How an Ag-tech Leader set up Value-based Pricing with Farmers
A global ag-tech company wanted to sell its high-performance seeds straight to farmers. We led a one-year BMI Launchpad project, co-developed a value-based pricing model and tested it in three countries. The pilot showed that farmers gained better yields and the company captured more value when both sides shared risk and reward.
With 28.000+ employees working in 90 countries and over $10 bn in global annual sales, our client is a market leader in the agtech sector. Their core business is two-fold: they develop advanced seeds and products that help protect crops. Thanks to their productive R&D department with 100+ global research and development sites, the company has been on the forefront of innovation for years. In the seeds business, our client is pioneering high-quality seeds allowing farmers to grow robust crops that can thrive in challenging environmental conditions – using less water, land, and other agricultural inputs than conventional crops.
The Challenge
Today’s agricultural sector is facing numerous challenges, ranging from climate change and soil degradation to the ever-increasing demand for nutritious food of a growing world population. Our client’s innovative seeds can play a key role in tackling these issues, empowering farmers to grow enough crops to provide food security and regenerate the planet in the process.
However, in a sector dominated by traditional market structures and long value chains, our client was lacking direct access to the farmers they supplied – preventing it from gaining valuable insights into their problems and needs on the fields and from capturing the full value of its highly innovative solutions.
Our Approach
To establish a new way of working more closely with farmers – sharing the risks and reaping the rewards of their new seeds – our client began expanding its innovation focus from product to business model innovation. That is why the company joined forces with the BMI Lab, an advisory with year-long experience of building sustainable new business.
The BMI Lab works with a broad portfolio of methodologies for generating innovative ideas, turning them into concepts and validating them on the market. The BMI Launchpad is an integrated offering combining all of these tools with full guidance through BMI Lab’s experts in a project design targeted to the client’s needs. This is the story of how our client used the Launchpad to develop a viable go-to-market model for their advanced seeds.
First, we formed a 15-person team from across the seed unit. In kickoff workshops we mapped strengths and gaps, then used the Business Model Navigator to create more than fifty revenue ideas.Next, we turned the best ideas into testable concepts. Together with internal experts we drew blueprints, listed key assumptions and built a minimum viable offer. Early farmer interviews refined the model.Finally, we ran a twelve-month pilot in three countries. Farmers tried the seeds under a value-based contract. They paid more only if yields or cost savings met clear targets. We gathered data through the season and fine-tuned the service and pricing logic.
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Impact
One year after launching the pilot program on the market, our client has been able to conclude that their advanced high-quality seeds meet the needs of farmers and open ways for creating and capturing new value.
Validated model
The agtech leader advanced seeds grow into robust crop using less water, land, and crop protection – added value justifying a new business model enabling the company to capture more of this value. The pilot program demonstrated that farmers benefit from the model, too: a value-based pricing model de-risks the transition to new seeds and the close way of working that goes hand in hand with such a model enables constant improvements to product and service.
Valuable insights
Accompanying farmers through an entire harvest cycle and receiving real-time feedback on their new solution brought our client a wealth of insights into the problems and needs of farmers and the actual performance of their seeds on the field. These learnings have allowed the company to improve their new solutions – but they also inform their other lines of business and customer offerings.
Innovation culture
Even beyond the current project, the BMI Launchpad has sparked change within the agtech leader. The drive for innovation, which has always been at the heart of the company's culture, has been expanded by another important dimension. Employees developing highly advanced products now also feel encouraged to reconsider how these products are distributed, what customer problems they solve and how they create value – they have learned to think in business models. This new skill has already resulted in several follow-up projects in various locations and departments will benefit the project participants, their colleagues, and the company well into the future.
Georg von der Ropp
Key Learnings & Next Steps
Sharing risk speeds adoption of new technology. Real farm data improves product decisions faster than lab trials. Next, the company will automate the pricing tool and extend the model to five more regions.
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