmers worldwide. Their services include GPS-guided systems, remote sensing, and data analytics, helping farmers optimize planting, irrigation, and fertilization practices. Trimble's services provide farmers with real-time insights and recommendations, leading to improved yields and resource efficiency.
     

  3. BASF - Crop Protection Services: BASF, a leading chemical company, provides crop protection services to farmers. These services include integrated pest management solutions, disease monitoring, and customized recommendations for crop protection. By offering these services, BASF helps farmers optimize pest control and disease management, ensuring healthy crop growth and maximizing yields.
     

  4. Climate Corporation (a subsidiary of Bayer) - Digital Farming Platform: The Climate Corporation offers a digital farming platform that integrates weather data, field analytics, and predictive modeling to assist farmers in making data-driven decisions. Their platform provides personalized insights and field-level recommendations, helping farmers optimize inputs and improve their overall farming practices.
     

  5. AGCO - Fuse Smart Farming Solutions: AGCO, a global agricultural equipment manufacturer, offers the Fuse smart farming solutions platform. Fuse provides farmers with a suite of digital tools and services, including telematics, fleet management, and agronomic insights. These services enable farmers to optimize equipment performance, reduce downtime, and make informed decisions based on data analytics.
     

  6. Corteva Agriscience - Seed and Crop Protection Bundles: Corteva Agriscience, a major agricultural biotechnology company, offers bundled solutions that combine seeds with crop protection products and agronomic advice. By providing integrated packages, Corteva aims to deliver more comprehensive solutions to farmers, addressing multiple aspects of crop production in a single offering.
     

These examples demonstrate how agriculture companies are leveraging servitization to enhance their offerings and provide value-added services to farmers. By integrating technology, data analytics, and agronomic expertise, these companies are transforming the way farmers manage their operations, resulting in improved productivity, sustainability, and profitability.

Conclusion

 

As the agricultural sector stands at the crossroads of change, servitization, and digitalization emerge as pivotal drivers of evolution. While the benefits of intertwining products with services are evident – enhanced productivity, waste reduction, and sustainable practices – the challenges are substantial. The hurdles of upfront costs, cultural resistance, and the integration of rapidly advancing technology cannot be ignored. By examining the success stories of industry giants like John Deere and BASF, we glimpse a future where farming isn't just about soil and crops but also about data, insights, and tailored solutions. The role of digitalization further accentuates this transformation, with IoT, AI, and cloud computing catalyzing precision, efficiency, and informed decision-making.

​

Despite these difficulties, we at Avrogan, as a solution provider for advanced services and service contract management, step up to the plate and provide our expertise and our cutting-edge SaaS solution. Avrogan and its advanced solution as Avrogan Service Excellence™play an instrumental role in easing the transition, allowing agricultural businesses to focus on their core services while ensuring contractual complexities are handled efficiently. In essence, the fusion of servitization and digitalization, aided by business partners like Avrogan, charts a promising trajectory for the future of agriculture. Through collaboration, innovation, and a relentless pursuit of value creation, agriculture is poised to not only feed the world but also do so sustainably, efficiently, and profitably.

 
 
Arsham Mazaheri.jpg

Dr. Arsham Mazaheri

Chief Operating Officer

  • linkedin-2166_Avrogan

Arsham is a data scientist by background, with 17+ years of industrial and managerial experience in various disciplines. Throughout his career, Arsham has helped many of Fortune 500 companies with their data and requirement challenges and has been involved in many IT solution implementation projects. Arsham has both mechanical and industrial engineering backgrounds and has a D.Sc. in Risk Management from Aalto University in Helsinki, Finland. He is a certified change and problem manager (CCM & CPCM) and holds an MBA in shipping and logistics.

bottom of page