Growing prosperity: Developing repeatable models to scale the adoption of agricultural innovations

Growing prosperityNovember 5, 2014 | Bain Brief

By Vikki Tam, Chris Mitchell, Fernando Martins, Sasha Dichter, Tom Adams, Noor Ullah and Siddharth Tata

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“If you care about the poorest, you care about agriculture.” – Bill Gates

Microdrip irrigation systems. Drought-resistant hybrid seeds. Asset-backed microloans. These innovations can transform the lives of those farming on less than two hectares of land and earning less than $4 a day. Yet until relatively recently, they were unknown in most smallholder farmer communities.

What does it take to get the developing world’s smallholder farmers to try one of these products? Importantly, what would it take to get them to buy these products again and again? For many of the 2.5 billion people living at the “base of the pyramid” and relying on agriculture for their livelihoods, adopting these innovations could improve their lives and the lives of future generations.

To answer these questions, Bain & Company and Acumen, with the support of the Bill & Melinda Gates Foundation, undertook a joint four-month research effort focused on South Asia (India and Pakistan) and sub-Saharan Africa (Ghana, Kenya and Uganda) to understand what it would take to catalyze the large-scale adoption of innovations that could lead to more secure and prosperous lives for smallholder farmers.

Focusing on the pioneer firm to understand what drives success

In recent years, innovations for smallholder farmers have frequently been introduced by pioneer firms—entrepreneurial companies that develop and offer market-based innovations to serve the poor in places where governments and traditional aid have fallen short. These firms provide smallholder farmers with access to products, services and markets, which can significantly improve their productivity, incomes and lives. Although pioneer firms have a social purpose, they are typically set up as for-profit companies, aiming to quickly and sustainably scale their operations and broaden their impact. While these firms offer huge promise, they face challenges that make their very existence, let alone their growth, extremely challenging. These firms serve hard-to-reach customers with limited disposable incomes, and they do so in the context of broader systems that often are broken. As a result, very few of these firms achieve scale and even fewer achieve both scale and profitability. 

While there is extensive literature on agriculture in the developing world, it focuses primarily on the actions of nongovernmental organizations (NGOs), aid agencies and governments, as well as on farmers’ decision making. In addition, much of that literature has been narrowly focused on one crop or one technology in a certain region and lacks specific business implications to inform management decisions. Relatively little has been written about the actions of the pioneer firms themselves—how they develop and execute their strategy and operating model as they grow and, in the process, encourage broad adoption of their innovation.

"Growing prosperity" aims to fill that gap by focusing on the interaction between farmer customers and pioneer firms, and what needs to happen in this interaction to spur sustained adoption, allowing these firms to serve hundreds of thousands, or even millions, of smallholder farmers. By understanding what is working in these interactions, other actors in the agricultural system can also better assess what they should, and should not, do to enable success at this primary point of contact.

Key findings: Driving adoption with smallholder farmers

Pioneer firms that introduce an agricultural innovation face a number of unique challenges that can impede both the rate and the scale of adoption of a new product or service:

A challenging customer segment. Smallholder farmers have low purchasing power, often linked to crop or livestock cycles. Most of what they can buy to increase farm output is either too costly or will yield unpredictable results. As such, it is difficult for firms to acquire a critical mass of early adopters (those who adopted the product within the first year of it being made available to them) who have both the inclination to consider an innovation and the disposable income to pay for it.

Pockets of applicability. An agricultural product or service will perform differently in different environments. For example, seeds will have higher or lower yields depending on altitude and soil acidity. Finding these pockets of applicability takes time, as a company and its customers come to understand the impact of ecological conditions on product performance.

Disconnected markets. Even when a new product is well adapted to local conditions, the spread of this innovation across wide areas is further complicated by the geographic dispersion of farmers and the varying levels of infrastructure—both roads and communications—in rural areas.

Immature business models. Given the small number of successful, large pioneer firms working with smallholders, there is a dearth of proven models for founders to emulate. Furthermore, new businesses often lack the strategies, processes, talent, systems and metrics to efficiently and effectively manage the growth of their firms. Finally, growing a pioneer firm requires a series of iterations of its business model, which make a company’s journey to scale anything but linear.

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Vikki Tam is a Bain & Company partner based in New York. Vikki leads Bain's Global Development practice and directs the firm's global partnerships with Acumen and Endeavor. Previously, she was a partner in Bain Greater China and based in Shanghai.

Chris Mitchell is a Bain & Company manager based in London. Chris is a leader in the Global Development practice and focuses on Bain’s work on sustainability and corporate responsibility.

Fernando Martins is a Bain & Company partner based in São Paulo. Fernando is a leader in the Agriculture and Global Development practices and has worked with many agribusinesses and development agencies in South America and sub-Saharan Africa.

Sasha Dichter is Acumen's Chief Innovation Officer and is based in New York. Sasha is responsible for increasing the impact of Acumen’s work through the spread of ideas and investment in leaders.

Tom Adams is Acumen’s Director of Impact and is based in London, leading all of Acumen’s global work in impact. Previously, Tom led DFID's private sector and climate change teams in Ethiopia.

Noor Ullah leads Acumen’s efforts in the global agriculture sector and is based in Karachi.

Siddharth Tata is a member of the portfolio team of Acumen India and is based in Mumbai, where he leads their work in agriculture and education.