I selected John Deere for the CEO memo assignment because I wanted to explore how IT can be applied to a traditional, industrial business.
Here are some examples of how Deere has already begun to leverage IT in its products:
- This GPS-enabled tractor uses sensors to collect data on crop health and yield and then uses the data to determine exactly how each square foot of soil should be prepared the following year. It creates value for the farmer in two ways: it both reduces pesticide and fertilizer costs and increases crop yields.
- This cotton harvester streamlines the harvesting, bailing and wrapping process. Some of the harvester’s tech features: it adds smart tags to bales that provide info such as whether the cotton is organic or grown with pesticides; it also communicates to a base station to signal when service is required.
Part of my memo will address how John Deere can continue to create value for its customers with IT. I plan to approach this by first identifying information that is currently not available to Deere’s customers but that could be accessed and leveraged through IT to make them more efficient and effective.
I'd also like to explore how Deere can use IT to create value for itself. For example, instead of having the GPS-enabled tractor send a repair signal to a base station, maybe it should send the info to a central server that is monitored by Deere. Under that scenario, Deere could still notify the farmers via diagnostic emails while collecting valuable information on the performance of its product. Perhaps there are also ways that Deere can use IT to make internal operations more efficient and improve collaboration which could lead to better product designs and faster development cycles.Before the break, I thought about how Deere could possibly leverage facebook but no good ideas came to mind. If anyone has thoughts on this I'd appreciate your comments. Any other comments are welcome as well.
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Matt-
ReplyDeleteThis is an interesting example that ties nicely with GM OnStar. The question is what should Deere do to get a fair share of the new value created from better crop yield. What can they learn from other settings where the technology is a core (but insufficient) part of the value capture equation. Hopefully, you will see some ideas and insights when we discuss the automotive sector. Interesting and potentially big idea that could change farming.
Thanks for the comment. I’d imagine that when you combine the savings on fertilizer costs with the incremental revenues from better crop yield, the value to farmers of a product like the GPS-enabled tractor could be huge.
ReplyDeleteAs far as how Deere can capture a part of this value, I had a couple thoughts: a simple option would be estimate the total value (cost savings and incremental revenues) to the farmer over the life of the tractor and add a portion of this to the purchase price. However, I see two problems with this approach: one is that the additional value could be significant and that farmers would be reluctant to pay an enormous premium on the tractor. The other is that the value is directly related to how much land is farmed, so it is very different for small farmers and big farmers. You could try to segment the market and charge different prices to small and large farmers, but I don’t think that would work.
The second thought would be for Deere to sell the information as a service. For example, the tractor could collect the data and send it to Deere’s database, and Deere then sends instructions on how to prepare the land to the farmer (or probably the tractor since everything is automated). This way, Deere could charge on a per acre basis: For each acre, Deere would charge an amount that is equal to a portion of the average incremental value that the farmer gets on an acre of land by using the tractor.
This is just an initial thought, but I think it could work. If anybody has criticisms of the idea I would appreciate your comments. Thanks.
Matt.. You are on track.... Worth developing in more detail..
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